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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 20-F

|           |                                                                                                | 
|---------- | ---------------------------------------------------------------------------------------------- | 
|(Mark One) |                                                                                                | 
|o          | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934

or

|  |                                                                                       | 
|- | ------------------------------------------------------------------------------------- | 
|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
|  | For the fiscal year ended March 31, 2003.                                            

or

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

Commission file number 000-27663

Sify Limited

(Exact name of Registrant as specified in its charter)


Not Applicable

(Translation at Registrants name into English)


Republic of India

(Jurisdiction of incorporation or organization)


Tidel Park, 2nd Floor
No. 4, Canal Bank Road
Taramani, Chennai 600 113 India
(91) 44-2254-0770
(Address of principal executive offices)

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

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

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

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

33,838,392 Equity Shares were issued and outstanding as of May 31, 2003

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.

YesxNo o

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

Item 17o                Item 18 x



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|                                                   |                                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Currency of Presentation and Certain Defined Terms
|Forward-Looking Statements May Prove Inaccurate   
|PART I                                            
|                                                   | Item 1. Identity of Directors, Senior Management and Advisers                        
|                                                   | Item 2. Offer Statistics and Expected Timetable                                      
|                                                   | Item 3. Key Information                                                              
|                                                   | Item 4. Information on the Company                                                   
|                                                   | Item 5. Operating and Financial Review and Prospects                                 
|                                                   | Item 6. Directors, Senior Management and Employees                                   
|                                                   | Item 7. Major Stockholders and Related Party Transactions                            
|                                                   | Item 8. Financial Information                                                        
|                                                   | Item 9. The Offer and Listing                                                        
|                                                   | Item 10. Additional Information                                                      
|                                                   | Item 11. Quantitative and Qualitative Disclosures About Market Risk                  
|                                                   | Item 12. Description of Securities Other Than Equity Securities                      
|PART II                                           
|                                                   | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                                   | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                                   | Item 15. Controls and procedures                                                     
|                                                   | Item 16A. Audit committee financial expert                                           
|                                                   | Item 16B. Code of ethics                                                             
|                                                   | Item 16C. Principal Accountant Fees and Services                                     
|PART III                                          
|                                                   | Item 17. Financial Statements                                                        
|                                                   | Item 18. Financial Statements                                                        
|                                                   | Item 19. Exhibits                                                                    
|SIGNATURES                                        
|Exhibit Index                                     
|EXHIBIT 8.1                                       
|EXHIBIT 23.1                                      
|EXHIBIT 99.1                                      
|EXHIBIT 99.2                                      



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Table of Contents

|                                                                                      |  |     
|------------------------------------------------------------------------------------- |  | ----
|Item                                                                                  |  | Page
|                                                                                      |  |     
|Currency of Presentation and Certain Defined Terms                                    |  | 1   
|Forward-Looking Statements May Prove Inaccurate                                       |  | 2   
|PART I                                                                                |  | 3   
|Item 1. Identity of Directors, Senior Management and Advisers                         |  | 3   
|Item 2. Offer Statistics and Expected Timetable                                       |  | 3   
|Item 3. Key Information                                                               |  | 3   
|Item 4. Information on the Company                                                    |  | 22  
|Item 5. Operating and Financial Review and Prospects                                  |  | 38  
|Item 6. Directors, Senior Management and Employees                                    |  | 50  
|Item 7. Major Stockholders and Related Party Transactions                             |  | 57  
|Item 8. Financial Information                                                         |  | 59  
|Item 9. The Offer and Listing                                                         |  | 60  
|Item 10. Additional Information                                                       |  | 61  
|Item 11. Quantitative and Qualitative Disclosures About Market Risk                   |  | 75  
|Item 12. Description of Securities Other Than Equity Securities                       |  | 76  
|PART II                                                                               |  | 76  
|Item 13. Defaults, Dividend Arrearages and Delinquencies                              |  | 76  
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 76  
|Item 15. Controls and Procedures                                                      |  | 76  
|Item 16A. Audit committee financial expert                                            |  | 77  
|Item 16B. Code of ethics                                                              |  | 77  
|Item 16C. Principal Accountant Fees and Services                                      |  | 77  
|PART III                                                                              |  | 77  
|Item 17. Financial Statements                                                         |  | 77  
|Item 18. Financial Statements                                                         |  | 78  
|Item 19. Exhibits                                                                     |  | 109 

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Currency of Presentation and Certain Defined Terms

Unless the context otherwise requires, references in this annual report to
we, us, the company, Sify or Satyam Infoway are to Sify 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. Until December 2002, we were a majority-owned subsidiary of
Satyam Computer Services Limited, a leading Indian information technology
services company which is traded on the New York Stock Exchange and the major
Indian stock exchanges. In January 2003, we changed the name of our company
from Satyam Infoway Limited to Sify Limited. Satyam is a trademark owned by
Satyam Computer Services, which has licensed the use of the Satyam trademark
to us subject to specified conditions. Sify.com, Sify, Sify iway,
SifyOnline,SatyamOnline, Satyam. Net, satyamonline.com and Satyam
iway are trademarks used by us for which we have registration applications
pending in India. All other trademarks or tradenames used in this annual
report 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, references to Rs., rupees or
Indian rupees are to the legal currency of India and references to GBP are
to the legal currency of the United Kingdom. References to a particular
fiscal year are to our fiscal year ended March 31 of that year.

For your convenience, this annual report contains translations of some
Indian rupee amounts into U.S. dollars which should not be construed as a
representation that those Indian rupee or U.S. dollar amounts could have been,
or could be, converted into U.S. dollars or Indian rupees, as the case may be,
at any particular rate, the rate stated below, or at all. Except as otherwise
stated in this annual report, all translations from Indian rupees to U.S.
dollars contained in this annual report have been based on the noon buying rate
in the City of New York on March 31, 2003, the last business day of March
2003, for cable transfers in Indian rupees as certified for customs purposes by
the Federal Reserve Bank of New York. The noon buying rate on March 31, 2003
was Rs. 47.53 per $1.00.

Our financial statements are prepared in Indian rupees and presented in
accordance with United States generally accepted accounting principles, or U.S.
GAAP. In this annual report, any discrepancies in any table between totals and
the sums of the amounts listed are due to rounding.

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

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

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Forward-Looking Statements May Prove Inaccurate

IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT
TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE
SECTION ENTITLED ITEM 3. KEY INFORMATIONRISK FACTORS, ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS AND ELSEWHERE IN THIS ANNUAL
REPORT. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH REFLECT MANAGEMENTS ANALYSIS ONLY AS OF THE DATE OF THIS
ANNUAL REPORT. IN ADDITION, YOU SHOULD CAREFULLY REVIEW THE OTHER INFORMATION
IN THIS ANNUAL REPORT AND IN OUR QUARTERLY REPORTS AND OTHER DOCUMENTS FILED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR SEC, FROM TIME TO
TIME. OUR FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE, WWW.SEC.GOV.

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PART I




Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.




Item 2. Offer Statistics and Expected Timetable

Not applicable.




Item 3. Key Information

Selected Financial Data

You should read the following selected consolidated historical financial
data in conjunction with our financial statements and the related notes and
Item 5. Operating and Financial Review and Prospects, all of which are
included elsewhere in this annual report. The statement of operations data for
the fiscal years ended March 31, 1999, 2000, 2001, 2002 and 2003 and the
balance sheet data as of March 31, 1999, 2000, 2001, 2002 and 2003 are derived
from our audited consolidated financial statements which have been audited by
KPMG India, independent accountants. Our financial statements are prepared in
Indian rupees and presented in accordance with U.S. GAAP for and as of the
fiscal years ended March 31, 1999, 2000, 2001, 2002 and 2003. Financial
statements for the year ended March 31, 2003 have been translated into U.S.
dollars for your convenience. Significant accounting policies used in the
preparation of our financial statements are summarized in Note 3 to our
consolidated financial statements appearing elsewhere in this annual report.
Please see Item 18. Financial Statements.

In addition, the selected consolidated historical financial data presented
herein includes transitional disclosures pertaining to adoption of SFAS 142,
Goodwill and other Intangible Assets, for the year ended March 31, 2001, 2002
and 2003.

The selected consolidated historical financial data includes a
presentation of EBITDA from continuing operations. As we calculate it, EBITDA

from continuing operations, represents earnings (loss) from continuing
operations before depreciation and amortization, interest income and expense
and income tax expense (benefit). EBITDA is neither an Indian GAAP measure nor
a U.S. GAAP measure and should not be considered in isolation or as an
alternative to net income as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity. Our presentation below also
includes a reconciliation of EBITDA from continuing operations to net loss,
which we believe to be the most comparable financial measure under U.S. GAAP.
EBITDA from continuing operations is presented because it is a basis upon which
our management assesses our financial performance and because we believe some
investors find it to be a useful tool for measuring a companys ability to fund
operating obligations and capital expenditure. Investors evaluating our
financial performance or analyzing our discounted cash flows based on EBITDA
from continuing operations should consider financing activities and
non-recurring charges that are not included in the calculation of EBITDA. Our
calculation includes significant charges recorded to reflect the impairment of
goodwill. Investors should also review carefully Item 5. Operating and
Financial Review and Prospects included elsewhere in this annual report for
further information regarding the underlying financial performance of our
company. While EBITDA is frequently reported by many companies as a
supplemental measure of operations, it is not necessarily comparable to other
similarly titled captions of other companies due to potential inconsistencies
in the method of calculation.

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|                                                                                                         |                                  |  |                                                 |         |                 |  |            |         |      |  |            |           |      |  |            |           |  |  |            |           |  |  |            |        | 
|-------------------------------------------------------------------------------------------------------- | -------------------------------- |  | ----------------------------------------------- | ------- | --------------- |  | ---------- | ------- | ---- |  | ---------- | --------- | ---- |  | ---------- | --------- |  |  | ---------- | --------- |  |  | ---------- | ------ | 
|                                                                                                         |                                  |  | Fiscal year ended March 31                     
|                                                                                                         |                                  |  | 1999                                            |         | 2000            |  | 2001       |         | 2002 |  | 2003       |           | 2003
|                                                                                                         |                                  |  | Indian Rupees                                   |         | U.S.
Dollars(2)
|                                                                                                         |                                  |  | (In thousands, except share and per share data)
|Statement of Operations Data:                                                                            |                                  |  |                                                 |         |                 |  |            |         |      |  |            |           |      |  |            |           |  |  |            |           |  |  |            |       
|                                                                                                         | Revenues                         |  |                                                 | 103,344 |                 |  |            | 618,467 |      |  |            | 1,200,833 |      |  |            | 1,493,636 |  |  |            | 1,862,585 |  |  |            | 39,188 | 
|                                                                                                         | Initial services charges         |  |                                                 |        |                 |  |            |        |      |  |            | 19,691    |      |  |            | 66,652    |  |  |            | 97,270    |  |  |            | 2,046  | 
|                                                                                                         | Satyam Computer Services Limited |  |                                                 |        |                 |  |            | 4,258   |      |  |            | 4,957     |      |  |            | 17,200    |  |  |            | 34,345    |  |  |            | 723    | 
|                                                                                                         | Satyam Computer Services Limited |  |                                                 |         |                 |  |            |         |      |  |            |           |      |  |            |           |  |  |            |           |  |  |            |        | 
|Total Revenue                                                                                            |                                  |  | 103,344                                         |         |                 |  | 622,725    |         |      |  | 1,225,481  |           |      |  | 1,577,488  |           |  |  | 1,994,200  |           |  |  | 41,957     |       
|Cost of revenues (excluding
depreciation and amortization)                                               |                                  |  | (63,651                                         | )       |                 |  | (281,431   | )       |      |  | (1,177,106 | )         |      |  | (1,192,671 | )         |  |  | (1,264,101 | )         |  |  | (26,596    | )     
|Gross profit (excluding depreciation
and amortization)                                                   |                                  |  | 39,693                                          |         |                 |  | 341,294    |         |      |  | 48,375     |           |      |  | 384,817    |           |  |  | 730,099    |           |  |  | 15,361     |       
|Operating expenses:                                                                                      |                                  |  |                                                 |         |                 |  |            |         |      |  |            |           |      |  |            |           |  |  |            |           |  |  |            |       
|Selling, general and administrative
expenses (including provision for
doubtful receivables and advances) |                                  |  | 200,213                                         |         |                 |  | 650,222    |         |      |  | 1,887,324  |           |      |  | 1,962,467  |           |  |  | 1,791,336  |           |  |  | 37,688     |       
|Acquisition expenses                                                                                     |                                  |  |                                                |         |                 |  |           |         |      |  |           |           |      |  | 20,000     |           |  |  |           |           |  |  |           |       
|Amortization of goodwill                                                                                 |                                  |  |                                                |         |                 |  | 115,992    |         |      |  | 931,967    |           |      |  | 4,420,644  |           |  |  |           |           |  |  |           |       
|Impairment of goodwill                                                                                   |                                  |  |                                                |         |                 |  |           |         |      |  |           |           |      |  |           |           |  |  | 246,999    |           |  |  | 5,197      |       
|Amortization of deferred stock
compensation expense                                                      |                                  |  | 69                                              |         |                 |  | 20,627     |         |      |  | 61,451     |           |      |  | 9,686      |           |  |  | 57,729     |           |  |  | 1,215      |       
|Foreign exchange (gain)/loss                                                                             |                                  |  | (615                                            | )       |                 |  | (5,414     | )       |      |  | (162,136   | )         |      |  | (44,520    | )         |  |  | 18         |           |  |  |           |       
|Total operating expenses                                                                                 |                                  |  | 199,667                                         |         |                 |  | 781,427    |         |      |  | 2,718,606  |           |      |  | 6,368,277  |           |  |  | 2,096,082  |           |  |  | 44,100     |       
|Operating loss                                                                                           |                                  |  | (159,974                                        | )       |                 |  | (440,133   | )       |      |  | (2,670,231 | )         |      |  | (5,983,460 | )         |  |  | (1,365,983 | )         |  |  | (28,739    | )     
|Other (expense)/income, net                                                                              |                                  |  | (27,402                                         | )       |                 |  | 71,852     |         |      |  | 242,368    |           |      |  | 32,711     |           |  |  | 52,948     |           |  |  | 1,114      |       
|Loss before equity in losses of
affiliates, income taxes and
minority interest                           |                                  |  | (187,376                                        | )       |                 |  | (368,281   | )       |      |  | (2,427,863 | )         |      |  | (5,950,749 | )         |  |  | (1,313,035 | )         |  |  | (27,625    | )     
|Equity in losses of affiliates                                                                           |                                  |  |                                                |         |                 |  |           |         |      |  | (263,178   | )         |      |  | (1,225,444 | )         |  |  | (26,061    | )         |  |  | (548       | )     
|Loss before income taxes and
minority interest                                                           |                                  |  | (187,376                                        | )       |                 |  | (368,281   | )       |      |  | (2,691,041 | )         |      |  | (7,176,193 | )         |  |  | (1,339,096 | )         |  |  | (28,173    | )     
|Income taxes                                                                                             |                                  |  |                                                |         |                 |  | 1,478      |         |      |  | (1,707     | )         |      |  |           |           |  |  | (2,856     | )         |  |  | (60        | )     
|Minority interest                                                                                        |                                  |  |                                                |         |                 |  | 1,799      |         |      |  | 11,137     |           |      |  | 17,928     |           |  |  | 12,564     |           |  |  | 264        |       
|Loss from continuing operations                                                                          |                                  |  | (187,376                                        | )       |                 |  | (365,004   | )       |      |  | (2,681,611 | )         |      |  | (7,158,265 | )         |  |  | (1,329,388 | )         |  |  | (27,969    | )     
|Discontinued operations                                                                                  |                                  |  |                                                 |         |                 |  |            |         |      |  |            |           |      |  |            |           |  |  |            |           |  |  |            |       
|Income / (loss) from discontinued
operations(3)                                                          |                                  |  |                                                |         |                 |  | (16,893    | )       |      |  | 172,581    |           |      |  | (125,373   | )         |  |  |           |           |  |  |           |       
|Profit on sale of discontinued
operations, net of direct costs                                           |                                  |  |                                                |         |                 |  |           |         |      |  |           |           |      |  | 81,121     |           |  |  |           |           |  |  |           |       
|Net loss                                                                                                 |                                  |  | (187,376                                        | )       |                 |  | (381,897   | )       |      |  | (2,509,030 | )         |      |  | (7,202,517 | )         |  |  | (1,329,388 | )         |  |  | (27,969    | )     
|Net profit/ (loss) per equity share
 continuing operations                                              |                                  |  | (17.31                                          | )       |                 |  | (19.68     | )       |      |  | (117.34    | )         |      |  | (308.59    | )         |  |  | (51.15     | )         |  |  | (1.08      | )     
|discontinuing operations                                                                                 |                                  |  |                                                |         |                 |  | (0.91      | )       |      |  | 7.55       |           |      |  | (1.91      | )         |  |  |           |           |  |  |           |       
|Net loss per share(4)                                                                                    |                                  |  | (17.31                                          | )       |                 |  | (20.59     | )       |      |  | (109.79    | )         |      |  | (310.50    | )         |  |  | (51.15     | )         |  |  | (1.08      | )     
|Weighted average equity shares used
in computing net loss per equity
share                               |                                  |  | 10,824,826                                      |         |                 |  | 18,545,399 |         |      |  | 22,852,600 |           |      |  | 23,196,428 |           |  |  | 25,988,095 |           |  |  | 25,988,095 |       

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|                                                                                                |  |                                                 |          |              |  |      |            |      |  |      |            |      |  |  |            |   |  |  |            |   |  |  |         |  
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | -------- | ------------ |  | ---- | ---------- | ---- |  | ---- | ---------- | ---- |  |  | ---------- | - |  |  | ---------- | - |  |  | ------- | -
|                                                                                                |  | Fiscal year ended March 31                     
|                                                                                                |  | 1999                                            |          | 2000         |  | 2001 |            | 2002 |  | 2003 |            | 2003
|                                                                                                |  | Indian Rupees                                   |          | U.S. Dollars
|                                                                                                |  | (In thousands, except share and per share data)
|Transitional disclosures pertaining to adoption of
SFAS 142Goodwill and other Intangible Assets |  |                                                 |          |              |  |      |            |      |  |      |            |      |  |  |            |   |  |  |            |   |  |  |         |  
|Reported net loss                                                                               |  |                                                 | (187,376 | )            |  |      | (381,897   | )    |  |      | (2,509,030 | )    |  |  | (7,202,517 | ) |  |  | (1,329,388 | ) |  |  | (27,969 | )
|Less: Goodwill amortization                                                                     |  |                                                 |         |              |  |      | 115,992    |      |  |      | 931,967    |      |  |  | 292,964    |   |  |  |           |   |  |  |        |  
|Less: Equity goodwill amortization                                                              |  |                                                 |         |              |  |      |           |      |  |      | 201,332    |      |  |  | 75,210     |   |  |  |           |   |  |  |        |  
|Adjusted net loss                                                                               |  |                                                 | (187,376 | )            |  |      | (265,905   | )    |  |      | (1,375,731 | )    |  |  | (6,834,343 | ) |  |  | (1,329,388 | ) |  |  | (27,969 | )
|Reported net loss per share                                                                     |  |                                                 | (17.31   | )            |  |      | (20.59     | )    |  |      | (109.79    | )    |  |  | (310.50    | ) |  |  | (51.15     | ) |  |  | (1.08   | )
|Less: Goodwill amortization                                                                     |  |                                                 |         |              |  |      | 6.25       |      |  |      | 40.78      |      |  |  | 12.63      |   |  |  |           |   |  |  |        |  
|Less: Equity goodwill amortization                                                              |  |                                                 |         |              |  |      |           |      |  |      | 8.81       |      |  |  | 3.24       |   |  |  |           |   |  |  |        |  
|Adjusted net loss per share                                                                     |  |                                                 | (17.31   | )            |  |      | (14.34     | )    |  |      | (60.20     | )    |  |  | (294.63    | ) |  |  | (51.15     | ) |  |  | (1.08   | )
|Balance Sheet Data:                                                                             |  |                                                 |          |              |  |      |            |      |  |      |            |      |  |  |            |   |  |  |            |   |  |  |         |  
|Cash and cash equivalents                                                                       |  |                                                 | 103,403  |              |  |      | 7,284,568  |      |  |      | 1,414,205  |      |  |  | 658,111    |   |  |  | 897,596    |   |  |  | 18,885  |  
|Total assets                                                                                    |  |                                                 | 454,888  |              |  |      | 10,634,004 |      |  |      | 11,501,884 |      |  |  | 4,146,274  |   |  |  | 3,700,387  |   |  |  | 77,854  |  
|Long-term debt, including current
installments                                                  |  |                                                 | 259,256  |              |  |      | 215,537    |      |  |      |           |      |  |  |           |   |  |  |           |   |  |  |        |  
|Total stockholders equity / (deficit)                                                          |  |                                                 | 67,617   |              |  |      | 9,927,840  |      |  |      | 10,588,336 |      |  |  | 3,394,113  |   |  |  | 2,888,696  |   |  |  | 60,776  |  
|Other Financial Data:                                                                           |  |                                                 |          |              |  |      |            |      |  |      |            |      |  |  |            |   |  |  |            |   |  |  |         |  
|EBITDA
from continuing operations(5)                                                            |  |                                                 | (111,068 | )            |  |      | (191,979   | )    |  |      | (1,312,887 | )    |  |  | (6,221,893 | ) |  |  | (741,589   | ) |  |  | (15,603 | )
|Add: Depreciation and amortization                                                              |  |                                                 | 49,162   |              |  |      | 247,190    |      |  |      | 1,601,430  |      |  |  | 966,626    |   |  |  | 607,183    |   |  |  | 12,774  |  
|Add: Interest and income tax                                                                    |  |                                                 | 27,146   |              |  |      |           |      |  |      |           |      |  |  |           |   |  |  | 2,856      |   |  |  | 60      |  
|Income/(loss) from discontinued
operations                                                      |  |                                                 |         |              |  |      | 16,893     |      |  |      |           |      |  |  | 125,373    |   |  |  |           |   |  |  |        |  
|                                                                                                |  |                                                 | 76,308   |              |  |      | 264,083    |      |  |      | 1,601,430  |      |  |  | 1,091,999  |   |  |  | 610,039    |   |  |  | 12,834  |  
|Less: Interest and income tax                                                                   |  |                                                 |         |              |  |      | 74,165     |      |  |      | 232,706    |      |  |  | 30,254     |   |  |  | 22,240     |   |  |  | 468     |  
|Income/(loss) from discontinued
operations                                                      |  |                                                 |         |              |  |      |           |      |  |      | 172,581    |      |  |  |           |   |  |  |           |   |  |  |        |  
|Profit on sale of discontinued operations                                                       |  |                                                 |         |              |  |      |           |      |  |      |           |      |  |  | 81,121     |   |  |  |           |   |  |  |        |  
|                                                                                                |  |                                                 |         |              |  |      | 74,165     |      |  |      | 405,287    |      |  |  | 111,375    |   |  |  | 22,240     |   |  |  | 468     |  
|Net (loss)                                                                                      |  |                                                 | (187,376 | )            |  |      | (381,897   | )    |  |      | (2,509,030 | )    |  |  | (7,202,517 | ) |  |  | (1,329,388 | ) |  |  | (27,969 | )

Notes



|1. |  | Certain prior-year data has been reclassified to conform to the current year presentation.                                                                                                                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Convenience translation to US Dollars done at the exchange rate on March 31, 2003 of Rs 47.53 / dollar, which should not be construed as a representation that those Indian rupee or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars or Indian rupees, as the case may be, at this rate or at all.                                                                                                                
|  
|3. |  | There is no goodwill associated with discontinued operations and no extraordinary items.                                                                                                                                                                                                                                                                                                                                                        
|  
|4. |  | Reference to shares and per share amounts refer to our equity shares. Our outstanding shares include shares held by a depositary representing equity shares underlying our ADSs. Effective September 24,
2002, one ADS represented one equity share. Our 1-for-4 reverse ratio change on September 24, 2002 did not have any effect on our equity shares or per equity share amounts, as the underlying shares
representing ADSs were unchanged.
|  
|5. |  | EBITDA from continuing operations represents earnings (loss) from continuing operations before interest, taxes, depreciation and amortization, and gain on sale of discontinued operations.                                                                                                                                                                                                                                                     

5



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##### Table of Contents



Exchange Rates

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

|              |  |      |  |     |       |  |       |     |  |  |       |  |  |  |       | 
|------------- |  | ---- |  | --- | ----- |  | ----- | --- |  |  | ----- |  |  |  | ----- | 
|Month         |  | High |  | Low
|              |  |      |  |    
|December 2002 |  | Rs.  |  |     | 48.55 |  |       | Rs. |  |  | 47.66 | 
|January 2003  |  |      |  |     |       |  | 48.23 |     |  |  |       |  |  |  | 47.60 | 
|February 2003 |  |      |  |     |       |  | 48.04 |     |  |  |       |  |  |  | 47.49 | 
|March 2003    |  |      |  |     |       |  | 47.91 |     |  |  |       |  |  |  | 47.39 | 
|April 2003    |  |      |  |     |       |  | 47.57 |     |  |  |       |  |  |  | 47.18 | 
|May 2003      |  |      |  |     |       |  | 47.45 |     |  |  |       |  |  |  | 46.68 | 

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

|                            |  |            |       |         |  |      |       |     |  |  |       |  |  |  |       | 
|--------------------------- |  | ---------- | ----- | ------- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|Fiscal Year Ended March 31, |  | Period End |       | Average |  | High |       | Low
|                            |  |            |       |         |  |      |       |    
|1999                        |  |            | 42.44 |         |  |      | 42.08 |     |  |  | 43.68 |  |  |  | 39.25 | 
|2000                        |  |            | 43.63 |         |  |      | 43.34 |     |  |  | 43.82 |  |  |  | 42.20 | 
|2001                        |  |            | 46.85 |         |  |      | 45.70 |     |  |  | 46.91 |  |  |  | 43.56 | 
|2002                        |  |            | 48.83 |         |  |      | 47.71 |     |  |  | 48.91 |  |  |  | 46.58 | 
|2003                        |  |            | 47.53 |         |  |      | 48.49 |     |  |  | 49.14 |  |  |  | 47.39 | 

Capitalization and indebtedness

Not applicable.

Reasons for the offer and use of proceeds

Not applicable.

Risk Factors

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

Risks Related to Sify Limited



| |  | Because we commenced operation of our private data network business in
April 1998 and launched our Internet portal website in November 1998, it
is difficult to evaluate our company based on our historical results of
operations.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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We commenced operation of our private data network business in April 1998
and launched our Internet service provider operations and Internet portal
website in November 1998. Accordingly, we have a limited operating history to
evaluate our business and during this period our business has not been
profitable. You must consider the risks and difficulties frequently encountered
by companies in the early stages of development, particularly companies in the
new and rapidly evolving Internet service markets. These risks and difficulties
include our ability to:



| |  |  | continue to develop and upgrade our technology;                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | maintain and develop strategic relationships with business partners;                                                           
|
| |  |  | offer compelling online services and content; and                                                                              
|
| |  |  | promptly address the challenges faced by early stage companies, which
do not have an experience or performance base to draw on.

Not only is our operating history short, but we have determined to compete
in three businesses that we believe are complementary. These three businesses
are corporate network/data services, Internet access services and online portal
and content offerings. In February 2002, we divested a fourth business
(software services) to our former majority stockholder, Satyam Computer
Services. We do not yet know whether our three remaining businesses will prove
complementary. We cannot assure you that we will successfully address the risks
or difficulties described above. Failure to do so could lead to an inability to
attract and retain corporate customers for our network services and subscribers
for our Internet services as well as the loss of advertising revenues.



| |  | For the year ended March 31, 2003 we incurred a net loss of Rs.1,329.4
million ($28.0 million). As of March 31, 2003, we had an accumulated
deficit of approximately Rs.11,737.8 million ($247.0 million). We
anticipate incurring additional losses in the future because our business
plan, which is unproven, calls for additional corporate customers and
subscribers to attain profitability.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since our founding, we have not been profitable and have incurred
significant losses and negative cash flows. For the year ended March 31, 2003
we incurred a net loss of Rs.1,329.4 million ($28.0 million). As of March 31,
2003, we had an accumulated deficit of approximately Rs.11,737.8 million
($247.0 million). We expect to continue to incur operating losses as we expand our services and
advertise and promote our brand. Our business plan assumes that businesses in
India will demand private network and related services. Our business plan also
assumes that consumers in India will be attracted to and use Internet access
services and content available on the Internet in increasing numbers. This
business model is not yet proven in India, and we cannot assure you that we
will ever achieve or sustain profitability or that our operating losses will
not increase in the future.

During fiscal 2003, our highest operational priority was to reduce cash
burn incurred to build our company and infrastructure to support our rapid
growth, which has now stabilized. Although we have significantly reduced our
cash burn over the last eight quarters and believe that these represent
permanent reductions, we do not know whether these measures, or other measures
which we may undertake in the future, will be successful in reducing negative
cash flow in future periods.



| |  | As a result of its former control by the Government of India, VSNL has
established relationships with international bandwidth suppliers and a
large customer base, which provide VSNL with a competitive advantage over
our company.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

VSNL is a provider of international telecommunications services in India
that, until recently, was controlled by the Government of India. While VSNL
was controlled by the Government of India, it had a number of significant
competitive advantages over our company, including direct access to network
infrastructure and greater financial resources. VSNL leveraged these
competitive advantages and its longer service history to develop relationships
with international bandwidth suppliers to develop a large subscriber base. In
February 2002, the Government of India sold a 25% stake in VSNL to the TATA
group, reducing the Government of Indias ownership of VSNL to 26%. Although
it is no longer controlled by the Government of India, the Government of India
maintains a substantial equity interest in VSNL and this relationship, combined
with VSNLs relationships with

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international bandwidth suppliers and large
customer base, continues to provide it with competitive advantages over our
company. As a result of VSNLs competitive position, we believe that we will
continue to face difficult market conditions in the Internet access services
business. These competitive issues may prevent us from attracting and retaining
subscribers and generating advertising revenue. This could result in loss of
market share, price reductions, reduced margins or negative cash flow for our
operations.



| |  | 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 in the Internet services market which would significantly
affect our revenues.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our corporate network/data services business faces significant competition
from well-established companies, including Bharti Broadband, Global E-Commerce
Limited, HCL Infinity and Tata Internet. Reliance Infocom, a member of the
Reliance Group, is building a nationwide fiber optic network in India and has
announced plans to provide a range of value-added services, including corporate
connectivity services.

A significant number of competitors have entered Indias liberalized
Internet service provider market, and we expect additional competitors to
emerge in the near future. As of February 28, 2003, approximately 395 companies
had obtained Internet service provider licenses in India, including 65
companies which have obtained licenses to offer Internet service provider
services throughout India. New entrants into the national Internet service
provider market in India may enjoy significant competitive advantages over our
company, including greater financial resources, which could allow them to
charge Internet access fees that are lower than ours in order to attract
subscribers. Since May 2000, we have offered unlimited Internet access to
consumers for a fixed price. A number of our competitors, including VSNL,
Dishnet and Mantra, also offer unlimited Internet access for a fixed price. In
addition, some competitors offer free Internet service. These factors have
resulted in significant reduction in actual average selling prices for consumer
ISP services. We expect the market for Internet access to remain extremely
price competitive.

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

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



| |  | Our marketing campaign to establish brand recognition and loyalty for the
SifyOnline,Sify andiwaybrands could be unsuccessful.
| |  | ------------------------------------------------------------------------------------------------------------------------------

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

Satyam is a trademark owned by Satyam Computer Services. The interest of
Satyam Computer Services in our company was reduced to approximately 36.0% in
connection with the private placement financing transaction with SAIF
Investment Company Limited, or SAIF, and Venture Tech Solutions Pvt. Limited,
or VentureTech. VentureTech is obligated to purchase additional shares from us
pursuant to the provisions of a Subscription

8



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##### Table of Contents



Agreement, and Satyam Computer
Services interest in our company will be further reduced in connection
therewith. In anticipation of the need to cease using the Satyam brand name,
we changed the name of our company from Satyam Infoway Limited to Sify Limited
in January 2003. In connection with our name change, our company will be
promoted exclusively under the Sifybrand name. Our results of operations may
be adversely affected by decreased brand recognition and decreased customer
loyalty resulting from this name change.



| |  | A number of large stockholders of our company and us are party to an
Investor Rights Agreement which governs the composition of our Board of
Directors and other important corporate matters.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of the date of this annual report and based on reports filed with the
Securities Exchange Commission, we believe that Satyam Computer Services
beneficially owns approximately 36.0% of our equity shares, SAIF owns
approximately 16.4% of our equity shares and VentureTech beneficially owns
approximately 13.1% of our equity shares (including 1,017,441 ADSs that
VentureTech or an affiliate is obligated to purchase from us on or prior to
July 31, 2003). As a result, these stockholders, if they elect to act together,
are presently able to exercise significant influence over many matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions, such as a sale of our company.
These stockholders are also party to an agreement with us relating to the
composition of our Board of Directors and other important corporate matters,
such as a right of first refusal with respect to the transfer of shares by
certain stockholders and the issuance by our company of additional shares, tag
along rights with respect to the transfer of shares by certain stockholders and
drag along rights. Under Indian law, a simple majority is sufficient to control
all stockholder action except for those items, which require approval by a
special resolution. If a special resolution is required, the number of votes
cast in favor of the resolution must not be less than three times the number of
votes cast against it. Examples of actions that require a special resolution
include:



| |  |  | altering our Articles of Association;                                                              
| | - |  | ---------------------------------------------------------------------------------------------------
|
| |  |  | issuing additional shares of capital stock, except for pro rata issuances to existing stockholders;
|
| |  |  | commencing any new line of business; and                                                           
|
| |  |  | commencing a liquidation.                                                                          

Circumstances may arise in which the interests of Satyam Computer
Services, SAIF, VentureTech or a subsequent purchaser of the shares currently
owned by any such holder, could conflict with the interests of our other
stockholders or holders of our ADSs. One or more of such stockholders could
delay or prevent a change of control of our company even if a transaction of
that sort would be beneficial to our other stockholders, including the holders
of our ADSs.



| |  | Our largest stockholder, Satyam Computer Services, has stated its
intention not to invest any further funds in our company and to
explore opportunities to divest its stake in our company.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In October 2001, our largest stockholder, Satyam Computer Services,
publicly announced that it had determined that it would not invest any further
funds in our company and that it had decided to explore opportunities to divest
its stake in our company. Although no longer our majority stockholder, Satyam
Computer Services continued to beneficially own approximately 36.0% of our
outstanding equity shares as of the date of this annual report. Any
significant sale of our equity shares might hurt the price of our ADSs and make
it more difficult for us to sell equity securities or ADSs in the future at a
time and at a price that we deem appropriate. Although Mr. Ramalinga Raju, the
Chairman of Satyam Computer Services, has resigned as our Chairman, Satyam
Computer Services continues to be entitled to nominate two members of our Board
of Directors. As of the date of this report, Messrs. K. Thiagarajan and V.
Srinivas served on our Board of Directors as the nominees of Satyam Computer
Services. Mr. S. Srinivasan is serving in the role of our Chairman pending the
formal selection of a Chairman by our Board of Directors. Through its stock
ownership and representation on our Board of Directors, Satyam Computer
Services is able to influence our business. If Satyam Computer Services
divests its interest in our company, the purchaser of that interest could also
influence our business significantly.

9



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| |  | If our efforts to retain our subscribers through past investment in
network infrastructure and ongoing investment in online content offerings
and customer and technical support are unsuccessful, our revenues will
decrease without a corresponding reduction in costs.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



| |  | Despite cost-reduction measures, 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 for the
foreseeable future will depend on the following:



| |  |  | the range of services provided by us and our strategic partners and
the usage thereof by our customers determines the amount of revenues
generated by our corporate network/data services division;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the number of subscribers to our Internet service provider service and
the prevailing prices charged determine the amount of revenues
generated by our Internet access services division; and      
|
| |  |  | advertising and electronic commerce activity on www.sify.comand its
related sites determines the amount of revenues generated by our
online portal and content offerings division.                 

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



| |  |  | the timing and nature of any agreements we enter into with strategic
partners will determine the amount of revenues generated by our
corporate network/data services division;                      
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | new Internet sites, services, products or pricing policies introduced
by our competitors may require us to introduce new offerings or reduce
the prices we charge our customers for Internet access;
|
| |  |  | our capital expenditures and other costs relating to our operations
could require us to generate additional revenue in order to be
profitable;                                                      
|
| |  |  | the timing and nature of our marketing efforts could affect the number
of our subscribers and the level of electronic commerce activity on
our websites;                                            
|
| |  |  | our ability to successfully integrate operations and technologies from
any acquisitions, joint ventures or other business combinations or
investments;                                              
|
| |  |  | the introduction of alternative technologies may require us to
re-evaluate our business strategy and/or to adapt our services to be
compatible with such technologies; and                          
|
| |  |  | technical difficulties or system failures affecting the
telecommunication infrastructure in India, the Internet                                                                                     

10



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##### Table of Contents



generally or the operation of our websites.

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

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



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

We rely on the Internet and accordingly, depend upon the continuous,
reliable and secure operation of Internet servers, related hardware and
software and network infrastructure such as lines leased from telecom
operators. We have a back-up data facility, but we do not have full redundancy
for all of our computer and telecommunications facilities. As a result, failure
of key primary or back-up systems to operate properly could lead to a loss of
customers, damage to our reputation and violations of our Internet service
provider license and contracts with corporate customers. A loss of customers
or damage to our reputation would result in a decrease in the number of our
subscribers, which would cause a decrease in the revenues generated by our
Internet access services division. A violation of our Internet service
provider license could result in the suspension or termination of that license,
which would prevent us from carrying on a significant portion of our operations
and materially adversely affect our operating results. Violations of our
contracts with corporate customers could result in the termination of these
contracts, which would cause a decrease in the revenues generated by our
corporate data/network services division. Any of these failures could also
lead to a decrease in value of our ADSs, significant negative publicity and
litigation. From time to time, a number of large Internet companies have
suffered highly publicized system failures resulting in adverse reactions to
their stock prices, significant negative publicity and, in some instances,
litigation.

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



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

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

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

11



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##### Table of Contents





| |  | If we are unable to manage our rapid growth over the past several years,
our results of operations will be adversely affected.
| |  | ------------------------------------------------------------------------------------------------------------------------------

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



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

Our success depends upon the continued service of our key personnel,
particularly Mr. Ramaraj, our Chief Executive Officer. All of our employees are
located in India. Each of our employees may voluntarily terminate his or her
employment with us. We do not carry key person life insurance on any of our
personnel. Our success also depends on our ability to attract and retain
additional highly qualified technical, marketing and sales personnel. The labor
market for skilled employees in India is extremely competitive, and the process
of hiring employees with the necessary skills is time consuming and requires
the diversion of significant resources. While we have not experienced
difficulty in employee retention or integration to date, we may not be able to
continue to retain or integrate existing personnel or identify and hire
additional personnel in the future. The loss of the services of key personnel,
especially the unexpected death or disability of such personnel, or the
inability to attract additional qualified personnel, could disrupt the
implementation of our business strategy, upon which the success of our business
depends.

In February 2002, we entered into Executive Employment Agreements with
each of Messrs. Ramaraj, Zacharias and Santhanakrishnan. These agreements
provide for base and bonus compensation and additional benefits and require
that we indemnify these officers for specified expenses incurred by them in
connection with their employment by our company. These agreements also contain
confidentiality and invention assignment provisions. In addition, these
agreements provide for specified payments in connection with a termination of
employment after a change of control of our company or in certain other
circumstances. Our agreement with Mr. Ramaraj had a term of approximately 13
months, and our agreements with Messrs. Zacharias and Santhanakrishnan have a
term of three years. Our stockholders approved an extension of Mr. Ramarajs
tenure as Managing Director for an additional five years, effective April 1,
2003.



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

We rely on our arrangements with strategic partners to provide key network
services to our business clients. Some of these relationships can be terminated
by our partners in some circumstances. We also rely on some of our strategic
partners to provide us with access to their customer base. We are a strategic
partner of UUNet Technologies in India and provide dial-up access to UUNet
Technologies roaming international clients in India. UUNet Technologies is a
unit of WorldCom, Inc., which in July 2002 filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code. We do not know
whether we will be able to maintain our strategic partnership with UUNet
Technologies, which accounted for approximately 6.7% of our revenues in fiscal
2003. If our relationships with our strategic partners do not continue, the
ability of our corporate network/data services division to generate revenues
will be decreased significantly.

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If there is an adverse outcome in the class action litigation that has
been filed against us, our business may be harmed.

Our company and certain of our officers and directors are named as
defendants in a securities class action lawsuit filed in the United States
District Court for the Southern District of New York. This action, which is
captioned In re Satyam Infoway Ltd. Initial Public Offering Securities
Litigation, also names several of the underwriters involved in our initial
public offering of American Depositary Shares as defendants. This class action
is brought on behalf of a purported class of purchasers of our ADSs from the
time of our IPO in October 1999 through December 2000. The central allegation
in this action is that the underwriters in our IPO solicited and received
undisclosed commissions from, and entered into undisclosed arrangements with,
certain investors who purchased our ADSs in the IPO and the aftermarket. The
complaint also alleges that we violated the United States federal securities
laws by failing to disclose in the IPO prospectus that the underwriters had
engaged in these allegedly undisclosed arrangements. More than 300 issuers
have been named in similar lawsuits. In July 2002, an omnibus motion to dismiss
all complaints against issuers and individual defendants affiliated with
issuers was filed by the entire group of issuer defendants in these similar
actions. In October 2002, our executive officers who were named as defendants
in this action were dismissed from the action without prejudice. In February
2003, the Court in this action issued its decision on defendants omnibus
motion to dismiss. This decision denied the motion to dismiss the Section 11
claim as to Sify and virtually all of the other issuer defendants. The
decision also denied the motion to dismiss the Section 10(b) claim as to
numerous issuer defendants, including Sify. Although we are unable to estimate
the range of loss that is reasonably possible, we believe that we have
meritorious defenses and intend to defend this action vigorously. However, we
could be forced to incur material expenses in the litigation and, in the event
there is an adverse outcome, our business could be harmed.



| |  | We face risks associated with our joint venture with Refco Sify Securities
India Private Limited, our strategic partnership with VeriSign, our investment in Wisden
Cricinfo Limited and with other potential acquisitions, investments,
strategic partnerships or other ventures, including whether any such
transactions can be identified, completed and the other party integrated
with our business on favorable terms.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In November 1999, we acquired 24.5% of the outstanding shares of
IndiaWorld Communications, together with an option to acquire IndiaWorld
Communications remaining outstanding shares.
In May 2000, we entered into a strategic partnership with VeriSign to provide
managed digital certificate-based authentication services in India. In June
2000, we acquired a 25% stake in CricInfo Limited and made an investment in
Refco Sify Securities India Private Limited. In July 2000, we completed our
investment in CricInfo Limited. These alliances may not provide all or any
portion of the anticipated benefits. Due to a general decline in market
valuations for technology companies during fiscal 2002, we reassessed, in
accordance with our accounting policy, the goodwill to be carried forward
relating to these acquisitions. As a result, we recorded a Rs.4,127.7 million
charge in fiscal 2002 relating to the impairment of goodwill. In February 2003,
CricInfo Limited sold its business to Wisden Cricinfo Limited and, in
connection with that transaction, our loan to CricInfo was fully repaid and we
acquired 33% of the equity in Wisden Cricinfo Limited.

We may attempt to grow our business through acquisitions. We may acquire
or make investments in other complementary businesses, technologies, services
or products, or enter into additional strategic partnerships with parties who can provide
access to those assets, if appropriate
opportunities arise in the future. From time to time we have had discussions
and negotiations with a number of companies regarding our acquiring, investing
in or partnering with their businesses, products, services or technologies, and
we regularly engage in such discussions and negotiations in the ordinary course
of our business. Some of those discussions also contemplate the other party
making an investment in our company. We may not identify suitable acquisition,
investment or strategic partnership candidates in the future, or if we do
identify suitable candidates, we may not complete those transactions on
commercially acceptable terms or at all. In addition, the key personnel of an
acquired company may decide not to work for us. If we make other types of
acquisitions, we could have difficulty in integrating the acquired products,
services or technologies into our operations. These difficulties could disrupt
our ongoing business, distract our management and employees and increase our
expenses, which could adversely affect our operating results and cause the
price of our ADSs to decline. Furthermore, we may incur indebtedness or issue
additional equity securities to pay for any future acquisitions. The issuance
of additional equity securities would dilute the ownership interests of the
holders of our ADSs.

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

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



| |  | A significant majority of the iway cybercafés are franchised operations
that we do not operate or control.
| |  | ----------------------------------------------------------------------------------------------------------

As of March 31, 2003, 817 cybercafés were franchised and 27 cybercafés
were owned and operated by our company. Franchise relationships are subject to
a number of special risks. For example, we do not operate or control our
franchisees, and they may not meet their obligations under our franchise
agreements with them. The failure of a franchisee to provide quality services
to its customers could result in end user dissatisfaction with our company. We
may become involved in disputes with our franchisees, which may result in
litigation or the termination of one or more of our franchise agreements. Our
franchisees could attempt to organize themselves into unions in order to
negotiate more favorable terms in our franchise agreements. Any failure to
continue our relationships with our franchisees on favorable terms could reduce
the size of our market share for Internet access in India and decrease the
revenues generated by our Internet access services division.



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

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

Our efforts to protect our intellectual property may not be adequate. 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.



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

Currently, only a relatively limited number of customers use our corporate
network, our Internet service provider services and our Internet portal. We
must continue to adapt our network infrastructure to accommodate additional
users, increasing transaction volumes and changing customer requirements. We
may not be able to project

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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.



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

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

Risks Related to the ADSs and Our Trading Market



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

Under the Companies Act, 1956 of India, or Companies Act, a public company
incorporated in India must offer its holders of equity shares preemptive rights
to subscribe and pay for a proportionate number of shares to maintain their
existing ownership percentages prior to the issuance of any new equity shares,
unless the preemptive rights have been waived by adopting a special resolution
by holders, whether on a show of hands or on a poll, holding not less than
three times the number of votes, if any, cast against the resolution. At our
2000 Annual General Meeting, our stockholders approved a special resolution
permitting us to issue up to one million equity shares (currently equivalent to
one million ADSs) in connection with acquisitions. We issued virtually all of
these equity shares in connection with our acquisitions of IndiaWorld
Communications, Indiaplaza.com and Kheladi.com and our investment in CricInfo
Limited. At our 2001 Annual General Meeting, our stockholders approved a
special resolution permitting us to issue up to four million additional equity
shares in connection with acquisitions or capital raising transactions, and our
ADS holders are deemed to have waived their preemptive rights with respect to
these shares. At our December 2002 Extraordinary General Meeting, our
stockholders approved a special resolution permitting us to issue up to 12.5
million additional equity shares (equivalent to 12.5 million ADSs) in
connection with the sale of equity shares to SAIF and VentureTech, and our ADS
holders are deemed to have waived their preemptive rights with respect to these
shares and our Board of Directors may approve the issuance of these shares
without further action of our stockholders.

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



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

As a holder of ADSs, you generally have the right under the deposit
agreement to instruct the depositary bank to exercise the voting rights for the
equity shares represented by your ADSs. At our request, the depositary bank
will mail to you any notice of stockholders meeting received from us together
with information explaining how to instruct the depositary bank to exercise the
voting rights of the securities represented by ADSs. If the depositary bank
timely receives voting instructions from a holder of ADSs, it will endeavor to
vote the securities represented by the holders ADSs in accordance with such
voting instructions. However, the ability of the depositary bank to carry out
voting instructions may be limited by practical and legal limitations and the
terms of the securities

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on deposit. We cannot assure you that you will receive
voting materials in time to enable you to return voting instructions to the
depositary bank in a timely manner.

Under Indian law, subject to the presence in person at a stockholder
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
a stockholder present in person and holding at least 10% of the total voting
power or on which an aggregate sum of not less than Rs.50,000 has been paid-up,
at the meeting demands 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 depositary bank, are not counted
in a vote by show of hands. As a result, only in the event that a stockholder
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.

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 stockholders. To date, our practice has been to
provide advance notice to our ADS holders of all stockholder meetings and to
solicit their vote on such matters through the depositary, and we expect to
continue this practice. The form of notice and proxy statement that we have
been using does not include all of the information that would be provided under
the SECs proxy rules.



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

The market price of our ADSs has fluctuated widely and may continue to do
so. For example, since our initial public offering in October 1999 through May
31, 2003, the trading price of our ADSs has ranged from a high of $452 per ADS
to a low of $0.88 per ADS. Many factors could cause the market price of our
ADSs to rise and fall. Some of these factors include:



| |  |  | our failure to integrate successfully our operations with those of acquired companies;                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | actual or anticipated variations in our quarterly operating results, including charges to write-off
goodwill and other acquisition costs;                            
|
| |  |  | announcement of technological innovations;                                                                                                                           
|
| |  |  | conditions or trends in the corporate network/data services, Internet and electronic commerce industries;                                                            
|
| |  |  | the competitive and pricing environment for corporate network/data services and Internet access services
in India and the related cost and availability of bandwidth;
|
| |  |  | the perceived attractiveness of investment in Indian companies;                                                                                                      
|
| |  |  | acquisitions and alliances by us or others in the industry;                                                                                                          
|
| |  |  | changes in estimates of our performance or recommendations by financial analysts;                                                                                    
|
| |  |  | market conditions in the industry and the economy as a whole;                                                                                                        
|
| |  |  | introduction of new services by us or our competitors;                                                                                                               
|
| |  |  | changes in the market valuations of other Internet service companies;                                                                                                
|
| |  |  | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;                                   
|
| |  |  | additions or departures of key personnel; and                                                                                                                        
|
| |  |  | other events or factors, many of which are beyond our control.                                                                                                       

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



| |  | We may not be able to maintain our Nasdaq National Market listing.
| |  | ------------------------------------------------------------------

In order to maintain the listing of our ADSs on the Nasdaq National
Market, we are required to comply with the continuing listing requirements of
Nasdaq, including the $1.00 minimum bid price requirement. In fiscal 2003, the
price of our ADSs on the Nasdaq National Market closed below $1.00 for more
than 30 consecutive days. Effective September 24, 2002, our equity share-to-ADS
exchange ratio was adjusted to one-to-one in order to re-establish compliance
with Nasdaqs minimum bid price requirement. There are also pending or expected
material changes to the listing requirements of the Nasdaq National Market
relating to implementation of the Sarbanes-Oxley Act of 2002 and other reforms
that will impose significant additional substantive and administrative
requirements on all public companies listed on the Nasdaq National Market,
including foreign private issuers. We do not know whether we will be able to
maintain our Nasdaq National Market listing in the future.



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

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



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

The market price of our ADSs could decline as a result of sales of a large
number of equity shares or ADSs or the perception that such sales could occur.
In October 2001 our former parent company, Satyam Computer Services, announced
its intention to divest its investment in our company. In December 2002, we
sold 7,558,140 ADSs to SAIF and 2,034,884 equity shares to VentureTech. In
April 2003, we sold an additional 1,017,442 equity shares to VentureTech
pursuant to the provisions of the December 2002 subscription agreement. We have
also agreed to sell an additional 1,017,441 ADSs to VentureTech or an affiliate
no later than July 31, 2003. The resale of the ADSs sold to SAIF is covered by
a registration statement on Form F-3. Based on documents filed with the
Securities and Exchange Commission, we believe that SAIF sold 2,000,000 ADSs to
Acqua Wellington North American Equities Fund, Ltd. in May 2003. Further, we
have agreed to sponsor an offering of ADSs against
existing equity shares of the Company deposited by a stockholder of our
company under Indian law. The size of sponsored ADS offering shall not be the
lesser of 3,600,000 equity shares and the greater of 4,605,000 equity shares.
We will not receive any proceeds in connection with this offering. Any
significant sales or our equity shares or ADSs might hurt 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 and ADSs to raise capital and to fund acquisitions and investments, and
the parties to any such future transactions could also decide to sell them.



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

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

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Risks Related to Investments in Indian Companies

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



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

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



| |  | Conflicts in South Asia and terrorist attacks in the United States, South
Asia and around the world could adversely affect the economy and cause our
business to suffer.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

South Asia has from time to time experienced instances of civil unrest and
hostilities among neighboring countries, including between India and Pakistan.
In April 1999, India and Pakistan conducted long-range missile tests. Since May
1999, military confrontations between India and Pakistan have occurred in the
Himalayan region of Kargil and other border areas. In October 1999, the
leadership of Pakistan changed as a result of a coup led by the military. In
September 2001, terrorist attacks were conducted in the United States, which
caused various adverse consequences, including adverse economic consequences.
In addition, in October 2001 the United States commenced military operations
against various targets located in Afghanistan. In December 2001, terrorist
attacks were conducted on the Indian Parliament building resulting in
heightened diplomatic and military tension between India and Pakistan. In
2003, the United States and several other NATO countries conducted military
operations against Iraq. These events are widely believed to have provoked a
significant slow-down in worldwide economic activity. Events of this nature
could influence the Indian and/or global economy and could have a material
adverse effect on the market for securities of Indian companies, including our
ADSs, and the market for our services.



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

Currently, there is no public trading market for our equity shares in
India 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 annual report. Under prior Indian laws and regulations our
depositary could not accept deposits of outstanding equity shares and issue
ADRs evidencing ADSs representing such equity shares without prior approval of
the Government of India. The Reserve Bank of India 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 in part because of restrictions on foreign
ownership of the underlying shares. Under current Indian regulations and
practice, the approval of the Reserve Bank of India is required for the sale of
equity shares underlying ADSs by a non-resident of India to a resident of India
as well as for renunciation of rights to a resident of India, unless the sale
of equity shares underlying the ADSs is

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



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

The exchange rate between the rupee and the U.S. dollar has changed
substantially in recent years and may fluctuate substantially in the future.
During the three-year period from June 1, 2000 through March 31, 2003, the
value of the rupee against the U.S. dollar declined by approximately 9.3%,
although the rupee appreciated against the dollar in late 2002 and early 2003.
Devaluations of the rupee will result in higher expenses to our company for the
purchase of capital equipment, such as servers, routers, modems and other
telecommunications and computer equipment, which is generally manufactured in
the U.S. In addition, our market valuation could be materially adversely
affected by the devaluation of the rupee if U.S. investors analyze our value
based on the U.S. dollar equivalent of our financial condition and results of
operations. Appreciation of the rupee against the dollar will result in
foreign exchange losses to the extent we hold excess cash in dollar-denominated
investments. For additional information, please see Exchange Rates.



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

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



| |  |  | Our Internet service provider license has a term of 15 years and was
originally issued in 1998. Our Internet service provider license was
reissued in 2002 enabling us to offer telephony services over the
Internet and increasing our maximum permitted level of foreign equity
investment to 74%. We have no assurance that the license will be
renewed in the future. If we are unable to renew our Internet service
provider license for any reason, we will be unable to operate as an
Internet service provider in India and will lose one of our primary
sources of revenue.                                                                               
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Telecom Regulatory Authority of India, or TRAI, a statutory
authority constituted under the Telecom Regulatory Authority of India
Act, 1997, maintains the right to regulate the prices we charge our
subscribers. The success of our business model depends on our ability
to price our services at levels we believe are appropriate. If the
TRAI sets a floor price , we may not be able to attract and retain
subscribers. Likewise, if the TRAI sets a ceiling price , we may not
be able to generate sufficient revenues to fund our operations.
Similarly, an action of the Indian Parliament may impact our ability
to set the prices for our services.
|
| |  |  | The Government of India maintains the right to take over our entire
operations or revoke, terminate or suspend our license for national
security and similar reasons without compensation to us. If the
Government of India were to take any of these actions, we would be
prevented from conducting all or part of our business.                                                                                                                                                                                                                                                                                                                                  

The charges for international gateways and other services presently being
provided by VSNL are the subject of a dispute before the Telecom Regulatory
Authority of India, or TRAI, and the Telecom Disputes Settlement and Appellate
Tribunal between VSNL and private Internet service providers, including our
company, represented by the Internet Service Providers Association of India, or
ISPAI. VSNL has priced these services at levels which we believe are
inconsistent with the terms and conditions on which VSNL has secured the
bandwidth for its international gateways. The Telecom Disputes Settlement and
Appellate Tribunal remanded the matter back to the TRAI, which decided against
the ISPAI. The ISPAI has not yet decided on a further course of action. We are
currently paying for bandwidth from VSNL at the higher rates. We presently do
not believe that the outcome of this
19Table of Contents

dispute will be material to our business
provided that the international gateway services market continues to be opened
to competition.



| |  | Changes in Indian income taxes will increase our tax liability and
decrease any profits we might have in the future.
| |  | --------------------------------------------------------------------------------------------------------------------

The statutory corporate income tax rate in India is currently 35.0%. For
fiscal 2003, this tax rate was subject to a 5.0% surcharge resulting in an
effective tax rate of 36.8%. The tax surcharge for fiscal 2004 has been
decreased to 2.5%, resulting in an effective tax rate of 35.9%. We cannot
assure you that the surcharge will be in effect only for a limited period of
time or that additional surcharges will not be implemented by the Government of
India.

Risks Related to the Internet Market in India

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



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

Bandwidth, the measurement of the volume of data capable of being
transported in a communications system in a given amount of time, remains very
expensive in India, especially when compared to bandwidth costs in the United
States. Bandwidth rates are commonly expressed in terms of Kbps (kilobits per
second, or thousands of bits of data per second) or Mbps (megabits per second,
or millions of bits of data per second). Although prices for bandwidth in India
have declined recently, they are high due to, among other things, capacity
constraints.



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

The market penetration rates of personal computers and online access in
India are far lower than such rates in the United States. Alternate methods of
obtaining access to the Internet, such as through set-top boxes for
televisions, are currently not popular in India. There can be no assurance that
the number or penetration rate of personal computers in India will increase
rapidly or at all or that alternate means of accessing the Internet will
develop and become widely available in India. While the personal computer
penetration level in India is relatively low, we are addressing the demand for
public Internet access through the establishment of a retail chain of public
Internet access centers, which we refer to as cybercafés, under the iway
brand name. As of March 31, 2003, 817 iway cybercafés were franchised and 27
iway cybercafés were owned and operated by our company. Although this service
creates a larger market, it also imposes on the operator of the cybercafé the
considerable costs of providing the consumer access to a personal computer and
related hardware and software.



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

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



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

Many of our existing and proposed services are designed to facilitate
electronic commerce in India, although there is relatively little electronic
commerce currently being conducted in India. Demand and market acceptance for
these services by businesses and consumers, therefore, are highly uncertain.
Many Indian businesses have deferred
20Table of Contents

purchasing Internet access and deploying
electronic commerce initiatives for a number of reasons, including the
existence or perception of, among other things:



| |  |  | inconsistent quality of service;                                               
| | - |  | -------------------------------------------------------------------------------
|
| |  |  | the need to deal with multiple and frequently incompatible vendors;            
|
| |  |  | inadequate legal infrastructure relating to electronic commerce in India;      
|
| |  |  | a lack of security of commercial data, such as credit card numbers; and        
|
| |  |  | low number of Indian companies accepting credit card numbers over the Internet.

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

Risks Related to the Internet



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

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



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

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



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

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

21



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| |  | Our service offerings may not be compatible with industry standards
developed in the future.
| |  | --------------------------------------------------------------------------------------------

Our ability to compete successfully depends upon the continued
compatibility and inter-operability of our services with products and
architectures offered by various vendors. Although we intend to support
emerging standards in the market for Internet access, industry standards may
not be established and, if they become established, we may not be able to
conform to these new standards in a timely fashion or maintain a competitive
position in the market. The announcement or introduction of new services by us
or our competitors and any change in industry standards could cause customers
to deter or cancel purchases of existing services.




Item 4. Information on the Company

History and Development

Our company, Sify Limited (formerly known as Satyam Infoway Limited), was
organized as a limited liability company under the laws of the Republic of
India pursuant to the provisions of the Companies Act on December 12, 1995.
Until December 2002, we were a majority-owned subsidiary of Satyam Computer
Services, a leading Indian information technology services company traded on
the New York Stock Exchange and the principal Indian stock exchanges. Our
company was formed as a separate business unit of Satyam Computer Services to
develop and offer connectivity-based corporate services allowing businesses in
India to exchange information, communicate and transact business
electronically. We conduct substantially all of our business in India. The
address of our principal executive office is Tidel Park, 2nd Floor, No. 4,
Canal Bank Road, Taramani, Chennai 600 113 India, and our telephone number is
(91) 44-2254-0770.

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.

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

On November 6, 1998, the Indian government opened the Internet service
provider market place to private competition. 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.



| |  | 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 (representing 4,801,250 equity
shares) at a price of $18.00 per ADS. We received approximately $79.2 million,
net of underwriting discounts, commissions and other offering costs.

In February 2000, we completed a secondary offering and issued 467,175
ADSs (representing 467,175 equity shares) at a price of $320.00 per ADS. We
received 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 2,034,884 equity
shares to VentureTech for consideration of $3.5 million. This transaction was
approved by our stockholders 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 connection with
this transaction, Mr. Ramalinga Raju resigned as the Chairman of our Board of

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Directors. In April 2003, we sold an additional 1,017,442 equity shares to
VentureTech. An affiliate of VentureTech is obligated to purchase an
additional 1,017,441 ADSs from our company prior to July 31, 2003.

In connection with this financing, the parties have entered into a
shareholders agreement providing for, among other things, a Board of Directors
comprised of nine directors to be nominated as follows: SAIFtwo nominees;
VentureTechtwo nominees; Satyam Computer Servicestwo nominees; South
Asia Regional Fundone nominee; one independent nominee; and one nominee who
shall be the Managing Director of Sify. The shareholders agreement has also
granted the investors consent rights with respect to specified corporate
transactions.



| |  | Investment Strategy
| |  | -------------------

We may attempt to grow
 our business through acquisitions. In evaluating investment opportunities, we consider important factors,
such as strategic fit, competitive advantage and financial benefit, through a
formal net present value evaluation. There is no significant difference in the
analysis undertaken in connection with an investment in an affiliate compared
to other uses of cash. Our investment strategy has not undergone major changes
in the last three years.



| |  | IndiaWorld Communications
| |  | -------------------------

In June 2000, we acquired IndiaWorld Communications, a private company
organized under the laws of the Republic of India, through the payment of
Rs.3,767.4 million in cash and issuance of 268,500 equity shares. In fiscal
2002, due to a general decline in market valuations for technology companies,
we reassessed, in accordance with our accounting policy, the goodwill to be
carried forward relating to this acquisition. As a result, we recorded a
charge relating to the impairment of goodwill arising in connection with this
acquisition.



| |  | CricInfo Limited
| |  | ----------------

In July 2000, we acquired a 25% stake in CricInfo Limited, a private
company incorporated in the United Kingdom, through the issuance of 551,180
ADSs (representing 551,180 equity shares).

In October 2001, we entered into a loan transaction with CricInfo Limited
for the issuance of unsecured convertible notes by CricInfo with a principal
amount of up to GBP 1.0 million, subject to the satisfaction of certain
performance measures by CricInfo. These notes, which provided for an interest
rate of 8.0% per annum, were convertible into CricInfo shares by us at any time
and redeemable by CricInfo on October 5, 2004. On May 17, 2002, we entered into
an Amended Subscription Agreement for an additional principal amount of notes
up to GBP 0.6 million that were subject to the same terms as the original
issue, thereby increasing our total subscription to GBP 1.6 million. We also
entered into a Term Loan Agreement with CricInfo granting a term loan facility
of GBP 100,000. The Loan carried an interest rate of 4% per annum. The interest
was payable on the last day of the interest periods of six months each. The
loan was repayable on December 31, 2004. The term loan and the convertible loan
were secured by a debenture document executed by CricInfo.

In February 2003, CricInfo transferred its net assets other than the loan
payable to Sify and miscellaneous current assets and liabilities to a newly
formed company incorporated in the United Kingdom, Wisden Cricinfo Limited. In
consideration of its contribution of assets, CricInfo Limited received a 33%
equity stake in Wisden Cricinfo Limited and GBP 1.8 million. CricInfo Limited
repaid our loan, including accrued interest of Rs. 107.0
million, and transferred its 33% stake in Wisden Cricinfo Limited to us
for a consideration of Rs.22.6 million (GBP 0.3 million). Contemporaneously we
advanced Rs.23.0 million (GBP 0.3 million) to Wisden Cricinfo Limited.



| |  | Indiaplaza.com
| |  | --------------

In July 2000, we entered into an agreement to acquire the outstanding
capital stock of Indiaplaza.com, a private company incorporated in California.
We completed our acquisition of Indiaplaza.com in December 2000 through the
issuance of an aggregate of 113,798 ADSs (representing 113,798 equity shares)
to the former equity holders of IndiaPlaza.com. In June 2003, we completed
the sale of substantially all of the assets of Indiaplaza.com to a third party.

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| |  | Kheladi.com
| |  | -----------

In July 2001, we completed our acquisition of Kheladi.com through the
issuance of 19,073 equity shares. Kheladi.com is a sports portal promoted by
Geet Sethi, the six time World Billiards Champion and a well-known sports
personality in India. The terms of the agreement include contingent payments
upon the achievement of specified profitability and revenue targets. As of
March 31, 2003, these contingencies were not met and no payments have been
made.



| |  | Software Services Business
| |  | --------------------------

In October 2001, we announced our proposal to divest our software services
business, which principally involved business to business e-commerce and
website development services including our strategic relationships with Open
Market and Sterling Commerce, to our former parent company, Satyam Computer
Services. Our software services business represented approximately 18% of our
revenues for fiscal 2002. This transaction was approved by our stockholders at
our Extraordinary General Meeting held on February 28, 2002. In February 2002,
we complete the divestment for the Indian Rupee equivalent of $6.9 million.
The objective of the divestment was to permit us to concentrate on our core
business of Internet services.



| |  | WIPRO Limited Customers
| |  | -----------------------

In July 2002, we entered into an agreement with WIPRO Limited, pursuant to
which, among other things, WIPRO Limited assigned its service contracts with
its corporate connectivity customers to us in exchange for a cash payment based
on the historical revenues generated by these customers.

Business Overview

We are the largest integrated Internet, network and electronic commerce
services company in India, offering end-to-end solutions with a comprehensive
range of services delivered over a common Internet backbone infrastructure.
Our services enable our business and consumer customers to communicate,
transmit and share information, access online content and conduct business
remotely using our private data network or the Internet. Our Internet and
network services include the following:



| |  |  | Corporate Network/Data Services. We offer a suite of
technology and network-based services that provide our corporate
customers with comprehensive Internet and private network access.
Our services enable our corporate customers to offer a full range
of business-to-business and electronic commerce related services.                                       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Internet Access Services. We offer dial-up Internet
access, email and web page hosting to consumers in India through
convenient online registration and user-friendly software. As of
March 31, 2003, we had more than 600,000 consumer Internet
subscribers. In addition, we offer public Internet access to
consumers through a retail chain of iway cybercafés.
|
| |  |  | Online Portal and Content Offerings. We operate an
online portal, www.sify.com, that functions as a principal entry
point and gateway for accessing the Internet by providing useful
web-related services and links. We also offer related content sites
specifically tailored to Indian interests worldwide.                                                     

We began providing corporate network/data services to businesses in April
1998, and as of March 31, 2003 we had more than 800 corporate customers. We
launched our Internet service provider business in November 1998, becoming the
first private Internet service provider to begin service after the Indian
government, opened the market to private competition. We also operate an
online portal, www.sify.com, and related content sites specifically tailored
for Indian interests worldwide. Sify.comis one of Indias leading portals
with services in areas such as news, travel, finance, health and shopping in
addition to e-mail, chat and search.

We currently operate a large national private data network in India. Our
network utilizes Internet protocol, which is an Internet industry standard for
tracking Internet addresses, routing outgoing messages and recognizing incoming
messages. In February 2002, we became the first Indian company to be certified
ISO 9001: 2000 for

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network services, data center operations and customer
relationship management. The ISO 9001: 2000 certification from Det Norske
Veritas (DNV), Netherlands under the RvA accreditation scheme provides
recognition for self-defined benchmarks against international companies with
respect to facilities, metrices, processes and practices.

As of March 31, 2003, we owned and operated 55 points of presence serving
more than 250 cities across India, representing an estimated 90% of the
installed personal computer base in India. Points of presence are
telecommunications facilities located in a particular market which allow our
customers to connect to the Internet through a local telephone call. We
operate international Internet gateways in Ahmedabad, Bangalore, Bhopal,
Kolkata (Calcutta), Chennai (Madras), Cochin, Chandigarh, Delhi, Hyderabad,
Lucknow, Mumbai (Bombay) and Pune.

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

Industry Overview

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

Special Communications Needs of Businesses. As the Internet becomes more
developed and reliable, businesses are increasingly utilizing the Internet for
functions critical to their core business strategies, such as sales and
marketing, customer service and project coordination. The Internet presents a
compelling profit opportunity for businesses by enabling them to reduce
operating costs, access valuable information and reach new markets. To
maintain a significant presence on the Internet, businesses typically purchase
Internet access services and establish a website. Internet access provides a
company with its basic gateway to the Internet, allowing it to transfer e-mail,
access information and connect with employees, customers and suppliers. A
website provides a company with a tangible identity and an interactive presence
on the Internet. Many corporations are also converting their information
systems and databases to web-enabled systems.

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

The ability to exploit the Internet service provider and other data
service markets in India is currently inhibited by bandwidth limitations
imposed by cost and technical obstacles. Generally, bandwidth remains very
expensive in India. Prices for bandwidth are set by two agencies in India, the
Department of Telecommunications, or DOT, and the TRAI and have remained high
due to, among other things, capacity constraints. The entry of private sector
providers into the market for bandwidth in India has not yet impacted
prevailing bandwidth prices.

To date, a significant amount of the usage of Indian content sites on the
World Wide Web has been driven by Internet users outside of India. We expect
the growth in personal computers and Internet users to increase the demand for
Internet content directed towards domestic Indian consumers as well as the
amount of electronic commerce in India.

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Private market participants historically have not been able to exploit the
market opportunities in India because the regulatory environment in India
largely prevented any competition with the national government-controlled
telecom providers. Until November 1998, the only Internet service provider
permitted in India was VSNL, which began providing Internet access on August
15, 1995. On November 6, 1998, the government opened the Indian Internet
service provider market to private competition and granted Internet service
provider licenses. The licensees include cable television operators and joint
ventures between local companies and large international telecom providers.
Internet service provider licenses are granted for 15 years, with only nominal
license fees. Currently, pricing of Internet service provider services is not
regulated by the Government of India, although it has the power to elect to do
so through policy directives. The prices Internet service providers charge
their subscribers and the interconnection charges between service providers are
regulated by the TRAI. The charges for international gateways and other
services presently being provided by VSNL are the subject of a dispute pending
before the TRAI and the Telecom Disputes Settlement and Appellate Tribunal
between VSNL and private Internet service providers, including our company.
VSNL has priced these services at levels which we believe are inconsistent with
the terms and conditions on which VSNL has secured the bandwidth for its
international gateways. The Telecom Disputes Settlement and Appellate Tribunal
remanded the matter back to the TRAI, which decided against the ISPAI. The
ISPAI has not yet decided on a further course of action. We are currently
paying for bandwidth from VSNL at the higher rates and do not believe that the
outcome of this dispute will be material to our business provided that the
international gateway services market continues to be open to competition.

Sify Business Model

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



| |  |  | End-to-end network solutions for business customers. We
provide our business customers with a comprehensive range of
Internet, connectivity, security, hosting and managed service
solutions complemented by a broad base of web-based business
applications. Our corporate services range from dial-up and
dedicated Internet access, virtual private networks, security, web
implementation, electronic commerce solutions and web hosting. Our
end-to-end solutions enable our corporate customers to address their
networking and data communication needs efficiently without having
to assemble products and services from different value-added
resellers, Internet service providers and information technology
firms.                                                                                                                                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | National private Internet protocol network backbone with
International Gateways. We operate a large national Internet
protocol data network in India. As of March 31, 2003, we owned and
operated 55 points of presence serving more than 250 cities across
India, representing an estimated 90% of the installed personal
computer base in India. Our network provides the platform for the
national delivery of Internet access to consumers as well as the
backbone for our full range of corporate network/data services. Our
private network infrastructure allows corporations to establish
virtual private networks without dealing directly with the
government telecom providers.                                                                                                                                                                                                 
|
| |  |  | Internet content and electronic commerce websites customized
for the Indian market. We view the Indian market as a series of
specific market segments with unique cultural and topical interests,
rather than an extension of a homogeneous, worldwide Internet
market. We have assembled a team of India-based employees familiar
with the local culture, language and business environments in our
markets to develop Internet content and electronic commerce websites
tailored for the Indian market. We regularly incorporate new and
original third-party content suited to our local and regional
audiences to enhance our customers online experience and to attract
new users both within India and abroad. As a result of our local
market knowledge, we have been able to increase traffic flow to our
websites and to create brand awareness for our SifyOnlineaccess
service.

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Strategy

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



| |  |  | Invest in the continued enhancement and expansion of our
network infrastructure to support customer growth, enter new markets
and accommodate increased customer usage.We intend to continue to
increase the capacity and geographic reach of our network in order
to support subscriber growth, enter new markets and accommodate
increased customer usage. We are committed to using proven
technologies and equipment and to providing superior network
performance. We have deployed asynchronous transfer mode, or ATM,
switches on nine points of presence along our network. The rest of
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. Our Internet service
provider license permits us to establish and maintain our own direct
connections to the international Internet, either by leasing or
purchasing capacity on transoceanic fiber optic cables or by
purchasing satellite earth stations. We have leased an STM-1 from
VSNL landing at Mumbai (Bombay). In addition, in partnership with
Singapore Telecommunications, Cyberstar and New Skies, we have
deployed private international satellite gateways that provide
regional egress and ingress points. We believe that as the size and
capacity of our network infrastructure grows, its large scale and
national coverage will create economies of scale and barriers to
entry for our competitors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increase penetration in our existing markets by expanding
awareness of the SifyOnline brand name to capitalize on our first
mover advantage in India.We intend to capitalize on our
first-to-market advantage in India to establish national service and
a brand name in advance of other private competitors. As of March
31, 2003, we had more than 600,000 consumer Internet subscribers and
844 iway cybercafés, of which 27 were owned and 817 were franchised.
Approximately 90% of these iways are on broadband, which provides
the user with significantly faster access speeds. Our marketing
strategy includes print, television and radio advertising, direct
mailing campaigns targeting personal computer owners and operating
with cybercafés. We are also actively promoting our broadband
services to homes by either the multi dwelling route or through
cable television operators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Expand our services with new technologies to
enable our customers to use the Internet more effectively.We
continually seek to expand the breadth of our service
offerings with new technologies. For example, we launched a new
generation billing software in our cybercafés where the user can pay
by the minute, which distinguishes our iways from the cybercafés
operated by our competitors. Our cybercafés prominently display the
Sify and SifyOnlinebrands and offer a full range of our Internet
connectivity services. We also introduced a number of other
services, including Internet telephony at select
cybercafés in April 2002, e-mail designed for regional Indian
dialects, a user customized portal site, video mail, Internet
Protocol fax service, Internet messaging and micro-payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | Strengthen our Internet portal and other Internet content
websites with more content tailored to Indian interests worldwide.
Our portals, www.sify.com and www.samachar.com, function as initial
gateways
to the Internet, the users starting point for web browsing and other
Internet services, for our consumer Internet service provider
subscribers and cybercafé users. Our portals are media rich, user
friendly, interactive websites offering hyperlinks to a wide variety
of websites and services, including our own websites. Our websites
cater to a variety of Indian interests within and outside of India.
To achieve our goal of developing the premier Internet portal focused
on the Indian market, we intend to continue to expand and improve the
quality of www.sify.com, and are developing additional content
oriented towards topical and cultural interests of Indians worldwide.
In addition, we are forming strategic alliances with several offline
media partners to deliver content to our users. As the availability
of Internet access expands in India, we believe that increasing
numbers of Internet users will be attracted to our high quality
websites and online content designed specifically for the Indian
consumer. We will                                                                                                                                                                                                                           

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| |   |  | seek to attract advertisers, electronic commerce
merchants and third-party content providers trying to reach our users
in order to generate additional revenues for sify.com.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Expand our customer distribution channels through strategic
alliances to take advantage of the sales and marketing capabilities
of our strategic partners.We intend to continue to expand our
customer acquisition channels, for both our consumer Internet access
and corporate network/data services. We have arrangements with a
leading personal computer manufacturer to bundle our SifyOnline
Internet access service with the sale of its personal computers in
India. We have also formed strategic alliances with computer and
electronics retailers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Pursue selective strategic investments, alliances and
acquisitions to expand our customer base, increase utilization of
our network and add new technologies to our service mix.We believe
that our growth can be supplemented by selective acquisitions of
complementary businesses. We may seek to expand our market presence
in our corporate network business through the acquisition of web
hosting, data center, web implementation and/or systems integration
companies. We will also consider acquisitions of third party
websites and content providers for our portal, www.sify.com, and
acquisitions of Internet service providers that have a significant
or growing customer base in our current or targeted markets. We
believe that as the Internet service provider market in India
evolves, customers will place greater emphasis on Internet service
provider performance, network coverage, reliability, value-added
services and customer support. These trends could lead to a future
consolidation of Internet service providers in India.
|
| |  |  | Superior end-user performance and customer support.We
provide a high level of customer service, network performance and
technical support to maximize customer satisfaction. A significant
number of our employees are engaged in our customer service or
technical support departments, which operate 24-hours-a-day,
seven-days-a-week. Our network engineers continually monitor
network traffic and congestion points to deliver consistent, high
quality network performance. Our backend processes are ISO
9001:2000 compliant for network operations, data center operations
and customer care. Our strategy of providing superior network
performance and customer service is designed to result in
significant customer growth from referrals and industry recognition.                                                                                                                                                                                                                                                                                

Service Offerings

Corporate network/data services. Our corporate network/data services
division addresses the network, security and application services needs of
Indian enterprises by leveraging our national Tier 1 IP network infrastructure.
We offer end-to-end integrated solutions that address critical needs of our
corporate customers, such as wide area network, or WAN, services, security
services and application services. We offer a comprehensive range of Internet
protocol, or IP, virtual private network, or VPN, offerings, including
intranets, extranets and remote access applications. We also offer a suite of
security solutions, including security design, audit, procurement and
integration. Our enterprise solutions portfolio includes a range of application
services, such as enterprise class email platforms, audio and video
conferencing solutions and business web services. Contracts for these services
are negotiated on an individual basis to provide specifically tailored
network/data services to each customer.

In February 2002, we became the first Indian company to be certified ISO
9001: 2000 for network services, data center operations and customer
relationship management. The ISO 9001: 2000 certification from Det Norske
Veritas (DNV), Netherlands under the RvA accreditation scheme provides
recognition for self-defined benchmarks against international companies with
respect to facilities, metrices, processes and practices.

VPN Services. We offer VPN services for both small and large corporate
customers. We offer virtual private network based on Frame, IPSec and MPLS,
which provide corporate connectivity for transaction-based VPNs as well as high
bandwidth transfers. We are the first service provider in India to provide
MPLS-based quality of service in India. We provide complex solutions to
various clients enabling them to run their mission critical applications on our
backbone. VPN services, often in combination with a website, are also the
basis for offering intranet and extranet services. Intranets are corporate
networks that rely on Internet-based technologies to provide secure links
between corporate offices and secure access to internal company data.
Extranets expand the network to selected business partners through secure links
on the Internet. Our nationwide Lotus Notes management system

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provides the
software and framework for our customers to utilize their private network
systems to interlink their offices and exchange information. We also support
the Microsoft Exchange messaging system.

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

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

Security services.We offer security services for audits, consulting,
implementation and managed services. Consulting services include consulting
for security audits, policy design, vulnerability and risk management services.
Implementation services include implementation of security equipment, such as
firewalls, intrusion detection systems, content security, authentication tools
and VPN services.

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

SafeScrypt Limited. In partnership with Verisign, a leading provider of
Internet trust services, we have formed a wholly-owned subsidiary, SafeScrypt
Limited, to provide managed digital certificate-based authentication services
in India. SafeScrypt Limited is the principal affiliate of Verisign in India
and is a member of Verisigns Global Affiliate Network. SafeScrypt Limited was
accredited as the first Certifying Authority for issuance of Certificate for
Digital Signature by the Ministry of Information Technology, Government of
India.

Our corporate network/data services division accounted for approximately
48.4%, 49.6% and 50.0%, respectively, of our revenues in fiscal 2001, 2002 and
2003. The increase in corporate network/data services division revenues as a
percentage of total revenues from fiscal 2001 to fiscal 2003 was primarily due
to the growth of our corporate customer base. Recent trends cause us to
believe that corporate services will continue to be the largest part of our
business for the immediate future.



| |  | Internet access services.
| |  | -------------------------

We offer dial-up Internet access, e-mail and web page hosting to consumers
in India through convenient online registration and user-friendly software.
In November 1998 after deregulation of the Internet service provider market in
India, we launched our Internet service provider business and became the first
private Internet service provider in India. As of March 31, 2003, we had more
than 600,000 consumer Internet subscribers. Dial-up internet
access is sold to customers either for a specified number of hours or for
an unlimited usage within a specified period of time. Customers purchase a
CD-ROM that enables them to access the Internet.

In addition, we offer public Internet access to consumers through
cybercafés, which we refer to as iways. Because the personal computer
penetration rate in India is relatively low, iways are designed to provide
public Internet access to the significant portion of the Indian population that
does not own a personal computer. As of March 31, 2003, we had 844 iways in 20
cities, of which 817 cybercafés were franchised and 27 cybercafés were owned
and operated by our company. We believe that iways will expand access to our
portal and websites to consumers who do not own a personal computer or have
Internet access at home. Iways offer a full range of Internet connectivity
services.

In connection with our franchised iways, we grant each franchisee a
non-exclusive license to operate the cybercafé using our logo, brand and trade
names. We enter into an agreement with the franchisee establishing
the

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rights
and obligations of each party. The cybercafés are owned and operated by the
franchisees. The franchisee procures the retail space, invests in furniture,
interior decor, PCs, point of sale signage and employs/trains the franchisee
staff. The franchisee is responsible for the maintenance of the premises and
interface with customers. We provide the complete backend support, including
bandwidth, the authentication/usage engine and the billing/collection system.
In connection with the establishment of a franchised iway, we receive an
initial franchise fee that covers the following upfront services rendered by
our company:



| |  |  | conducting a market survey and deciding on the best
location for the cybercafé;                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | installing the broadband receiver equipment on the roof
top of the cybercafé and connecting it to one of Sifys
broadcasting towers;
|
| |  |  | obtaining the regulatory approvals for clearance of the
site for wireless transmission at the allotted frequency range;               
|
| |  |  | installing the wiring from the receiver unit to the individual PCs;                                                                   
|
| |  |  | assistance in obtaining facilities, including computers and interiors; and                                                            
|
| |  |  | providing the operations manual with instructions and guidelines for running the cybercafé.                                           

We are also actively promoting our broadband services to homes by either
the multi dwelling route or through cable television operators.

Until recently, the largest national Internet service provider in India
was VSNL, which had been majority-owned by the Indian government. In February
2002, the Government of India sold a 25% stake in VSNL to the TATA group. The
Government of India retained a 26% interest in VSNL. The TATA group has
announced various initiatives in telecom operations in India.

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

Our dial up service offerings come in a number of packages, designed to
attract beginning Internet users and service the needs of advanced users. Our
efforts are to provide more and more value added services to our customers.
All our customers are supported by 24-hour-a-day, seven-day-a-week customer
service. Our services are offered only on a prepaid basis and can be renewed
online. Subscribers can access a single number for customer service and
technical support. Subscribers can also e-mail their questions directly to a
customer service and technical support address at our company.

Since May 2000, we have offered unlimited Internet access to consumers for
a fixed price. Our Unlimited... domestic packs for home personal computer
users offer unlimited Internet access for a period of one and three, months
from the date of registration. We expect the market for consumer Internet
access to remain highly price competitive as late market entrants attempt to
acquire customers. Our consumer Internet service provider offerings include:

|                   |  |                                                          |  |                |       |             |  | 
|------------------ |  | -------------------------------------------------------- |  | -------------- | ----- | ----------- |  | 
|                   |  |                                                          |  |                |       | Price as of
|Service            |  | Summary Description                                      |  | March 31, 2003
|                   |  |                                                          |  |               
|Discover 12        |  | 12 hours of Internet access over a 1-month period        |  | Rs.            | 149   |            
|Discover 25        |  | 25 hours of Internet access over a 3 month period        |  | Rs.            | 299   |            
|Discover 36        |  | 36 hours of Internet access over a 3-month period        |  | Rs.            | 399   |            
|Discover 100       |  | 100 hours of Internet access over a 12-month period      |  | Rs.            | 990   |            
|Discover 200       |  | 200 hours of Internet access over a 24-month period      |  | Rs.            | 1,790 |            
|Discover 500       |  | 500 hours of Internet access over a 36-month period      |  | Rs.            | 3,390 |            
|UnLtd... (1 month) |  | Unlimited hours of Internet access over a 1-month period |  | Rs.            | 799   |            
|UnLtd... (3 month) |  | Unlimited hours of Internet access over a 3-month period |  | Rs.            | 2199  |            
|Net blast 150 hrs  |  | 150 hours of Internet access over a 3-month period       |  | Rs.            | 840   |            
|Net blast 50 hrs   |  | 50 hours of Internet access  over a 1-month period       |  | Rs.            | 315   |            

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|             |  |                                                       |  |                |       |             |  | 
|------------ |  | ----------------------------------------------------- |  | -------------- | ----- | ----------- |  | 
|             |  |                                                       |  |                |       | Price as of
|Service      |  | Summary Description                                   |  | March 31, 2003
|             |  |                                                       |  |               
|Venture 750  |  | 750 hours of Internet access over a 12- month period  |  | Rs.            | 5,465 |            
|Venture 1500 |  | 1500 hours of Internet access over a 12 -month period |  | Rs.            | 9,465 |            

The most common connection technique is for subscribers to dial-up to our
system using a personal computer configured with a modem. A subscriber who is
within local dialing range of one of our points of presence can access the
Internet with a local telephone call. In addition to paying for Internet
access, the customer is responsible for the cost of the call, which currently
is 1.3 rupees (2.7¢) per 3 minutes. We estimate that substantially all of our
subscribers access our services with a local telephone call. Subscribers who
access our services with a long-distance telephone call are responsible for the
long-distance charges. We believe that a critical element of consumer
satisfaction is to have an adequate number of access lines available to assure
prompt and reliable connection to our service.

Our Internet access services division accounted for approximately 38.3%,
32.7% and 33.8%, respectively, of our revenues in fiscal 2001, 2002 and 2003.
The decrease in Internet access services division revenues as a percentage of
total revenues from fiscal 2001 to fiscal 2002 was due to competition and
pricing pressures in the market for consumer Internet access services and the
growth of our corporate customer base. The increase in Internet access
services division revenues as a percentage of total revenues from fiscal 2002
to fiscal 2003 was due to the stabilization of pricing for consumer Internet
access services in fiscal 2003.



| |  | Online portal and content offerings.
| |  | ------------------------------------

We operate an online portal, www.sify.com, that functions as a principal
entry point and gateway for accessing the Internet by providing useful
web-related services and links. We also offer related content sites
specifically tailored to Indian interests worldwide in four local Indian
languages. Our portal site, www.sify.com, is designed to be the initial launch
screen for all of our SifyOnlinecustomers and Iwayusers, but can also be
accessed by Internet users worldwide.

As a portal, we provide a gateway to the Internet by offering information
services, directory tools, e-mail, contests, Internet chat and electronic
commerce activities such as online shopping and classified ads. We also allow
the user to personalize the www.sify.comstart page to include links to the
users most frequently used features on the Internet, including particular
search engines, free mail providers and favorite content sites. For online
merchants, we allow them to create their own e-commerce store hosted on our
www.sify.comvirtual shopping mall web page. Our customization features
encourage users to make www.sify.comtheir first stop on the Internet and allow
us to provide special privileges and benefits to our Internet service provider
subscribers compared to users who access www.sify.comthrough another service
provider. Our objective is to attract as many users as possible to generate
revenues from advertising, sponsorship fees and electronic commerce transaction
commissions.

Channels on www.sify.compresently include:

|            |  |                   |  |                            
|----------- |  | ----------------- |  | ---------------------------
|Group       |  | Channels in Group |  | Content of Group           
|            |  |                   |  |                            
|News & Info |  | News              |  | Our news and information   
|            |  | Samachar          |  | channels provide news and  
|            |  | Tamil             |  | information to our users in
|            |  | Telugu            |  | multiple languages.        
|            |  | Malayalam         |  |                            
|            |  | Hindi             |  |                            
|            |  | Cities            |  |                            
|            |  | Search/Khoj       |  |                            
|            |  | Education         |  |                            
|            |  | Weather           |  |                            
|            |  |                   |  |                            
|Connect     |  | Mail              |  | Our communication channels 
|            |  | Mobile            |  | provide a range of         
|            |  | Messenger         |  | communications services to 
|            |  | Chat              |  | our users, including email 
|            |  | Greetings         |  | and instant messaging.     
|            |  | Clubs             |  |                            

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|              |  |                 |  |                                                                                        
|------------- |  | --------------- |  | ---------------------------------------------------------------------------------------
|              |  | Return2India    |  |                                                                                        
|              |  | Voice of India  |  |                                                                                        
|              |  |                 |  |                                                                                        
|Entertainment |  | Movies          |  | Our entertainment channels                                                             
|              |  | Carnatic music  |  | provide infotainment to                                                              
|              |  | Games           |  | our users, including games                                                             
|              |  | Youth           |  | and contests.                                                                          
|              |  | People & Places |  |                                                                                        
|              |  |                 |  |                                                                                        
|Lifestyle     |  | Astrology       |  | Our lifestyle channels                                                                 
|              |  | Bawarchi        |  | cater to the hobby                                                                     
|              |  | Home Decor      |  | interests of users in the                                                              
|              |  | Women           |  | fields of astrology, home                                                              
|              |  | Carstreet       |  | improvement, food and                                                                  
|              |  |                 |  | automobiles.                                                                           
|              |  |                 |  |                                                                                        
|Services      |  | Shopping        |  | Our services channels                                                                  
|              |  | IP Travel       |  | provide ecommerce services                                                             
|              |  | Real Estate     |  | to our users. SifyMall is                                                              
|              |  | Matrimonial     |  | a destination shopping site                                                            
|              |  | Samachar Gifts  |  | for Indian Residents. Jobs                                                             
|              |  | Jobs            |  | and Matrimonial are partner                                                            
|              |  | Vacations       |  | channels. Vacations is a                                                               
|              |  |                 |  | newly introduced channel.                                                              
|              |  |                 |  |                                                                                        
|Finance       |  | Equity          |  | Our finance channels offer                                                             
|              |  | Mutual Funds    |  | a range of financial                                                                   
|              |  | Fixed Income    |  | services to our users.                                                                 
|              |  | Forex           |  |                                                                                        
|              |  | Tax             |  |                                                                                        
|              |  | Bullion         |  |                                                                                        
|              |  | Insurance       |  |                                                                                        
|              |  |                 |  |                                                                                        
|Sports        |  | Cricket         |  | Our sports channels offer                                                              
|              |  | Motorsport      |  | cricket and other sports                                                               
|              |  | Football        |  | news and information to our                                                            
|              |  | Hockey          |  | users.                                                                                 
|              |  | Tennis          |  |                                                                                        
|              |  | Others          |  |                                                                                        
|              |  |                 |  |                                                                                        
|Services      |  | Dial-up         |  | Our services channels                                                                  
|              |  | I-way           |  | provide information about                                                              
|              |  | Way2Talk        |  | certain services to our                                                                
|              |  | Broadband       |  | users.                                                                                 
|              |  |                 |  |                                                                                        
|Interactives  |  |                 |  | Our interactives channels                                                              
|              |  |                 |  | provide a range of                                                                     
|              |  |                 |  | interactive tools to our
users, such as discussion
boards, photogalleries and
contests.

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

In fiscal 2001, 2002 and 2003, our online portal and content offerings
division accounted for approximately 11.8%, 13.1% and 8.3%, respectively, of
our total revenues. The increase in online portal and content offerings
division revenues as a percentage of total revenues from fiscal 2001 to fiscal
2002 was primarily due to [an increase in advertising and sponsorship revenue
as a result of the] growth of our corporate customer base. The decrease in
online portal and content offerings division revenues as a percentage of total
revenues from fiscal 2002 to fiscal 2003 was due to a decrease in advertising
revenues as a result of decreasing advertising expenditures by our customers
combined with lower advertising rates.

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Strategic Vendor Partnerships

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

Corporate Customers

We have established a diversified base of corporate customers in a variety
of data intensive industries, including financial services, publishing, retail,
shipping and manufacturing. Our corporate customer base has grown to over 800
customers. Based on fiscal 2003 revenues generated by our corporate
network/data services division, our largest corporate customers were Accel
ICIM, Accenture, DCM Sriram Consolidated, General Electric, Gillette India,
Gric Communication, Hutch, I-Flex solutions, iPass, ITC Infotech, Lucent,
Novell Software, Oracle, Ranbaxy, Sapient, Usha International, UUNet, Whirlpool
and Wipro. No single customer accounted for more than 10% of our revenues in
fiscal 2003. The increased scope of the services we offer, particularly the
provision of broadband services to our existing customers, and our acquisition
of Wipros corporate customers has increased our market base.

Customer Service and Technical Support

We believe that excellent customer support is critical to our success in
attracting and retaining subscribers. We currently provide customer service
and technical support via a local telephone call in all 55 cities in which we
have a point of presence. Our web-based help desk and MIS system provides
online information to our clients. Subscribers can also e-mail their questions
directly to a customer service and technical support address at our company.
Our customer service and technical support staff handles all questions
regarding a subscribers account and the provision of our services and is
available 24-hours-a-day, seven-days-a-week.

Sales and Marketing

Corporate Offerings. The principal focus of our sales and marketing staff
is existing and potential corporate customers. We seek to penetrate this
market through trade publication ads, industry trade shows and seminars for the
benefit of industry associations and potential customers. As of March 31,
2003, we had 77 employees dedicated to sales and marketing exclusively for our
corporate offerings.

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

In addition, we intend to continue to operate cybercafés under the iway
brand name, and to enter into relationships with independent cybercafés to
co-brand our websites with their businesses, in order to expand access to our
portal and websites by consumers who do not own a personal computer or have
Internet access at home. To increase Internet access and use of our websites
by personal computer buyers, we entered into an arrangement with a leading
personal computer manufacturers to have our Internet access software bundled
with its computers sold in India.

Technology and Network Infrastructure

We operate a national Internet protocol private data network with 55
points of presence serving more than 250 cities across India, representing an
estimated 90% of the installed personal computer base in India. A point of

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presence is commonly defined as the ability to access online services in a
market through a local telephone call or local leased lines. We operate our
network facilities and customer service operations which gives us greater
control over the utilization and quality of our network. We have designed and
built our network using advanced technologies and equipment which allows us to
continue to expand the geographic range of our network, integrate improved data
processing technologies and enhance speed and capacity with little or no
disruption to our customers.

Geographic Coverage. Through our national network of points of presence,
our business and consumer Internet access customers are able to access the
Internet in 55 of the largest markets in India via a local phone call. We have
backbone points of presence in Ahmedabad, Bangalore, Bhopal, Kolkata
(Calcutta), Chennai (Madras), Cochin, Chandigarh, Delhi, Hyderabad, Lucknow,
Mumbai (Bombay) and Pune. These backbone points of presence, or primary nodes,
reside at the core of a larger Internet protocol network with a meshed topology
architecture. We also have additional points of presence, or secondary nodes,
in Aurangabad, Baroda, Belgaum, Bhubaneshwar, Calicut, Coimbatore, Davengere,
Ghaziabad, Goa, Gurgaon, Guwahati, Gwalior, Hubli, Indore, Jabalpur, Jaipur,
Jamnagar, Jamshedpur, Jodhpur, Kanpur, Kakinada, Karnal, Kota, Ludhiana,
Madurai, Mangalore, Mysore, Nagpur, Nasik, Patna, Pondicherry, Raipur, Rajkot,
Salem, Shimoga, Siliguri, Surat, Thiruvananthapuram, Tiruvalla, Trichy,
Varanasi, Vijayawada and Vishakapatnam. 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 located near a Bharat
Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) or
private basic service operator (BSO) telephone switching station. Each point
of presence contains a modem bank which receives and aggregates incoming calls
from customers who access our system by modem connection through a local call
on the public telephone system. The last mile of the Internet could be a
leased line, ISDN or point-to-multipoint radio link in the 5.7 gigahertz range
which we have licensed from the Wireless Planning Commission. 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 Cisco routers to
route traffic between nodes interconnected using a high speed interface. Our
applications and network verification servers are manufactured by Sun, Dell and
Hewlett-Packard.

The primary nodes on the backbone network are connected by up to 42 Mbps
high speed fiber optic lines that we lease from long distance operators. The
secondary nodes are connected by 2 Mbps or lower leased lines. A number of
nodes are accessible from at least two other nodes, allowing us to reroute
traffic. We reduce our exposure to failures on the local loop by usually
locating our points of presence within one segment of the central telephone
exchange and purchasing connectivity from multiple exchanges. To further
maximize our network uptime, we are continuing to install fiber optic
connections directly from each of our primary nodes to the central exchange.

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

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

Competition

General. We face competition in each of our markets and expect that this
competition will intensify as the markets in India for corporate network/data
services, Internet access services and online content develop and

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expand. We compete primarily on the basis of service, reliability and customer support.
Price and ease of use are also competitive factors.

Corporate network/data services. Our competitors for many private network
services include government services, companies that have built and operate
their own private data networks, satellite communications agencies, such as
Bharti BT, Comsat, HCL Comnet and Hughes, and terrestrial network providers,
such as Bharti Broadband, Global Electronic Commerce Services and HCL
Infinity and Tata Internet.

Internet Access Services. Our principal competitor is VSNL, a telecom
provider that was controlled by the Government of India until recently. As of
February 28, 2003, approximately 395 companies had obtained Internet service
provider licenses in India. We expect other competitors to emerge in the
future. We also expect prices to continue to fall as more competitors enter
the market. Further, we believe that it is inevitable that the large, foreign
providers of Internet service provider services will eventually attempt to
enter the Indian market through local joint ventures or other means.

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

In the past, VSNL aggressively reduced consumer Internet access prices
despite the lack of offsetting reductions in prevailing bandwidth tariffs
payable by private competitors, such as our company. We believe that these
practices constitute an improper cross-subsidy funded by VSNLs present
monopoly in long distance telephone service. The charges for international
gateways and other services presently being provided by VSNL are the subject of
a dispute pending before the TRAI and the Telecom Disputes Settlement and
Appellate Tribunal between VSNL and private Internet service providers,
including our company. The Telecom Disputes Settlement and Appellate Tribunal
remanded the matter back to the TRAI, which decided against the ISPAI. The
ISPAI has not yet decided on a further course of action. We are currently
paying for bandwidth from VSNL at the higher rates and do not believe that the
outcome of this dispute will be material to our business provided that the
international gateway services market continues to be open to competition. In
addition, we could face competition from companies that develop new and
innovative techniques to access the Internet. Although growing rapidly,
International Data Corporation estimates that India had an installed base of
only approximately 4.2 million personal computers in 2000. Technology
permitting a connection to the Internet through alternative, less capital
intensive means is likely to be attractive to Indian consumers. A number of
companies are planning alternative Internet access devices, such as set-top
boxes for televisions, to create demand for Internet services in excess of that
which could be supported by the installed base of personal computers. The
provider who develops this technology is likely to have a significant advantage
in the marketplace.

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

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



| |  |  | the ability to offer a wider array of services;                     
| | - |  | --------------------------------------------------------------------
|
| |  |  | larger production and technical staff;                              
|
| |  |  | greater name recognition and larger marketing budgets and resources;
|
| |  |  | larger subscriber bases; and                                        

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| |  |  | substantially greater financial, technical and other resources.
| | - |  | ---------------------------------------------------------------

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

Intellectual Property

Our intellectual property rights are important to our business. We rely on
a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect our intellectual property. We
have filed trademark applications for SifyOnline, Sify.Net,
Sifyonline.com, sify.com and Sifyiway in India. These applications are
currently pending.

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. Our subsidiary IndiaWorld
Communications was involved in litigation relating to the IndiaWorld trademark
in Federal Court in San Diego, California with a third party located in the
United States, which was settled during the quarter ended December 31, 2002
without any liability to Sify or IndiaWorld Communications.

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, 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.

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

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



| |  |  | make recommendations on (i) the need and timing for the
introduction of new service providers, (ii) the terms and conditions
of licenses granted to service providers, (iii) the revocation of
licenses for non-compliance, (iv) measures to facilitate competition
and promote efficiency in the operation of telecommunications
services so as to facilitate growth in such services, (v)
technological improvements in the services provided by service
providers, (vi) the type of equipment to be used by service
providers, (vii) measures for the development of telecommunications
technology and the telecommunications industry and (viii) the
efficient management of the available spectrum;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | discharge the following functions: (i) ensure compliance of
the terms and conditions of licenses, (ii) fix the terms and
conditions of interconnectivity between service providers, (iii)
ensure technical compatibility and effective interconnection between
service providers, (iv) regulate revenue sharing arrangements
between service providers, (v) establish standards of quality of
service, (vi) establish time periods for providing local and long
distance telecommunications circuits between service providers,
(vii) maintain and keep for public inspection a register of
interconnect agreements and (viii) ensure effective compliance of
universal service obligations;            
|
| |  |  | levy fees and other charges at such rates and in respect of
such services as may be determined by regulation; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | perform such other functions as may be entrusted to it by the
Government of India or as may be necessary to carry out the
provisions of the Telecom Regulatory Authority of India Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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



| |  |  | to call on service providers to furnish information relating to their operations;
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | to appoint persons to make official inquiries;                                   
|
| |  |  | to inspect the books of service providers; and                                   
|
| |  |  | to issue directives to service providers to ensure their proper functioning.     

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

We began offering Internet access services on November 22, 1998, and as of
March 31, 2003, we operated 55 Internet access nodes. In November 1998, the
Government of India opened the Internet service provider market to private
competition, and the DOT instituted a mandatory license requirement for the
provision of Internet services. We entered into a license agreement with the
DOT on November 12, 1998 with effect on the same day, under which we were
granted a license to provide national Internet services on a non-exclusive
basis. The terms and conditions of our license are generally consistent with
the policy for licensing Internet service providers. The term of our license
is 15 years. Our license can be revoked by the DOT if we breach the terms and
conditions of the license. The DOT retains the right to take over our network
and to modify, revoke, terminate or suspend the terms and conditions of the
license at any time if, in its opinion, it is necessary or expedient to do so
in the interest of general public, or for the proper operation of the
telecommunications sector or for security considerations. The DOT also retains
the right to review the terms of our license based on changes in national
telecommunications policy. We are not allowed to assign or transfer our rights
under our license without the prior written consent of the DOT.

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The Government of India has recently revised foreign investment policies
permitting up to 74% foreign equity in an Internet service provider. Our
license was reissued in April 2002 permitting us to have foreign investment up
to 74% of our total equity and also permitting us to offer Internet telephony,
subject to the terms of operation as detailed in our license.

Our license also requires us to ensure that objectionable, obscene and
unauthorized content, or any other content, messages or communications
infringing copyrights, intellectual property rights and domestic and
international cyberlaws or which is inconsistent with the laws of India, is not
carried on our network.

Although under the terms of our license we are free to fix the prices we
charge our subscribers, the TRAI may set prices for the provision of Internet
access services generally. We are permitted to use encryption to safeguard
information transmitted over our network. However, if we use a higher level of
encryption than that specified by the Government of India, our license requires
us to deposit a set of keys with the Government of India. License fees are
waived through October 31, 2003, and a nominal license fee of Re.1 per annum is
payable from November 1, 2003. Our obligations under the license are secured
by a performance bank guarantee in the amount of Rs.29.2 million ($0.6
million).

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

Seasonality

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

Property, plant and equipment

We own our approximately 100,000 square foot corporate headquarters
located in Chennai (Madras), India. We lease an approximately 3,500 square
foot network operations center in Chennai and an approximately 25,000 square
foot operations center in Mumbai (Bombay). Our Chennai facility houses our
central network servers as well as our network staff which monitors network
traffic, service quality and equipment at all our points of presence, or POPs,
to ensure a reliable Internet service. Most of our POPs are staffed
24-hours-a-day, seven-days-a-week. Approximately 80% of our POPs are owned,
and approximately 20% of our POPs are leased. 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. We have POPs
in Ahmedabad, Aurangabad, Bangalore, Baroda, Belgaum, Bhopal, Bhubaneshwar,
Kolkata (Calcutta), Calicut, Chandigarh, Cochin, Coimbatore, Davengere, Delhi,
Goa, Gurgaon, Guwahati, Hubli, Hyderabad, Indore, Jabalpur, Jaipur, Jamnagar,
Jamshedpur, Jodhpur, Kakinada, Karnal, Kota, Kanpur, Lucknow, Ludhiana,
Madurai, Mangalore, Nagpur, Nasik, Patna, Pondicherry, Pune, Raipur, Rajkot,
Salem, Shimoga, Siliguri, Surat,
Thiruvananthapuram, Tiruvalla, Trichy, Varanasi and Vijayawada. As we
expand our operations, we anticipate leasing additional facilities in each city
in which we develop a point of presence.

During fiscal 2001, we invested approximately Rs.173.0 million in land
located in Hyderabad for one of our subsidiaries. We subsequently decided not
to pursue this business opportunity and are in negotiations for the sale of
this land.




Item 5. Operating and Financial Review and Prospects

Investors are cautioned that this discussion contains forward-looking
statements that involve risks and uncertainties. When used in this discussion,
the words believe, estimate, intend, will and expect and other
similar expressions as they relate to our company or its business are intended
to identify such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Actual results, performance or
achievements could differ
38Table of Contents

materially from those expressed or implied in such
forward-looking statements. Factors that could cause or contribute to such
differences include those described under the heading Risk Factors in this
report. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of their dates. The following
discussion and analysis should be read in conjunction with our financial
statements included herein and the notes thereto.

Overview

Please see the section entitled Item 4. Information on the Company 
Business Overview in this annual report.

Operating Results

The primary operating segments of our company include:



| |  |  | corporate network/data services, which include private
network services, messaging services and web hosting for
businesses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Internet access services;                                                                                                  
|
| |  |  | Online portal services and content offerings; and                                                                          
|
| |  |  | Other services, such as development of e-learning software.                                                                

In Note 29 to our consolidated financial statements, we provide
supplemental segment data which provides separate revenue and operating income
(loss) information for each of these business segments. This information is
available in Item 18. Financial Statements of this annual report and is
incorporated herein by reference.

Revenues



| |  | Corporate network/data services
| |  | -------------------------------

Corporate network/data services revenues primarily include connectivity
services and, to a lesser extent, the revenues from the sale of hardware and
software purchased from third party vendors, installation of the link and other
ancillary services, such as e-mail, fax and domain registration. Generally,
these elements are sold as a package consisting of all or some of the elements.

The revenue attributable to hardware/software is recognized on delivery.
The revenue attributable to the installation of the link is recognized on
completion of the installation work Revenue from ancillary services, such as
email facilities, fax facility and domain registration, are recognized over the
period such facilities are provided. All revenues are shown exclusive of sales
tax and service tax and net of applicable discounts and allowances.

Web hosting service revenues primarily include co-location services and
connectivity services. On occasion, we also sell related hardware/software to
our web hosting customers. Revenue from these sales is recognized on delivery.
Revenue from hosting services is recognized over the period during which the
service is provided.



| |  | Internet access services
| |  | ------------------------

Internet access services include dial-up Internet access revenues and
public Internet access revenues. Dial-up internet access is sold to customers
either for a specified number of hours or for an unlimited usage within a
specified period of time. Customers purchase a CD-ROM that enables them to
access the Internet. The amounts received from customers on the sale of these
CD-ROMs are not refundable. We recognize revenue from sale of CD-ROMs based on
usage by the customer. At the end of the specified period, the remaining
unused hours, if any, are recognized as revenue. Revenue from unlimited
internet access and electronic mail access is recognized over the specified
period.

Public Internet access is provided to customers through a chain of
franchisee cybercafé outlets and, to a lesser extent, Sify-owned cybercafés.
Initial franchise fee revenue is recognized at the time of commencement of
operations by the franchise.

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| |  | Online portal services and content offerings
| |  | --------------------------------------------

Online portal services and content offerings revenues include advertising
revenues from the various channels of our internet portal, www.sify.com. We
enter into contracts with customers to serve advertisements in the portal, and
we are paid on the basis of impressions, click-throughs or leads.



| |  | Other services
| |  | --------------

Other services include revenue from our subsidiaries, Sify E-learning
Limited and Safescrypt Limited. We provide e-learning software development
services to facilitate web-based learning in various organisations. Revenue
from such projects is recognized on the proportionate performance method.

Expenses



| |  | Corporate network/data services
| |  | -------------------------------

Cost of revenues for the corporate network/data services division consists
of telecommunications costs necessary to provide services, customer support
costs, cost of goods in respect of communication hardware and security services
sold and the cost of providing network operations. Depreciation of plant and
equipment has not been included in the cost of revenues since a significant
part of the fixed assets are not directly identifiable.



| |  | Internet access services
| |  | ------------------------

Cost of revenues for the Internet access services division consists
primarily of recurring telecommunications costs necessary to provide service to
subscribers. Telecommunications costs include the costs of international
bandwidth procured from VSNL and satellite gateway providers and is required
for access to the Internet, providing local telephone lines to our points of
presence, the costs of using third-party networks pursuant to service
agreements and leased line costs. Although the trend towards lower bandwidth
costs in India has slowed, the market for bandwidth in India remains volatile
and future pricing trends are not susceptible to quantification.

Another recurring cost included in cost of revenues is the personnel and
related operating expenses associated with customer support and network
operations. We expect that customer support and network operations expenses
will decrease as a percentage of revenues as we more efficiently utilize these
capabilities across a larger customer base and across multiple business
segments.



| |  | Online portal services and content offerings
| |  | --------------------------------------------

Cost of revenues for the online portal and content offerings division
includes the cost of procuring and managing content for the websites, the cost
of third-party software that are sold in accordance with EITF 99-19.

General

Selling, general and administrative expenses consists of salaries and
commissions for sales and marketing personnel, salaries and related costs for
executive, financial and administrative personnel, sales, marketing,
advertising and other brand building costs, provision for doubtful debts,
depreciation and amortization of intangibles and travel costs, and occupancy
and overhead costs.

A total of 1.8 million equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. As of March 31, 2003, we had outstanding
an aggregate of 390,560 options (net of 562,040 options forfeited or expired by
employees and 200 options exercised for equity shares) under our ASOP with a
weighted average exercise price equal to approximately Rs.1,359 per equity
share. The unamortized deferred compensation related to these grants amounted
to Rs.24.8 million as of March 31, 2003.

We depreciate our tangible assets on a straight-line basis over the useful
life of assets, ranging from two to five years and, in the case of buildings,
28 years. Historically, we have amortized the goodwill recognized in
acquisition transactions on a straight-line basis over five years. In
accordance with our accounting policy, during

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fiscal 2002, our management
assessed the goodwill that we were carrying on our books in connection with the
significant acquisitions and investments made by us in Internet content and
commerce companies in 1999 and 2000, including IndiaWorld Communications and
Indiaplaza.com. Based on that evaluation, which was measured at the enterprise
level, we concluded that these intangible assets were impaired. Accordingly,
during the fiscal 2002, we recorded a non-cash charge of Rs.4,112.7 million to
write-off all of the goodwill related to these acquisitions. Impairment of
Rs.15.0 million was recognized in fiscal 2002 in respect of other investments.
In addition, during fiscal 2002, we recorded a non-cash charge of Rs.1,089.9
million to reflect an impairment of investment in affiliate related to our
investment in CricInfo Limited.

We assess for impairment of long lived assets under SFAS No. 144. The
carrying value of long-lived assets are compared with the adjusted estimated
future cash flows at the identifiable business segment level. If the sum of
such undiscounted cash flows is less than the aggregate carrying amount, the
asset is not recoverable and the impairment loss is recognized. During fiscal
2003, we recorded an impairment charge of Rs.247 million ($5.2 million).

In addition to our operations and those of our consolidated subsidiaries,
our financial statements include our pro ratashare of the financial results of
those companies in which we have significant, non-controlling minority
interests, such as Wisden Cricinfo Limited and Refco Sify Securities Private
Limited. These investments are accounted for under the equity method of
accounting. In December 2002, we divested our entire stake in Placements.com
Private Limited.

Since our inception, we have experienced negative cash flow from
operations and have incurred net losses. Our ability to generate positive cash
flow from operations and achieve profitability is dependent on our ability to
continue to grow our revenues base and achieve further operating efficiencies.
For fiscal 1999 through 2003, we incurred negative cash flow from continuing
operations of approximately, Rs.172.1 million, Rs.596.9 million, Rs.1,133.4
million, Rs.775.7 million and Rs. 238.3 million ($5.0 million), respectively.
For fiscal 1999 through 2003, we incurred net losses of approximately Rs.187.4
million, Rs.381.9 million, Rs.2,509.0 million, Rs.7,202.5 million and Rs.
1,329.4 ($28.0 million), respectively. We may not be able to realize
sufficient future revenues to recover our present investment in network
infrastructure and online content offerings or achieve positive cash flow or
profitability in the future. As of March 31, 2003, we had an accumulated
deficit of approximately Rs.11,737.8 million ($247.0 million). For additional
information, see Item 3. Key Information  Risk Factors.

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

Results of Operations

Year ended March 31, 2003 compared to year ended March 31, 2002

Revenues. We recognized Rs.1,994.2 million ($42.0 million) in revenues
for the year ended March 31, 2003, as compared to Rs.1,577.5 million for the
year ended March 31, 2002, representing an increase of Rs.416.7 million, or
26.4%. This increase was attributable to a Rs.215.23 million increase in
revenues generated by our corporate network/data services business and a
Rs.158.4 million increase in revenues generated by our Internet access services
business. Our corporate network/data services business obtained a significant
number of new orders
from prominent customers with operations throughout India. The increase
in Internet access revenues was mainly on account of an increase in prices
charged to customers in the dial-up business and increased revenues from iway
cafes. Our online portal and content offerings division accounted for Rs 164.9
million of revenues for the year ended March 31, 2003, as compared to Rs. 207.1
million for the year ended March 31, 2002, representing a decrease of Rs. 42.2
million, or 20.4%. Revenues generated by our other businesses and subsidiaries
increased by Rs.85.31 million, or 119%, primarily as a result of revenues
generated by our wholly owned subsidiary, Satyam Education Services Limited.
Satyam Education Services derives its revenues from the design and development
of content for Element K, a company based in the United States that provides
tutorials over the web. The contract between Satyam Education Services Limited
and Element K expires in September 2003. The renewal of the contract is under
discussion and continued revenues from this business will depend on the terms
of this renewal agreement.

Cost of Revenues. Cost of revenues were Rs.1,264.1 million ($26.6
million), or 63.4 % of revenues, for the year ended March 31, 2003, compared to
Rs.1,192.7 million, or 75.6 % of revenues, for the year ended March 31, 2002,
representing an increase of Rs.71.4 million, or 6.0%. This increase was due to
a Rs.99.8 million increase in
41Table of Contents

cost of goods sold as result of a Rs.50.5 million
increase in direct expenses paid to franchisees for operating franchised iway
cafes and an increase in direct personnel costs of our e-learning subsidiary as
we hired additional employees, offset by a Rs.76.4 million decrease in
international bandwidth and leased line costs resulting from our negotiations
with suppliers and marginal changes in direct personnel and other costs.

Gross Profit.Gross profit for the year ended March 31, 2003 was Rs.730.1
million, compared to Rs.384.8 million for the year ended March 31, 2002. This
increase was due to an increase in revenues generated by our Internet access
and corporate data/network services division combined with cost reductions in
international bandwidth through our purchase of satellite bandwidth and cost
reductions in leased lines within the country.

Selling, general and administrative expenses(including provision for
doubtful receivables and impairment of assets). Selling, general and
administrative expenses were Rs.2,038.3 million ($42.9 million) for the year
ended March 31, 2003, compared to Rs.1,962.5 million for the year ended March
31, 2002, representing an increase of Rs.75.9 million, or 3.9%. This increase
was largely on account of a Rs. 247.0 million impairment charge relating to
certain assets identified to have carrying values not considered to be
recoverable. Provision for doubtful receivables and advances increased by Rs.
54.7 million from Rs.101.5 million to Rs.156.2 million as a result of changes
in our credit and provisioning policy. The increase in selling, general and
administrative expenses was offset by a Rs.43.5 million decrease in marketing
and promotional expenses resulting from a reduction in advertisement expenses,
a Rs.54.9 million decrease in personnel expenses by, a Rs.106.77 million
decrease in depreciation and a Rs.20.6 million decrease in general
administrative expenses as a result of the cost cutting measures implemented
during the year.

Amortization / Impairment of goodwill. Amortization / Impairment of
goodwill for the year ended March 31, 2003 was nil, compared to an impairment
of Rs.4,127.7 million and an amortization of Rs. 293.0 for the year ended March
31, 2002. With the adoption of SFAS No. 142, we no longer amortize goodwill
for indefinite lived assets. Goodwill was tested and assessed with no charge
for impairment for the year ended March 31, 2003.

Amortization of Deferred Stock Compensation expenses.Amortization of
deferred stock compensation expenses was Rs.57.7 million ($1.2 million) for the
year ended March 31, 2003, compared to Rs.9.7 million for the year ended March
31, 2002, representing an increase of Rs.48.0 million.

Equity in loss of affiliates.Equity in loss of affiliates was Rs.26.1
million ($0.54 million) for the year ended March 31, 2003, compared to
Rs.1,225.5 million for the year ended March 31, 2002, representing a decrease
of Rs.1,199.4 million, or 97.9 %. This decrease was primarily due to an
impairment charge of investments amounting to Rs.1,089 million during the
previous year. The decrease in operating losses in the affiliates is a result
of the sale of certain investments during the year and an improvement in the
performance of certain investments of our company. We also recorded a gain on
sale of investments during the year amounting to Rs.24.6 million.

Other income (net). Other income was Rs.52.9 million ($1.1 million) for
the year ended March 31, 2003, compared to Rs.32.7 million for the year ended
March 31, 2002, representing an increase of Rs.20.2 million, or 61.8%.

Net Loss. Our net loss was Rs. 1,329.4 million ($28.0 million) for the
year ended March 31, 2003, compared to a net loss of Rs.7,202.5 million for the
year ended March 31, 2002. This decrease is attributable to a Rs.416.7 million
increase in revenue, improved operating margins and non-impairment and
non-amortisation of goodwill and investments in affiliates. Amortisation and
impairment of goodwill during the year ended March 31, 2002 was Rs 4,127.7
million and Rs 293.0 million.

Income/loss from discontinued operations. Loss from discontinued
operations for the year ended March 31, 2003 was nil, compared to Rs.125.4
million for the year ended March 31, 2002.

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

Revenues. We recognized Rs. 1,577.5 million in revenues from continuing
operations for the year ended March 31, 2002, as compared to Rs.1,225.5 million
for the year ended March 31, 2001, representing an increase of
42Table of Contents

Rs.352.0
million, or 28.7%. This increase was due to a Rs.189.5 million in corporate
services revenues, a Rs.46.3 million increase in Internet access revenues and a
Rs.62.7 million increase in revenue from online portal and content offerings.

Cost of Revenues. Cost of revenues were Rs. 1,192.7 million , or 75.6 %
of revenues, for the year ended March 31, 2002, compared to Rs. 1,177.1
million, or 96.1 % of revenues, for the year ended March 31, 2001,
representing an increase of Rs. 15.6 million. This increase was due to a
Rs.103.2 million increase in cost of goods sold and a Rs. 94.2 million increase
in lease line charges, partially offset by a decrease in direct personnel
expenses and other costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.1962.5 million for the year ended March 31,
2002, compared to Rs.1,887.3 million for the year ended March 31, 2001,
representing an increase of Rs.75.2 million, or 4.0%. This increase resulted
from a Rs.229.5 million increase in personnel expenses, a Rs.155.6 million
increase in depreciation, a Rs.70.0 million increase in provision for bad and
doubtful receivables and a Rs.39.1 million increase in other administrative
expenses, partially offset by a Rs. 419.1 million decrease in marketing and
promotional expenses resulting from a reduction in advertisement expenses.

Amortization / impairment of goodwill. Amortization / impairment of
goodwill was Rs.4,420.6 million for the year ended March 31, 2002, compared to
Rs. 932.0 million for the year ended March 31, 2001. The increase resulted
primarily from Rs. 4,127.7 million of goodwill impaired during the year.

Amortization of deferred compensation expense.Amortization of deferred
compensation expense was Rs.9.7 million for the year ended March 31, 2002,
compared to Rs.61.5 million for the year ended March 31, 2001, representing a
decrease of Rs.51.8 million.

Other income, net. Other income was Rs.32.7 million for the year ended
March 31, 2002, compared to Rs.242.4 million for the year ended March 31, 2001,
representing a decrease of Rs.209.7 million, or 86.5%.

Equity in losses of affiliates.Equity in losses of affiliates was
Rs.1,225.4 for the year ended March 31, 2002, compared to Rs. 263.2 million for
the year ended March 31, 2001, representing an increase of Rs.962.3 million, or
365.6%. This increase is primarily due to a Rs.1,089.9 million impairment of
investment in affiliates during the year ended March 31, 2002. Of the
unamortized goodwill of Rs.1,248 million ($26 million) on April 1, 2001, Rs.159
million ($ 3.3 million) attributable to future cash flows has been retained
and the balance Rs.1,089 million ($22.7 million) impaired. In assessing
recoverability of goodwill, we considered the cash flows receivable on account
of the investment, the current fair value of the entity on an independent basis
and the value of strategic and synergistic factors in assessing for other than
temporary decline in the value of the investment. We do not believe that these
factors are reasonably likely to impact our future results of operations and
financial position.

Income/loss from discontinued operations. Loss from discontinued
operations for the year ended March 31, 2002 was Rs.125.4 million ($2.6
million), compared to Rs.172.5 million in income from discontinued operations
for the year ended March 31, 2001. This is attributable to a Rs.220.9 million
decrease in revenues, a Rs.125.3 million increase in cost of revenues and a
Rs.7.6 million increase in amortization of goodwill and intangibles, offset by
a Rs.51.4 million decrease in selling, general and administrative expenses
and a Rs.4.5 million decrease in amortization of deferred stock compensation
expense.

Net loss. Our net loss was Rs.7,202.5 million ($147.5 million) for the
year ended March 31, 2002, compared to Rs.2,509.0 million for the year ended
March 31, 2001.

Liquidity and Capital Resources

Prior to 1998, we financed our operations through funding from Satyam
Computer Services, our former parent company. No further funding is expected
from Satyam Computer Services in the future. Since 1998, we have financed our
operations through equity sales and borrowings from institutions and banks.
During fiscal 1998, 1999 and 2000, we received Rs.38.5 million, Rs.307.5
million and Rs.10,220.0 million, respectively, in net cash proceeds from the
sale of equity securities. We did not issue any equity shares in financing
transactions in fiscal 2001 or fiscal 2002. During fiscal 2003, we received Rs.
792.0 million in net cash proceeds from the sale of equity securities.

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In February 2002, we divested our software services business to Satyam
Computer Services for the Indian Rupee equivalent of $6.9 million. The
objective of the divestment was to permit our company to concentrate on our
core business of Internet services. This transaction was approved by our
stockholders at an extraordinary general meeting held on February 28, 2002.

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

|                                                     |  |                                        |            |      |  |                |            |      |  |  |            |            |  |  |         |  
|---------------------------------------------------- |  | -------------------------------------- | ---------- | ---- |  | -------------- | ---------- | ---- |  |  | ---------- | ---------- |  |  | ------- | -
|                                                     |  | Fiscal year ended, and as of March 31,
|                                                     |  |                                       
|                                                     |  | 2001                                   |            | 2002 |  | 2003           |            | 2003
|                                                     |  |                                        |            |      |  |                |            |     
|                                                     |  |                                        |            |      |  | Indian Rupees  |            |      |  |  |            |           
|                                                     |  |                                        |            |      |  | (in thousands) |            |      |  |  |            | US Dollars
|                                                     |  |                                        |            |     
|Net loss from continuing operations                  |  |                                        | (2,681,611 | )    |  |                | (7,158,265 | )    |  |  | (1,329,388 | )          |  |  | (27,969 | )
|Net decrease (increase) in working capital           |  |                                        | (167,297   | )    |  |                | 27,232     |      |  |  | 52,320     |            |  |  | 1,100   |  
|Other adjustments for non-cash items                 |  |                                        | 1,715,473  |      |  |                | 6,355,353  |      |  |  | 1,038,795  |            |  |  | 21,856  |  
|Net cash provided by (used in) operating activities  |  |                                        |            |      |  |                |            |      |  |  |            |            |  |  |         |  
|- continuing operations                              |  |                                        | (1,133,435 | )    |  |                | (775,680   | )    |  |  | (238,273   | )          |  |  | (5,013  | )
|- discontinued operations                            |  |                                        | (174,927   | )    |  |                | 237,531    |      |  |  |           |            |  |  |        |  
|Net cash provided by (used in) investing activities  |  |                                        |            |      |  |                |            |      |  |  |            |            |  |  |         |  
|-continuing operations                               |  |                                        | (4,318,732 | )    |  |                | (481,136   | )    |  |  | (273,674   | )          |  |  | (5,757  | )
|- discontinued operations                            |  |                                        | (26,804    | )    |  |                | (71,279    | )    |  |  |           |            |  |  |        |  
|Proceeds from sale of discontinued operations        |  |                                        |            |      |  |                | 349,165    |      |  |  |           |            |  |  |        |  
|Net cash provided by (used in) financing activities  |  |                                        | (216,465   | )    |  |                | (9,097     | )    |  |  | 758,777    |            |  |  | 15,964  |  
|Effect of exchange rate changes on cash              |  |                                        |            |      |  |                | (5,598     | )    |  |  | (7,345     | )          |  |  | (155    | )
|Net increase (decrease) in cash and cash equivalents |  |                                        | (5,870,363 | )    |  |                | (756,094   | )    |  |  | 239,485    |            |  |  | 5,039   |  

Our principal capital and liquidity needs historically have related to
developing our network infrastructure and our corporate network and electronic
commerce services, establishing our customer service and support operations,
developing our sales and marketing activities and for general working capital
needs. We have also expended significant funds in our acquisition and
investment program, including the Indiaworld Communications transaction.

A significant part of our development of 55 points of presence in India
and our related network and infrastructure was completed during fiscal 2001.
During fiscal 2001, we invested approximately Rs.500.0 million in moving to new
owned office space in Chennai and Mumbai. During fiscal 2001, we also invested
approximately Rs.173.0 million in land located in Hyderabad for one of our
subsidiaries. We subsequently decided not to pursue this business opportunity
and are in negotiations for the sale of this land. Since the expansion into
additional points of presence in India is not presently a priority and since
the network has sufficient capacity to handle the traffic
during 2003, there were no significant sums expended on plant and
equipment during the year, other than equipment required to provide broadband
access through wireless technologies on the last mile. In the light of reduced
capital expenditure for our business, we incurred Rs.304.7 million for capital
expenditures for the fiscal year ending March 31, 2003.

Although we have 55 points of presence in India, a need for expansion into
smaller towns could arise as our corporate and data network services grow.
There are many ISPs and data/network service providers exiting the business
and, depending on pricing and other terms, we may acquire one or more of these
third parties. We will need to invest in technologies to increase the speed of
the backbone and edge networks. We will also have to invest in wireless and
wireline methods of last mile Internet access delivery. We are also likely to
add an owned access capability in the United States.

During fiscal 2003, our highest operational priority was to reduce cash
burn incurred to build our organization and infrastructure to support our rapid
growth, which has now stabilized. We pursued several initiatives to reduce our
cash burn. The first focus was toward reducing the working capital required by
our business. This was

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done by enhanced focus on collecting receivables and
advancing the billing for the customers of our corporate data/network services
division to the beginning of the quarter from the end of the quarter. Our
improved collection efforts and change in policy to collect fees for certain
services in advance resulted in a decrease in net receivables in recent
periods. The second focus was toward reducing bandwidth costs. This was
achieved by leveraging on the demonopolization of VSNL, negotiation with a
range of suppliers, including VSNL, and increasing the role of fixed wireless
mode of delivery in the last mile. As a result of these initiatives, we have
significantly reduced our cash burn over the last eight quarters. We believe
that the reductions achieved on account of the above are permanent reductions.

We intend to continue to focus on the reduction of our cash burn in fiscal
2004. Nonetheless, we expect to incur continued losses in the near future.
Based upon our present business and funding plans, we believe that our cash and
cash equivalents of Rs.897.6 million ($18.9 million) as of March 31, 2003,
excluding restricted cash included in current assets of Rs. 74.6 million ($1.6
million) and restricted cash included in non-current assets of Rs.100.0 million
($2.1 million), is sufficient to meet our currently known
requirements for at least the next 12 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 balances held in foreign currency were Rs.1,344.3, Rs.252.8 and Rs.
551.0 million as of March 31, 2001, 2002 and 2003, respectively. Cash balances
held in Indian currency were Rs.100.0 million, Rs.557.7 and Rs. 521.2 million as of March 31, 2001, 2002 and 2003, respectively. These
amounts include cash and cash equivalents and restricted cash.

Cash used in operating activities during fiscal 2003 was Rs.238.3 million
($5.0 million). Cash used in operating activities of continuing operations for
fiscal 2003 was attributable to a Rs.1,329.4 million ($28.0 million) net loss
from continuing operations, a Rs.78.8 million decrease in trade accounts
payable, a Rs.65.8 million increase in accounts receivable, a Rs.25.0 million
increase in other assets, a Rs.12.6 million increase in minority interest, a
Rs.11.3 million increase in inventories, a Rs.10.0 million increase in prepaid
expenses, a Rs.7.9 million increase in amounts due from related parties and a
Rs.1.5 million gain in sale of investments, offset a Rs.2.6 million loss on
sale of plant and equipment, a Rs. 6.7 million write-off of inventory, a
Rs.10.9 million increase in advances from customers, a Rs.26.1 million loss on
equity in loss of affiliates, a Rs.32.9 million increase in other liabilities,
a Rs.62.6 million decrease in due from officers and employees a Rs. 144.8
million increase in deferred revenue, a Rs.156.2 million against provision for
doubtful receivables and advances and a Rs.854.2 million of depreciation and
amortisation. Cash used in investing activities of continuing operations during
fiscal 2003 was Rs.273.7 million ($5.8 million), principally as a result of
the purchase of routers, modems, ports, servers and other capital equipment in
connection with the expansion of our network of Rs.284.3 million ($6.0
million), purchase of intangible assets of Rs.16.9 million ($0.4 million) and
a Rs.22.2 million increase in restricted cash, offset by proceeds from sale of
plant and equipment of Rs.12.1 million ($0.3 million), proceeds from sale of
investments of Rs. 8.6 million ($0.3 million) and proceeds from sale of
investments in affiliates of Rs.29.2 million ($0.6 million). Cash provided by
financing activities for fiscal 2003 was Rs. 758.8 million ($16.0 million)
consisted of net proceeds from issuance of common stock of Rs. 760.5 million
($16.0 million), offset by repayment of principal under capital lease
obligations of Rs.1.7 million.

Cash used in operating activities during fiscal 2002 was Rs.538.1 million
attributable to cash used in continuing operations of Rs.775.7 million,
partially offset by cash provided by discontinued operation of Rs.237.6
million. Cash used in operating activities of continuing operations for fiscal
2002 was attributable to a Rs.7,158.3 million net loss from continuing
operations, a Rs.17.9 million minority interest, a Rs.15.9 million increase
in account receivables, a Rs.84.4 million decrease in advances from customers,
a Rs.15.7 million decrease in other liabilities, a Rs.14.5 million decrease in
accrued liabilities and a Rs.39.5 million decrease in deferred revenue, offset
by depreciation, amortization and write off of goodwill of Rs.4,978.0 million,
impairment of investment in affiliate of Rs.1,089.9 million, equity in losses
of affiliates of Rs.178.2 million, loss on sale of plant and equipment of
Rs.3.7 million, provision for doubtful debts of Rs.101.5 million, inventory
write down of Rs.22.0 million, a Rs.50.5 million decrease in inventories, a
Rs.26.1 million decrease in due from officers and employees, a Rs.26.0 million
decrease in other assets and a Rs.94.6 million decrease in prepaid expenses.
Cash used in investing activities of continuing operations during fiscal 2002
was Rs.481.1million, principally as a result of the purchase of routers,
modems, ports, servers and other capital equipment in connection with the
expansion of our network of Rs.181.2 million, investment in affiliates of
Rs.119.7 million, payment of license fees of Rs.59.2 million, an increase

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of Rs.122.3 million in restricted cash and
purchase consideration for acquisition of Rs.11.2 million, offset by proceeds
from sale of plant and equipment of Rs.12.5 million. Cash provided by proceeds
from sale of our software services division was Rs.349.2 million. Cash used in
investing activities of discontinued operations was Rs.71.3 million. Cash used
in financing activities for fiscal 2002 was Rs.9.1 million and represented the
repayment of principal under capital lease obligations.

Cash used in operating activities during fiscal 2001 consisted of cash
used in continuing operations of Rs.1,133.55 million and cash used in
discontinued operations of Rs.174.9 million. Cash used in operating activities
of continuing operations for fiscal 2001 was attributable to Rs.2,681.6 million
of net loss from continuing operations, a Rs.11.1 million increase minority
interest, a Rs.304.1 million increase in accounts receivable, a Rs.83.5 million
increase in due from officers and employees, a Rs.91.7 million increase in
inventories, a Rs.157.3 million increase in other assets and a Rs.5.9 million
decrease in other liabilities, offset by depreciation, amortization and write
off of goodwill of Rs.1,400.0 million, equity in losses of affiliate of
Rs.294.5 million, loss on sale of plant and equipment of Rs.0.6 million,
provision for doubtful debts of Rs.31.5 million, a Rs.42.2 million decrease in
prepaid expenses, a Rs.320.5 million increase in accrued liabilities, a Rs.33.3
million increase in deferred revenue and a Rs.79.2 million increase in advance
from customers. Cash used in investing activities of continuing operations
during fiscal 2001 was Rs.4,318.7 million , principally as a result of the
purchase of routers, modems, ports, servers and other capital equipment in
connection with the expansion of our network of Rs.1,888 million, investment in
affiliates of Rs.163.6 million, payment of license fees of Rs.28.0 million and
purchase consideration for acquisition of Rs.2,233.1 million, a increase of
Rs.7.0 million in cash restricted offset by proceeds from sale of plant and
equipment of Rs.0.9 million and proceeds from sale of investments of Rs.0.1
million. Cash used in investing activities of discontinued operations was
Rs.26.8 million. Cash used in financing activities for fiscal 2001 was
Rs.216.5 million attributable to repayment of principal of long term debt of
Rs.208.1 million, repayment of principal under capital lease obligations of
Rs.6.5 million and repayment of short-term loans of Rs.1.8 million, offset by
cash provided by proceeds from issuance of common stock of Rs.0.1 million.

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

Government of India policies previously limited the total foreign equity in an
Internet service provider to 49%. In May 2001, the Department of Commerce and
Industry increased the limit on foreign direct investment for Internet
companies, such as our company, from 49% to 74%. Our license was reissued in
April 2002, increasing the maximum permitted level of foreign equity investment
in our company to 74% and also permitting us to provide Internet telephony,
subject to the terms of operation as detailed in the license. If additional
funds are raised through the issuance of equity or convertible debt securities,
the percentage ownership of our stockholders and the holders of our ADSs will
be reduced and these securities may have rights, preferences or privileges
senior to those of our stockholders and the holders of our ADSs. We cannot
assure you that additional financing will be available on terms favorable to
us, or at all. If adequate funds are not available or are not available on
acceptable terms, our ability to fund and expand our operations, take advantage
of unanticipated opportunities, develop or enhance Internet content, features
or services, or otherwise respond to competitive pressures will be
significantly limited. Our business, results of operations and financial
condition could be materially adversely affected by any such limitation.
Please see Item 3. Key InformationRisk FactorsForward-looking statements
contained in this annual report may not be realized.

As of March 31, 2003, we had spent approximately Rs.1,562.0 million to
develop and deploy our network infrastructure. As of March 31, 2003, our
future contractual obligations and commercial commitments were as follows:

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|                              |  |                        |     |             |  |             |     |           |  |       |     |  |  |  |   |        |  |      |   | 
|----------------------------- |  | ---------------------- | --- | ----------- |  | ----------- | --- | --------- |  | ----- | --- |  |  |  | - | ------ |  | ---- | - | 
|                              |  | Payments Due by Period |     | Rs. million
|                              |  |                        |    
|                              |  |                        |     |             |  |             |     |           |  |       |     |  |  |  |   |        |  | More
|Contractual                   |  |                        |     |             |  | Less than 1 |     |           |  |       |     |  |  |  |   | than 5
|Obligations                   |  | Total                  |     | year        |  | 1-3 years   |     | 3-5 years |  | years
|                              |  |                        |     |             |  |             |     |           |  |      
|Capital Lease Obligations     |  |                        | 6.3 |             |  |             | 2.5 |           |  |       | 3.8 |  |  |  |  |        |  |      |  | 
|Total Contractual
Obligations |  |                        | 6.3 |             |  |             | 2.5 |           |  |       | 3.8 |  |  |  |  |        |  |      |  | 

|                             |  |                                            |       |             |  |           |      |           |  |       |       |  |  |        |   |  |  |  |   | 
|---------------------------- |  | ------------------------------------------ | ----- | ----------- |  | --------- | ---- | --------- |  | ----- | ----- |  |  | ------ | - |  |  |  | - | 
|                             |  | Amount of Commitment Expiration Per Period |       | Rs. million
|                             |  |                                            |      
|Other Commercial             |  | Total Amounts                              |       | Less than 1 |  |           |      |           |  |       |       |  |  | Over 5
|Commitments                  |  | Committed                                  |       | year        |  | 1-3 years |      | 4-5 years |  | years
|                             |  |                                            |       |             |  |           |      |           |  |      
|Standby Letters of Credit    |  |                                            | 140.4 |             |  |           | 40.4 |           |  |       | 100.0 |  |  |        |  |  |  |  |  | 
|Guarantees                   |  |                                            | 34.2  |             |  |           | 34.2 |           |  |       |      |  |  |        |  |  |  |  |  | 
|Other Commercial
Commitments |  |                                            | 20.2  |             |  |           | 20.2 |           |  |       |      |  |  |        |  |  |  |  |  | 
|Total Commercial
Commitments |  |                                            | 194.8 |             |  |           | 94.8 |           |  |       | 100.0 |  |  |        |  |  |  |  |  | 

Recent Accounting Pronouncements

In November 2002, the Emerging Issues Task Force reached a consensus on
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables,applicable
for fiscal periods beginning after June 2003. This issue addresses when and, if
so, how an arrangement involving multiple deliverables should be divided into
separate units of accounting, where the deliverables (the revenue generating
activities) are sufficiently separable and have standalone value to the
customer. It is also necessary that there exist sufficient evidence of fair
value to separately account for some or all of the deliverables. We are
currently evaluating the impact of Issue No. 00-21.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees Including Indirect
Guarantees of Indebtedness of Others. FIN No. 45 requires a guarantor to
include disclosures of certain obligations, and if applicable, at the inception
of the guarantee, recognize a liability for the fair value of certain other
obligations undertaken in issuing a guarantee. The recognition requirements are
effective for guarantees issued or modified after December 31, 2002. The
adoption of this Interpretation did not have a material impact on our
accounting or disclosure policies.

In January 2003, the FASB issued interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51, that applies to
variable interest entities created after January 31, 2003 and to variable
interest entities in which an enterprise obtains an interest after that date.
We have assessed the implication of this Interpretation and will not have to
consolidate or disclose information about variable interest entities when the
Interpretation becomes applicable to existing entities from July 1, 2003.

On May 15, 2003, the Financial Accounting Standards Board issued
Statement No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.Statement 150 requires issuers
to classify as liabilities (or assets in some circumstance) three classes of
freestanding financial instruments that embody obligations for the issuer.
Generally, Statement 150 is effective for financial instruments entered into or
modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. We will adopt the
provisions of Statement 150 on July 1, 2003. We do not expect to have
significant impact on adoption of Statement 150.

Critical Accounting Policies

Critical accounting policies are defined as those that in our view are
most important to the portrayal of the Companys financial condition and
results and that are most demanding on our calls on judgment. We believe that
the accounting policies discussed below are the most critical accounting
policies.

Revenue recognition

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Corporate network/data services.Corporate network/data services revenues
primarily include connectivity services and, to a lesser extent, the revenues
from the sale of hardware and software purchased from third party vendors,
installation of the link and other ancillary services, such as e-mail, fax and
domain registration. Generally, these elements are sold as a package consisting
of all or some of the elements. This multiple element arrangement is recognized
as separable elements because each element constitutes a separate earnings
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. We provide connectivity for a fixed
period of time at a fixed rate regardless of usage. Connectivity is the last
element that is provided in the case of a bundled contract. The connectivity
charges are the same when sold alone or as part of a package. The revenue
attributable to connectivity services is recognized ratably over the period of
the contract. The hardware and software are standard products that are being
freely traded in and purchased from the market, have standard specifications
and are not otherwise customized for the specific needs of a customer. The
software sold by us is an off-the-shelf software, such as antivirus utilities
and firewalls. The fair value for the hardware and software is available from
the market. The revenue attributable to hardware/software is recognized on
delivery. Installation consists of commissioning the last mile connectivity to
the customer premises from the carrier exchange (primarily Bharat Sanchar Nigam
Limited, or BSNL, a Government of India entity). However, once commissioned
this connection can be used by the customer to access any other service
provider. The installation normally takes 4-6 weeks. When the customer has
such last mile connectivity, we do not charge any installation fee. The revenue
attributable to the installation of the link is recognized on completion of the
installation work. When installation and connectivity services are provided as
a package, the value of the installation service is based on the residual
amount using the residual method as defined in SOP 98-9. Revenue from
ancillary services, such as email facilities, fax facility and domain
registration, are recognized over the period such facilities are provided. All
revenues are shown exclusive of sales tax and service tax and net of applicable
discounts and allowances.

Web hosting service revenues primarily include co-location services and
connectivity services. On occasion, we also sell related hardware/software to
our web hosting customers. At all times, such hardware and software belongs to
the customer. This hardware and software is purchased from outside vendors and
is freely traded in the market. We treat each element of the arrangement as a
separate earnings process based on the guidelines of SOP 97-2, Software Revenue
Recognition. The value of the hosting service is determined based on vendor
specific objective evidence from similar services sold separately by us. When
hardware and/or software is also included with hosting services and sold as a
package, the vendor specific objective evidence of the undelivered element is
considered to arrive at the residual value of the delivered element under SOP
98-9. Revenue from hosting services is recognized over the period during which
the service is provided.

Internet access services.Dial-up Internet access is sold to customers
either for a specified number of hours or for an unlimited usage within a
specified period of time. Customers purchase a CD-ROM that enables them to
access the Internet. The amounts received from customers on the sale of these
CD-ROMs are not refundable. We recognize revenue from sale of CD-ROMs based on
usage by the customer. At the end of the specified period, the remaining
unused hours, if any, are recognized as revenue. Revenue from unlimited
Internet access and electronic mail access is recognized over the specified
period.

Public Internet access is provided to customers through a chain of
franchisee cybercafé outlets and, to a lesser extent, Sify-owned cybercafés.

We enter into an arrangement with franchisees that provides for the
payment of an initial franchisee fee in consideration for establishing the
franchisee relationship and providing specified initial services. The fee is
typically received in full before installation. The fee covers the following
upfront services rendered by us in:



| |  |  | conducting a market survey and deciding on the best
location for the cybercafé;                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | installing the broadband receiver equipment on the roof
top of the cybercafé and connecting it to one of Sifys
broadcasting towers;
|
| |  |  | obtaining the regulatory approvals for clearance of the
site for wireless transmission at the allotted frequency range;               
|
| |  |  | installing the wiring from the receiver unit to the individual PCs;                                                                   

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| |  |  | assisting in obtaining facilities, including computers and interiors; and                  
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | providing the operations manual with instructions and guidelines for running the cybercafé.

Initial franchisee fee revenue is recognized at the time of commencement
of operations by the franchisee, in accordance with SFAS No. 45, Accounting for
Franchisee Fee Revenue, because we believe that substantial performance for
which these non-refundable payments are received is completed at the time of
commencement of operations and no uncertainty exists with regard to the
collection of such fees. The amount of initial franchise fee revenue recognized
during the year ending March 31, 2003 was Rs.21.4 million ($0.5 million). As
of March 31, 2003, we owned 26 of the 844 cybercafés. Internet access revenue
is recognized based on usage by the customer.

Online portal services and content offerings. We enter into contracts
with customers to serve advertisements in the portal, and we are paid on the
basis of impressions, click-throughs or leads. In each case, revenue is
recognized based on actual impressions, click throughs or leads delivered.
There are no performance obligations or minimum guarantees. Revenues from
electronic commerce transactions are recognized when the transactions are
completed.

Impairment of long-lived assets

We assess for impairment of long lived assets under SFAS No. 144.
Estimated future cash profits are adjusted for taxes, normal capital
expenditure and any inflow from sale or divestment of a business. We use the
undiscounted adjusted cash flows in evaluating the impairment of long-lived
assets under SFAS 144. We first assess the recoverability test (and the
measurement of impairment loss, if necessary) at the identifiable business
segments level that benefit from common assets of our company. If the sum of
such undiscounted cash flows is less than the aggregate carrying amount, an
impairment charge is recognized. The carrying amounts of the long-lived assets
within the business segment is added to the carrying amount of the common
asset. We compare that aggregate carrying amount with the sum of the cash
flows from the business segments as calculated above, which includes the cash
outlays the entity expects to incur at the common asset level. If the sum of
such undiscounted cash flows is less than the aggregate carrying amount, the
common asset is not recoverable and the impairment loss is recognized. During
fiscal 2003, we recorded an impairment charge of Rs.247 million ($5.2 million).

Deferred Stock Compensation

We apply the intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, including FASB Interpretation No.
44, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, issued in March 2000, to account for our
fixed-plan stock options. Under this method, compensation expense is recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, we have elected to continue to apply the
intrinsic-value-based method of accounting described above, and have adopted
only the disclosure requirements of SFAS No. 123 as amended by SFAS No. 148
Accounting for Stock-Based Compensation  Transition and Disclosure.

Accounting estimates

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

We continually evaluate these estimates and assumptions based on the most
recently available information, our own historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and

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liabilities that are not readily apparent from other sources. Since the
use of estimates are an integral component of the financial reporting process,
actual results could differ from those estimates.




ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Board of Directors and Senior Management Executives

The following table sets forth the name , age and position of each
director and executive officer of our company as of May 31, 2003:

|                               |  |     |    |          |  |                                      
|------------------------------ |  | --- | -- | -------- |  | -------------------------------------
|Name                           |  | Age |    | Position
|                               |  |     |    |         
|R. Ramaraj                     |  |     | 53 |          |  | Chief Executive Officer and Director 
|George Zacharias               |  |     | 44 |          |  | Chief Operating Officer              
|T.R. Santhanakrishnan          |  |     | 45 |          |  | Chief Financial Officer              
|Shrikant Joshi                 |  |     | 46 |          |  | Vice President  Access Media        
|V.V. Kannan                    |  |     | 44 |          |  | Vice President  Interactive Services
|K. Dasaratharaman              |  |     | 43 |          |  | Chief Executive Officer, Safescrypt  
|Rahul Swarup                   |  |     | 43 |          |  | President, Enterprise Solutions      
|J. Avinash                     |  |     | 41 |          |  | Vice President, Internet Data Centers
|Rustom Irani                   |  |     | 40 |          |  | Chief Technology Officer             
|George A. Ajit                 |  |     | 43 |          |  | Chief Human Resources Officer        
|Donald Peck (1)(2)             |  |     | 50 |          |  | Director                             
|Eric Hsia                      |  |     | 32 |          |  | Director                             
|Ravi Chandra Adusumalli (1)(2) |  |     | 27 |          |  | Director                             
|Sandeep Reddy (1)(2)           |  |     | 34 |          |  | Director                             
|V. Srinivas                    |  |     | 43 |          |  | Director                             
|K Thiagarajan                  |  |     | 50 |          |  | Director                             
|T.H. Chowdary                  |  |     | 71 |          |  | Director                             
|S. Srinivasan                  |  |     | 68 |          |  | Director                             



---

|(1) |  | Member of the Compensation Committee.
|--- |  | -------------------------------------
|   
|(2) |  | Member of the Audit Committee.       

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

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

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

Shrikant Joshi has joined as Vice President  Access Media in December
2001. Mr. Joshi served as Head of Sales of Heinz from July 2000 to November
2001. From 1996 to 2000, Mr. Joshi served as Head of Domestic appliances and
Personal Care Business of Phillips India Ltd. Mr. Joshi started his career with
WIPRO in 1983 and

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held various senior positions across different businesses of WIPRO. Mr.
Joshi received a Bachelors degree from IIT Delhi and an M.B.A from IIM
Ahmedabad.

V.V. Kannan has served as Vice President  Interactive Services since May
2002. Mr Kannan served as Vice President, Internet Sales of our company from
July 1999 to April 2002. From 1996 to 1999, Mr. Kannan was Vice President,
Marketing of G.M. Pens International Limited, a manufacturing company. From
1995 to 1996, he was Vice President, Retail Sales of Real Value Marketing Sales
Limited, and from 1992 to 1995 he was Marketing Manager of ITC Agri Business
Division, a manufacturing company.

K Dasaratharaman joined us in April 2002 as Chief Executive Officer,
Safescrypt. From April 2000 to March 2002, Mr. Dasaratharaman was the Chief
Executive Officer of Music World, part of the RPG group. From 1984 to March
2000, he was with ITC Limited, where he started as a Management Trainee. Mr.
Dasaratharaman received a B.Tech in Mechanical Engineering from IIT Madras and
an M.B.A from IIM, Ahmedabad.

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

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

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

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

Donald Peck has served as a Director of Sify since March 1999. Mr. Peck
has been with Commonwealth Development Corporation, a UK-based institution
investing in developing markets, since 1991. He has been based in India since
1995, initially as head of International Venture Capital Management, or IVCM,
and since April 1998 as Chief Executive Officer of CDC Advisors Private
Limited, a Commonwealth Development Corporation subsidiary providing advisory
services to IVCM. Mr. Peck received a PhD in Latin American Economic History
from Oxford University. Mr. Peck is also a director in BPL Communications
Limited, Cico Technologies Limited, International Auto Limited, Ortel
Communications Limited, UTI Bank Limited, Alumnus Software Limited and Daksh
eServices Private Limited.

Eric Hsia has served as a Director of Sify since December 2002. Mr. Hsia
is Managing Director of SOFTBANK Infrastructure Fund (SOFTBANK), a venture
capital fund launched in partnership with Cisco systems in January 2001. Mr.
Hsia led SOFTBANKs investments in ADIR Technologies, Groupe Sense PDA, SEVEN
and Skypilot. Previously, Mr Hsia was an Associate Partner with SOFTBANK
Venture Capital focused on seed and early stage communications services,
e-commerce and e-finance investments. Prior to joining SOFTBANK, Mr. Hsia was
a founding member of Merrill Lynchs Technology Investment Banking Group in New
York and San Francisco focused on the communications equipment sector and was a
consultant with The LEK/Aclar Consulting Group in Briton. Mr. Hsia received a
B.A. in economics from Harvard College.

Ravi Chandra Adusumalli has served as a Director of Sify since December
2002. Mr. Adusumalli is a Principal with the Softbank Asia Infrastructure Fund
( SOFTBANK). Prior to joining SOFTBANK, Mr. Adusumalli was an Associate
Partner with Mobius Venture Capital in Silicon Valley, an early stage venture
capital firm with $2.3 billion under management. Prior to Mobius, Mr Adusumalli
was an Associate with Softbank Capital Partners, a

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private equity firm with $1.25 billion under management. Prior to
Softbank Capital Partners, Mr. Adusumalli worked with Credit Suisse First
Boston and Wasatch Funds. Mr. Adusumalli holds a B.A. in Economics and
Government from Cornell University.

Sandeep Reddy has served as a Director of Sify since December 2002. Mr.
Reddy is a London based professional. Mr. Reddy is a Director in VentureTech
Solutions Private Limited (VentureTech), which has invested in a diversified
portfolio of companies spanning telecom, life sciences, network and software
companies. Mr. Reddy holds an MBA from IMD Switzerland. Mr. Reddy is also a
director of Unify Wealth Management Limited and Trans Cibernet (India) Limited.

V. Srinivas has served as a Director of Sify since December 2002. Mr.
Srinivas has been Senior Vice President and Chief Financial Officer of Satyam
Computer Services Limited since November 2000. Prior to this, Mr. Srinivas was
Vice President and Chief Financial Officer of Satyam Computer Services Limited
since 1998. Before this, he was General Manager, Finance of Satyam Computer
Services Limited. Mr. Srinivas is a fellow member of the Institute of Chartered
Accountants of India and the Institute of Company Secretaries of India. He is
also an associate member of the Institute of Cost and Works Accountants of
India. Mr. Srinivas is also a director of Satyam Asia Pte Limited and Nipuna
Services Limited. In addition, Mr. Srinivas holds a bachelor of law degree and
a master of commerce degree from Osmania University.

K. Thiagarajan has served as a Director of Sify since December 2002. Mr.
Thiagarajan has served as a Director and Senior Vice President-Corporate
Planning and Strategy of Satyam Computer Services Limited since April 2001.
Prior to this, Mr. Thiagarajan was President-E Training of Sify since January
2000. Before this, he was with Sanmar Weighing Systems Ltd., as President. Mr.
Thiagarajan, is also a director in Satyam Computer Services (Shanghai) Co. Ltd.
Mr. Thiagarajan holds a Bachelor of Technology degree from Indian Institute of
Technology, Chennai and Post Graduate Diploma in Business Management from
Indian Institute of Management, Ahmedabad.

T.H. Chowdary has served as a Director of our company since February 1996.
Mr. Chowdary retired as the Chief Executive Officer of VSNL. Mr. Chowdary is
also a director in Icomm, Softsol India Limited and Tera Software Limited.

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

Board Composition

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



| |  |  | at least two-thirds of our directors shall be subject to re-election by
our stockholders; and                                             
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | at least one-third of our directors who are subject to re-election
shall be up for re-election at each annual meeting of our stockholders.

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



| |  |  | so long as SARF owns at least 5.0% of our issued ordinary share
capital, it is entitled to nominate one director to our Board of
Directors;                           
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | so long as Satyam Computer Services owns at least 50.1% of our issued
ordinary share capital, it is entitled to nominate four directors to our
Board of Directors; and
|
| |  |  | a quorum for a meeting of our Board of Directors shall be no less than
three directors.                                                                               

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In December 2002, we entered into a Shareholders agreement with SAIF
Investment Company Limited (SAIF), VentureTech Solutions Private Limited
(VentureTech) and Satyam Computer Services providing for, among other things, a
Board of Directors comprised of nine directors to be nominated as follows:
SAIF  two nominees; VentureTech  two nominees; Satyam Computer Services 
two nominees; South Asia Regional Fund  one nominee; one independent nominee;
and one nominee who shall be the Managing Director of Sify. The shareholders
agreement has also granted the investors consent rights with respect to
specified corporate transactions.

Mr. Peck is a nominee of South Asian Regional Fund. Messrs. Hsia and
Adusumalli are the nominees of SAIF. Mr. Reddy is a nominee of VentureTech.
Messrs. Srinivas and Thiagarajan are the nominees of Satyam Computer Services.
Mr. Peck was reappointed at our Annual General Meeting in 2003. Also, Messrs.
Hsia, Adusumalli, Reddy, Srinivas and Thiagarajan were appointed at our Annual
General Meeting in 2003 as they were appointed during the year as additional
directors. The terms of Messrs. Ramaraj, Chowdary and Srinivasan will expire
at our Annual General Meeting to be held in 2004. The terms of Messrs. Peck,
Hsia and Adusumalli will expire at our Annual General Meeting to be held in
2005. The terms of Messrs. Reddy, Srinivas and Thiagarajan will expire at our
Annual General Meeting to be held in 2006. There are no family relationships
between any of the directors or executive officers of our company.

Board Committees

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

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

Director Compensation

Our Articles of Association provide that each of our directors receives a
sitting fee not exceeding Rs.2,000 for every Board and Committee meeting. In
fiscal 2003, we did not pay any fees to our non-employee directors. Mr.
Ramaraj, who is employed as our Chief Executive Officer, does not receive any
additional compensation for his service on our Board of Directors. Directors
are reimbursed for travel and out-of-pocket expenses in connection with their
attendance at Board and Committee meetings.

Officer Compensation

The following table sets forth all compensation paid by us during the
fiscal year ended March 31, 2003 to our executive officers.

|                           |  |        |      |       |  |               |      |              |  |                        |       |          |  |  |      | 
|-------------------------- |  | ------ | ---- | ----- |  | ------------- | ---- | ------------ |  | ---------------------- | ----- | -------- |  |  | ---- | 
|Summary Compensation Table |  |        |      |       |  | (Rs. Million)
|                          
|                           |  |        |      |       |  |               |      |              |  | All Other Compensation
|                           |  |        |      |       |  |               |      |              |  |                       
|                           |  |        |      |       |  |               |      |              |  | Under                  |       |          |  | 
|                           |  |        |      |       |  |               |      |              |  | Executive              |       |          |  | 
|                           |  |        |      |       |  |               |      |              |  | Employment             |       | Deferred
|Name                       |  | Salary |      | Bonus |  | agreement     |      | Compensation
|                           |  |        |      |       |  |               |      |             
|R. Ramaraj                 |  |        | 5.35 |       |  | Nil           |      | Nil          |  |                        | 4.98  |         
|George Zacharias           |  |        | 5.41 |       |  |               | 0.64 |              |  |                        | 10.00 |          |  |  | 5.26 | 
|T.R. Santhanakrishnan      |  |        | 4.16 |       |  |               | 0.64 |              |  |                        | 10.00 |          |  |  | 3.84 | 
|Shrikant Joshi             |  |        | 2.86 |       |  | Nil           |      | Nil          |  |                        | 0.01  |         
|V V Kannnan                |  |        | 2.71 |       |  |               | 0.34 |              |  |                        | 3.50  |          |  |  | 0.26 | 
|K Dasaratharaman           |  |        | 3.37 |       |  | Nil           |      | Nil          |  |                        | 0.01  |         

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|                           |  |        |      |       |  |               |      |              |      |                        |      |          |      |  |      | 
|-------------------------- |  | ------ | ---- | ----- |  | ------------- | ---- | ------------ | ---- | ---------------------- | ---- | -------- | ---- |  | ---- | 
|Summary Compensation Table |  |        |      |       |  | (Rs. Million)
|                          
|                           |  |        |      |       |  |               |      |              |      | All Other Compensation
|                           |  |        |      |       |  |               |      |              |      |                       
|                           |  |        |      |       |  |               |      |              |      | Under                  |      |          |      | 
|                           |  |        |      |       |  |               |      |              |      | Executive              |      |          |      | 
|                           |  |        |      |       |  |               |      |              |      | Employment             |      | Deferred
|Name                       |  | Salary |      | Bonus |  | agreement     |      | Compensation
|                           |  |        |      |       |  |               |      |             
|Rahul Swarup               |  |        | 4.34 |       |  |               | 0.64 |              |      |                        | 5.00 |          |      |  | 2.19 | 
|J. Avinash                 |  |        | 2.06 |       |  |               | 0.43 |              |      | Nil                    |      |          | 1.67 | 
|Rustom Irani               |  |        | 2.99 |       |  |               | 0.50 |              |      |                        | 3.50 |          |      |  | 2.49 | 
|George A. Ajit             |  |        | 2.91 |       |  |               | 0.55 |              |      |                        | 4.00 |          |      |  | 1.75 | 
|S Srinivasan               |  | Nil    |      | Nil   |  | Nil           |      |              | 1.31 |                       

The following table sets forth all stock options granted by us during the
fiscal year ended March 31, 2003 to our executive officers.

|                   |  |                         |       |                |  |                 |       |  |  |  |            | 
|------------------ |  | ----------------------- | ----- | -------------- |  | --------------- | ----- |  |  |  | ---------- | 
|Option Grant Table
|                  
|                   |  | Equity Shares           |       |                |  |                 |       |  |  | 
|Name               |  | Underlying Option Grant |       | Exercise Price |  | Expiration Date
|                   |  |                         |       |                |  |                
|Shrikant Joshi     |  |                         | 5,100 |                |  | Rs.             | 49.97 |  |  |  | 11-11-2005 | 
|K Dasaratharaman   |  |                         | 5,100 |                |  | Rs.             | 49.97 |  |  |  | 11-11-2005 | 

No executive officer exercised stock options during the fiscal year ended March
31, 2003.

In February 2002, we entered into Executive Employment Agreements with
each of Messrs. Ramaraj, Zacharias and Santhanakrishnan. Our agreement with
Mr. Ramaraj had a term of approximately 13 months, and our agreements with
Messrs Zacharias and Santhanakrishnan have a term of three years. Our
stockholders approved an extension of Mr. Ramarajs tenure as Managing Director
for an additional five years, effective April 1, 2003, retaining the terms as
per the Executive employment agreement. The material terms of the agreement
between us and the executives, are as follows:



| |  |  | during the term of employment, the executive shall be
entitled to compensation and benefits, subject to deduction of
tax per applicable law, as provided in the agreement;                                                                                                                                                                                                                                                                                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the executive agreed not to disclose confidential
information and trade secrets to any third party except when
mandated by law and not to use such information for any purpose
except in the performance of his work for Sify;                                                                                                                                                                                                                                                                    
|
| |  |  | the executive agreed that all work of a copyrightable
or patentable nature done in the course of work for Sify belongs
to Sify and undertook to help in every way to duly register
Sifys ownership of such copyrights and patents;                                                                                                                                                                                                                                                               
|
| |  |  | Sify agreed to indemnify the executive, his executors,
administrators or assigns for all expenses which the executive
incurs or becomes legally obligated to pay in connection with any
proceedings;                                                                                                                                                                                                                                                                                              
|
| |  |  | executive is entitled to full compensation and benefits
(excluding the performance bonus) up to the date of termination
of his employment, including a pro rated performance bonus up to
the date of termination of his employment in the event that
executives employment is terminated for good reason or within
one year after a change of control;                                                                                                                                         
|
| |  |  | executive is entitled to certain additional terminal
compensation of base salary in the event of the termination of
executives employment by Sify for any reason or by executive for
good reason; and                                                                                                                                                                                                                                                                                          
|
| |  |  | executive has been provided with a loan by our company
which is repayable by the executive with interest on December 31,
2002. We agreed to pay the executive an additional compensation
sufficient to repay the loan (income tax to executives account)
and an additional compensation
sufficient to pay the interest (income tax to Sifys account) at
the earliest of the maturity date of the loan and the occurrence of
a change of control. The loan bears interest at an annual rate of
4%

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| |  |  | (increased to 13% effective October 1, 2001. If the executives
employment is terminated, the unpaid balance of the loan and
accrued interest is payable by executive. In the event of the
executives death, we would waive the recovery of the unpaid
balance of the loan and accrued interest.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We were providing for the incentive obligation in the accounts over the
period from the date of disbursement to the contracted date of repayment.
However, in the quarter ended December 31, 2002, consequent to a change of
control event, the entire unamortized portion of the loan was amortized. Such
additional compensation to repay the loans given to certain executives are
fully written off.

Stock Ownership

The following table sets forth information with respect to the beneficial
ownership of our equity shares as of May 31, 2003 by each director and our
Chief Executive Officer. The table gives effect to equity shares issuable
within 60 days of May 31, 2003 upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date.
Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to equity shares. Unless
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all equity shares beneficially owned.

|                            |  |                    |            |         |  |  |      |  
|--------------------------- |  | ------------------ | ---------- | ------- |  |  | ---- | -
|                            |  | Equity Shares     
|                            |  | Beneficially Owned
|                            |  |                   
|Beneficial Owner            |  | Number             |            | Percent
|                            |  |                    |            |        
|R. Ramaraj (1)              |  |                    | 370,000    |         |  |  | 1.1  | %
|Donald Peck (2)             |  |                    | 3,600,000  |         |  |  | 10.6 |  
|Eric Hsia (3)               |  |                    | 5,558,140  |         |  |  | 16.4 |  
|Ravi Chandra Adusumalli (4) |  |                    | 5,558,140  |         |  |  | 16.4 |  
|Sandeep Reddy (5)           |  |                    | 4,550,767  |         |  |  | 13.1 |  
|V Srinivas (6)              |  |                    | 12,182,600 |         |  |  | 36.0 |  
|K Thiagarajan (7)           |  |                    | 12,182,600 |         |  |  | 36.0 |  
|T. H. Chowdary              |  |                    |           |         |  |  |     |  
|S. Srinivasan               |  |                    |           |         |  |  |     |  



---

|(1) |  | Excludes options to purchase (a) 20,000 equity shares with an exercise
price of $76.95 per share granted on June 1, 2000 and (b) 26,040 equity
shares with an exercise price of $3.53 per share granted on November 21,
2001 to Mr. Ramaraj which expire three years and one month from the date
of grant.                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Consists of 3,600,000 equity shares beneficially owned by South Asia
Regional Fund. Mr. Peck is affiliated with South Asia Regional Fund. Mr.
Peck disclaims beneficial ownership of the equity shares owned by South
Asia Regional Fund, except to the extent of his pecuniary interest
therein.                                                                 
|   
|(3) |  | Consists of 5,558,140 ADSs beneficially owned by SAIF Investment Company
Limited. Mr. Hsia is Managing Director of SOFTBANK Infrastructure Fund,
an affiliate of SAIF Investment Company Limited. Mr. Hsia disclaims
beneficial ownership of the ADSs owned by SAIF Investment Company Limited,
except to the extent of his pecuniary interest therein.           
|   
|(4) |  | Consists of 5,558,140 ADSs beneficially owned by SAIF Investment Company
Limited. Mr. Adusumalli is a Principal of SOFTBANK Asia Infrastructure
Fund, an affiliate of SAIF Investment Company Limited. Mr. Adusumalli
disclaims beneficial ownership of the ADSs owned by SAIF Investment
Company Limited, except to the extent of his pecuniary interest therein.
|   
|(5) |  | Consists of 4,550,767 equity shares beneficially owned by VentureTech
Solutions Private Limited, including 1,017,441 ADSs that VentureTech
Solutions Private Limited or an affiliate is obligated to purchase from
our
company on or prior to July 31, 2003. Mr. Reddy is a Director of
VentureTech Solutions Private Limited. Mr.                                

55



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|    |  | Reddy disclaims beneficial
ownership of the equity shares owned by VentureTech Solutions Private
Limited, except to the extent of his pecuniary interest therein.                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(6) |  | Consists of 12,182,600 equity shares beneficially owned by Satyam
Computer Services Limited. Mr. Srinivas is Senior Vice President and
Chief Financial Officer of Satyam Computer Services Limited. Mr. Srinivas
disclaims beneficial ownership of the equity shares owned by Satyam
Computer Services Limited, except to the extent of his pecuniary interest
therein.                           
|   
|(7) |  | Consists of 12,182,600 equity shares beneficially owned by Satyam
Computer Services Limited. Mr. Thiagarajan is a Director and Senior Vice
President  Corporate Planning and Strategy of Satyam Computer Services
Limited. Mr. Thiagarajan disclaims beneficial ownership of the equity
shares owned by Satyam Computer Services Limited, except to the extent of
his pecuniary interest therein.

As of May 31, 2003, we had 33,838,392 outstanding equity shares. As of
March 31, 2003, there were approximately 32,000 record holders of ADRs
evidencing 13,491,543 ADSs.

Employee Stock Option Plan

We have
an Associate Stock Option Plan, which we refer to as our Employee Stock
Option Plan or ASOP, which provides for the
grant of options to employees of our company. The ASOP was approved by our
Board of Directors and our shareholders in March 1999. A total of 1.8 million
equity shares are reserved for issuance under our Associate Stock Option Plan.
As of March 31, 2003, we had outstanding an aggregate of 390,560 options (net
of 562,040 options forfeited by employees or expired and 200 options exercised
for equity shares) under our ASOP with a weighted average exercise price equal
to approximately Rs.1,359 ($28.60) per equity share.

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

An employee holding options may apply for conversion of the options on a
date specified therein which is referred to as the conversion date. The
options are not transferable by an employee on or before the conversion date,
except to the Trust should the employee cease to be an employee by reason of
resignation, dismissal or termination of employment due to reasons of
non-performance or otherwise. On exercise of the option, the employee submits
a letter of conversion to the Trust for allotment of our equity shares in his
or her name. The Trust collects the consideration for conversion arrived at as
a product of number of options converted and the conversion price as reduced by
the price of the options paid by the employee for the number of options
converted by the employee. The equity shares transferred to the employee after
conversion from options is the absolute property of the employee and will be
held by the employee. Upon the filing with the U.S. Securities and Exchange
Commission of a registration statement on Form S-8 covering the shares issuable
under the ASOP, we expect that participants in the ASOP will be able to receive
ADSs upon exercise of their options.

Employees

As of March 31, 2003, we had 1,068 employees. We anticipate maintaining
the current size of our employee base over the next year. We had 887
employees, 1,185 employees and 622 employees , respectively, as of March 31,
2002, March 31, 2001 and March 31, 2000. The 231 employees previously engaged
in our software services division have been transferred to Satyam Computer
Services in connection with the sale of that division. Of
our current employees, 105 are administrative, 313 form our sales and
marketing staffs, 241 are in services and

56



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##### Table of Contents



content development and 409 are
dedicated to technology, technical support, business process and customer care.
None of our employees are represented by a union. We believe that our
relationship with our employees is good.




Item 7. Major Stockholders and Related Party Transactions

Principal Stockholders

The following table sets forth information with respect to the beneficial
ownership of our equity shares as of May 31, 2003 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 60 days of March 31, 2003 upon the exercise of
all options and other rights beneficially owned by the indicated stockholders
on that date. Beneficial ownership is determined in accordance with the rules
of the SEC and includes voting and investment power with respect to equity
shares. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all equity shares
beneficially owned.

Messrs. Satyam Ramnauth and Pierre Guy Noel, directors of International
Venture Capital Management, which manages South Asia Regional Fund, exercise
voting control and dispositive power over the equity shares owned by South Asia
Regional Fund. Mr. Peck, a director of our company, is affiliated with South
Asia Regional Fund.

Messrs. Anthony J. Castellanos, Ronald David Fisher, Reaz Noormamode,
Denis Sek Sum and Andrew Y. Yan, directors of SAIF Investment Company Limited,
exercise voting control and dispositive power over the equity shares owned by
SAIF Investment Company Ltd. Mr. Hsia and Mr Adusumalli , directors of our
company, are affiliated with SOFTBANK Asia Infrastructure Fund.

Messrs. Sandeep Reddy and N. Mal Reddy, directors of VentureTech Solutions
Private Limited , exercise voting control and dispositive power over the equity
shares owned by VentureTech Solutions Private Limited. Mr. Reddy, a director
of our company, is a Director with VentureTech.

Messrs. B. Ramalinga Raju and B. Rama Raju, directors of Satyam Computer
Services Limited, exercise voting control and dispositive power over the equity
shares owned by Satyam Computer Services. Messrs. Srinivas and Thiagarajan,
directors of our company, are affiliated with Satyam Computer Services.

57



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|                                                    |                                                                                                                |        |                    |         |  |  |      |   | 
|--------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------ | ------------------ | ------- |  |  | ---- | - | 
|                                                    |                                                                                                                |        | Equity Shares     
|                                                    |                                                                                                                |        | Beneficially Owned
|                                                    |                                                                                                                |        |                   
|Beneficial Owner                                    |                                                                                                                | Number |                    | Percent
|                                                    |                                                                                                                |        |                    |        
|Satyam Computer Services Limited                    |                                                                                                                |        | 12,182,600         |         |  |  | 36.0 | %
|                                                    | Mayfair Centre, S P Road
Secunderabad 500 003
India                                                            |        |                    |         |  |  |      |   | 
|SAIF Investment Company Limited                     |                                                                                                                |        | 5,558,140          |         |  |  | 16.4 | %
|                                                    | Suite 307, St. James Court
St. Denis Street, Port Louis
Mauritius                                              |        |                    |         |  |  |      |   | 
|VentureTech Solutions Private Limited               |                                                                                                                |        | 4,550,767          | (1)     |  |  | 13.1 | %
|                                                    | 12, Subba Rao Avenue
Chennai 600006
India                                                                      |        |                    |         |  |  |      |   | 
|South Asia Regional Fund                            |                                                                                                                |        | 3,600,000          |         |  |  | 10.6 | %
|                                                    | Les Cascades Building
Edith Cavell Street
Port Louis
Mauritius                                                 |        |                    |         |  |  |      |   | 
|Acqua Wellington North American Equities
Fund, Ltd. |                                                                                                                |        | 2,000,000          |         |  |  | 5.9  | %
|                                                    | c/o Fortis Fund Services (Bahamas) Ltd.
Montage Sterling Centre
East Bay St., P.O. Box 55-6238
Nassau, Bahamas |        |                    |         |  |  |      |   | 



|(1) |  | Includes 1,017441 ADSs that VentureTech Solutions Private Limited or an
affiliate is obligated to purchase from our company on or prior to July
31, 2003.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Control of Registrant

Satyam Computer Services, SAIF Investment Company Limited and VentureTech
Solutions Private Limited collectively beneficially owned approximately 65.5%
of our equity shares as of May 31, 2003 These stockholders are parties to an
Investor Rights Agreement with our company dated October 7, 2002. The Investor
Rights Agreement provides for, among other things, a Board of Directors
comprised of nine directors to be nominated as follows: SAIF  two nominees;
VentureTech  two nominees; Satyam Computer Services  two nominees; South
Asia Regional Fund  one nominee; one independent nominee; and one nominee who
shall be the Managing Director of Sify. The Investor Rights Agreement provides
certain of the stockholders with consent rights in connection with specified
corporate transactions.

These stockholders are presently able to exercise control over many
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. Under Indian law,
a simple majority is sufficient to control all stockholder action except for
those items which require approval by a special resolution. If a special
resolution is required, the number of votes cast in favor of the resolution
must be not less than three times the number of votes cast against it.
Examples of actions that require a special resolution include:



| |  |  | altering our Articles of Association;                                                             
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | issuing additional shares of capital stock, except for pro rataissuances to existing stockholders;

58



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| |  |  | commencing any new line of business; and
| | - |  | ----------------------------------------
|
| |  |  | commencing a liquidation.               

Circumstances may arise in which the interests of Satyam Computer
Services, SAIF Investment Company Limited and/or VentureTech Solutions Private
Limited or a subsequent purchaser of their respective shares could conflict
with the interest of our other stockholders or holders of our ADSs. These
stockholders could prevent or delay a change in control of our company even if
a transaction of that sort would be beneficial to our other stockholders,
including the holders of our ADSs.

Related Party Transactions

Our company has a stated policy on related party transactions which states
that whenever Sify enters into any transaction with a related party the
Company shall perform these transactions on terms no less favorable to the
Company than could have been obtained from independent third parties.

Until December 2002, Satyam Computer Services was our parent company. In
fiscal 2003, we sold an aggregate of Rs.34.3 million in services to Satyam
Computer Services and its affiliates. We believe that these transactions with
Satyam Computer Services and its affiliates were on terms no less favorable to
our company than could have been obtained from independent third parties.

On October 5, 2001, we entered into an agreement to subscribe for
unsecured convertible loan notes (loan notes) to be issued by CricInfo
Limited in an aggregate amount of up to GBP 1.6 million to meet Cricinfos
short-medium term working capital requirements over the next year. These loan
notes were redeemable on October 5, 2004 and the terms of the loan note
instrument provided for the payment of interest on the principal amount at the
rate of 8% per annum.

We also entered into a Term Loan Agreement with Cricinfo for granting a
term loan facility of GBP 0.1 million. The Loan carried an interest rate of 4%
per annum and was repayable on December 31, 2004. This term loan and the
convertible loan were secured by a Debenture document executed by CricInfo.

In February 2003, CricInfo transferred its net assets, other than the loan
payable to Sify and miscellaneous current assets, and liabilities to a newly
formed company incorporated in the United Kingdom, Wisden Cricinfo Limited. In
consideration of its contribution of assets, Cricinfo Limited received a 33%
equity stake in Wisden Cricinfo Limited and GBP 1.8 million. Cricinfo Limited
repaid our loan, including accrued interest of Rs. 107.0 million, and
transferred its 33% stake in Wisden Cricinfo Limited to us for a consideration
of Rs. 22.6 million (GBP 0.3 million). Contemporaneously we advanced Rs 23.0
million (GBP 0.3 million) to Wisden Cricinfo Limited.

As a result of the foregoing transactions including the loan to Wisden
Cricinfo, we recognized a gain of Rs.22.6 million being the difference between
proceeds received Rs. 126.9 million and the net carrying value of the notes
(including accrued interest) of Rs.81.4 million and a deferred gain of Rs. 23.0
million.




Item 8. Financial Information

Financial Statements

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

Legal Proceedings

Our company and certain of our officers and directors are named as
defendants in a securities class action lawsuit filed in the United States
District Court for the Southern District of New York. This action, which is
captioned In re Satyam Infoway Ltd. Initial Public Offering Securities
Litigation, also names several of the underwriters involved in our initial
public offering of American Depositary Shares as defendants. This class action
is brought on behalf of a purported class of purchasers of our ADSs from the
time of our IPO in October 1999 through December 2000. The central allegation
in this action is that the underwriters in our IPO solicited and received
undisclosed commissions from, and entered into undisclosed arrangements with,
certain investors who purchased

59



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our ADSs in the IPO and the aftermarket. The complaint also alleges that
we violated the United States federal securities laws by failing to disclose in
the IPO prospectus that the underwriters had engaged in these allegedly
undisclosed arrangements. More than 300 issuers have been named in similar
lawsuits. In July 2002, an omnibus motion to dismiss all complaints against
issuers and individual defendants affiliated with issuers was filed by the
entire group of issuer defendants in these similar actions. In October 2002,
our executive officers who were named as defendents in this action were
dismissed from the action without prejudice. In February 2003, the Court in
this action issued its decision on defendants omnibus motion to dismiss. This
decision denied the motion to dismiss the Section 11 claim as to Sify and
virtually all of the other issuer defendants. The decision also denied the
motion to dismiss the Section 10(b) claim as to numerous issuer defendants,
including Sify. Although we are unable to estimate the range of loss that is
reasonably possible, we believe that we have meritorious defenses and intend to
defend this action vigorously. However, we could be forced to incur material
expenses in the litigation and, in the event there is an adverse outcome, our
business could be harmed.

Our subsidiary IndiaWorld Communications was involved in litigation in the
United States relating to the IndiaWorld trademark, which dispute was settled
during the quarter ended December 31, 2002 without any liability to us or
IndiaWorld Communications.

The charges for international gateways and other services presently being
provided by VSNL are the subject of a dispute pending before the TRAI and the
Telecom Disputes Settlement and Appellate Tribunal between VSNL and private
Internet service providers, including our company, represented by the Internet
Service Providers of India (ISPAI). VSNL has priced these services at levels
which we believe are inconsistent with the terms and conditions on which VSNL
has secured the bandwidth for its international gateways. The Telecom Disputes
Settlement and Appellate Tribunal remanded the matter back to the TRAI, which
decided against the ISPAI. The ISPAI has not yet decided on a further course of
action. We are currently paying for bandwidth from VSNL at the higher rates
and do not believe that the outcome of this dispute will be material to our
business provided that the international gateway services market continues to
be open to competition.

We are party to additional legal actions arising in the ordinary course of
business. Based on information available to us as of March 31, 2003 we believe
that we have adequate legal defenses or insurance coverage for these actions
and that the ultimate outcome of these actions will not have a material adverse
effect on our company.

Dividends

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

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




Item 9. The Offer and Listing

Trading Markets

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

The number of outstanding equity shares in our company as of May 31, 2003
was 33,838,392 . As of March 31, 2003 , there were approximately 32,000 record
holders of ADRs holding 13,491,543 ADSs

Price History

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Our ADSs commenced trading on the Nasdaq National Market on October 19,
1999. Effective September 24, 2002, we effected a 1-for-4 reverse ratio change
such that one ADS represents one equity share. The tables below set forth, for
the periods indicated, high and low trading prices for our ADSs after giving
effect to the reverse ratio change:

Prior Fiscal Years

|                                            |  |             |        |     |  |   |       | 
|------------------------------------------- |  | ----------- | ------ | --- |  | - | ----- | 
|                                            |  | Price Range
|                                            |  |            
|                                            |  | High        |        | Low
|                                            |  |             |        |    
|Fiscal Year ended                           |  |             |        |     |  |   |       | 
|March 31, 2000 (beginning October 19, 1999) |  | $           | 452.00 |     |  | $ | 30.00 | 
|March 31, 2001                              |  |             | 256.00 |     |  |   | 11.76 | 
|March 31, 2002                              |  |             | 17.60  |     |  |   | 2.88  | 
|March 31, 2003                              |  |             | 6.44   |     |  |   | 0.88  | 

Quarters of Prior Fiscal Years

|                                 |  |             |       |     |  |   |       | 
|-------------------------------- |  | ----------- | ----- | --- |  | - | ----- | 
|                                 |  | Price Range
|                                 |  |            
|                                 |  | High        |       | Low
|                                 |  |             |       |    
|Fiscal Year ended March 31, 2002 |  |             |       |     |  |   |       | 
|First Quarter                    |  | $           | 17.60 |     |  | $ | 10.00 | 
|Second Quarter                   |  |             | 14.20 |     |  |   | 2.88  | 
|Third Quarter                    |  |             | 12.76 |     |  |   | 3.40  | 
|Fourth Quarter                   |  |             | 11.16 |     |  |   | 5.84  | 
|Fiscal Year ended March 31, 2003 |  |             |       |     |  |   |       | 
|First Quarter                    |  | $           | 6.44  |     |  | $ | 2.00  | 
|Second Quarter                   |  |             | 3.00  |     |  |   | 0.88  | 
|Third Quarter                    |  |             | 4.95  |     |  |   | 0.90  | 
|Fourth Quarter                   |  |             | 5.30  |     |  |   | 2.27  | 

Prior Six Months

|              |  |             |      |     |  |   |      | 
|------------- |  | ----------- | ---- | --- |  | - | ---- | 
|              |  | Price Range
|              |  |            
|Month         |  | High        |      | Low
|              |  |             |      |    
|December 2002 |  | $           | 3.85 |     |  | $ | 2.05 | 
|January 2003  |  |             | 5.30 |     |  |   | 2.27 | 
|February 2003 |  |             | 4.24 |     |  |   | 3.25 | 
|March 2003    |  |             | 4.38 |     |  |   | 2.90 | 
|April 2003    |  |             | 4.96 |     |  |   | 3.65 | 
|May 2003      |  |             | 8.10 |     |  |   | 4.55 | 

The initial public offering of our ADSs was priced on October 18, 1999 at a price of $18.00 per ADS.




Item 10. Additional Information

Memorandum and Articles of Association

Our authorized share capital is 37,500,000 shares, par value Rs.10 per
share. As of May 31, 2003, 33,838,392 equity shares were issued and
outstanding.

The equity shares are our only class of share capital. Some of the equity
capital are represented by American Depository Receipts issued by our company
in accordance with the applicable laws and regulations. Our Articles of
Association and the Companies Act permit us to issue classes of securities in
addition to the equity shares. For the purposes of this annual report,
shareholder means a shareholder who is registered as a member in the register
of members of our company.

A total of 1.8 million equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. As of March 31, 2003, we had outstanding
an aggregate of 390,560 options (net of 562,040 options forfeited

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by employees or expired and 200 options exercised for equity shares) under
our ASOP with a weighted average exercise price equal to approximately Rs.1,359
per equity share. The unamortized deferred compensation related to these
grants amounted to Rs.24.8 million as of March 31, 2003.

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



| |  |  | developing, servicing and selling or leasing data through
direct or electronic media, developing a wide area of communications
network and providing value-added services on the network for the
development, service, purchase or sale of computers, software and
related products in order to provide marketing services; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | designing and developing systems and application software for
sale in and outside of India, and designing and developing systems
and applications software for or on behalf of manufacturers, owners
and users of computer systems and digital or electronic equipment.                                                        

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

In October 2003, we entered into an Investor Rights Agreement with Satyam
Computer Services, SAIF and VentureTech providing for, among other things, a
Board of Directors comprised of nine directors to be nominated as follows:
SAIF  two nominees; VentureTech  two nominees; Satyam Computer Services 
two nominees; South Asia Regional Fund  one nominee; one independent nominee;
and one nominee who shall be the Managing Director of Sify. The Investor
Rights Agreement also provides certain of the stockholders with consent rights
in connection with specified corporate transactions.

Dividends

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

Under the Companies Act, dividends may be paid out of profits of a company
in the year in which the dividend is declared or out of the undistributed
profits of previous fiscal years. Before declaring a dividend greater than 10%
of the par value of its equity shares, a company is required under the
Companies Act to transfer to its reserves a minimum percentage of its profits
for that year, ranging from 2.5% to 10% depending upon the dividend percentage
to be declared in such year. The Companies Act further provides that, in the
event of an inadequacy or absence of profits in any year, a dividend may be
declared for such year out of the companys accumulated profits, subject to the
following conditions:



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

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| |  |  | the total amount to be drawn from the accumulated profits earned in the
previous years and transferred to the reserves may not exceed an amount
equivalent to 10% of its paid up capital and free reserves, and the
amount so drawn is to be used first to set off the losses incurred in the
fiscal year before any dividends in respect of preference or equity
shares are declared; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the balance of reserves after withdrawals shall not fall below 15% of
its paid up capital.                                                                                                                                                                                                                                                                                                

For additional information, please see Item 8. Financial Information 
Dividends. Until April 1, 2002, a tax of 10.2%, including the applicable
surcharge, of the total dividend declared, distributed or paid for a relevant
period is payable by our company. For additional information, please see Item
5. Operating and Financial Review and Prospects  Income Tax Matters.

Bonus Shares

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

Preemptive Rights and Issue of Additional Shares

The Companies Act gives shareholders the right to subscribe for new shares
in proportion to their respective existing shareholdings unless otherwise
determined by a special resolution passed by a general meeting of the
shareholders. For approval, a special resolution must be approved by a number
of votes which is not less than three times the number of votes against the
special resolution. At our 2000 Annual General Meeting, our stockholders
approved a special resolution pursuant to which we may issue up to one million
equity shares (equivalent to one million ADSs) in connection with acquisitions,
268,500 of which we issued in connection with our acquisition of IndiaWorld
Communications, 551,180 of which we issued in connection with our acquisition
of a 25% stake in CricInfo Limited and 113,798 of which we issued in connection
with our acquisition of Indiaplaza.com. At our 2001 Annual General Meeting,
our stockholders approved a special resolution permitting us to issue up to
four million additional equity shares in connection with acquisitions or
capital raising transactions, and ADS holders are deemed to have waived their
preemptive rights with respect to these shares. At our December 2002
Extraordinary General Meeting, our stockholders approved a special resolution
permitting us to issue up to 12.5 million additional equity shares (equivalent
to 12.5 million ADSs) in connection with the sale of equity shares to SAIF and
VentureTech, and our ADS holders are deemed to have waived their preemptive
rights with respect to these shares and our Board of Directors may approve the
issuance of these shares without further action of our stockholders.

Each of our directors is entitled to receive a sitting fee not exceeding
Rs.2,000 for every Board and Committee meeting as well as all traveling and
out-of-pocket expenses incurred in attending such meetings. Our Board of
Directors may from time to time or at any time at its discretion raise or
borrow any sum of money for use by our company. Unless otherwise determined by
our company in a general meeting, our directors are not required to hold any
shares of our companys capital stock to qualify to serve. For additional
information, please see Item 6. Director, Senior Management and Employees -
Board Composition,    Board Committees and    Director and Officer
Compensation.

Annual General Meetings of Shareholders

We must convene an annual general meeting of shareholders within six
months after the end of each fiscal year and may convene an extraordinary
general meeting of shareholders when necessary or at the request of a
shareholder or shareholders holding at least 10% of our paid up capital
carrying voting rights. The annual general meeting of the shareholders is
generally convened by our Secretary pursuant to a resolution of the Board.
Written notice setting out the agenda of the meeting must be given at least 21
days (excluding the days of mailing and

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receipt) prior to the date of the general meeting to the shareholders of
record. Shareholders who are registered as shareholders on the date of the
general meeting are entitled to attend or vote at such meeting.

The annual general meeting of shareholders must be held at our registered
office or at such other place within the city in which the registered office is
located. Meetings other than the annual general meeting may be held at any
other place if so determined by the Board. Effective April 3, 2003 our
registered office is located at 2nd Floor, Tidel Park, 4 Canal Bank Road,
Taramani, Chennai 600 113, India.

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

2003 Annual General Meeting

Our Annual General Meeting for the 2003 fiscal year was held on June 23,
2003 at 11.00 a.m. (local time) at the registered office of our
company, 2nd
Floor, Tidel Park, 4 Canal Bank Road, Taramani, Chennai 600 113, India. The
matters brought in front of our stockholders at this meeting are described in a
Notice of Seventh Annual General Meeting were mailed to stockholders on or
about May 19, 2003 and were also filed with the Commission on Form 6-K.
Please see that filing for a description of the matters considered by our
stockholders at the meeting. At the Annual General Meeting, each of the
proposals was approved by our stockholders.

Voting Rights

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

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

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

Register of Shareholders; Record Dates; Transfer of Shares

We maintain a register of shareholders as required under the Companies
Act, 1956. For the purpose of determining the shares entitled to annual
dividends, the register is closed for a specified period prior to the annual
general meeting. The date on which this period begins is the record date.

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

Following the introduction of the Depositories Act, 1996, and the repeal
of Section 22A of the Securities Contracts (Regulation) Act, 1956, which
enabled companies to refuse to register transfers of shares in some
circumstances, the equity shares of a public company are freely transferable,
subject only to the provisions of Section 111A of the Companies Act. Since we
are a public company, the provisions of Section 111A will apply to us. Our
Articles currently contain provisions which give our directors discretion to
refuse to register a transfer of

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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 two
months after receipt of the application for registration of transfer by our
company. In accordance with the provisions of Section 111A(2) of the Companies
Act, our directors may exercise this discretion if they have sufficient cause
to do so. If our directors refuse to register a transfer of shares, the
shareholder wishing to transfer his, her or its shares may file a civil suit or
an appeal with the Company Law Board, or CLB. Pursuant to Section 111A(3), if
a transfer of shares contravenes any of the provisions of the Securities and
Exchange Board of India Act, 1992 or the regulations issued thereunder or the
Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian
laws, the CLB may, on application made by the company, a depositary
incorporated in India, an investor, the Securities and Exchange Board of India
or other parties, direct the rectification of the register of records. The CLB
may, in its discretion, issue an interim order suspending the voting rights
attached to the relevant shares before making or completing its investigation
into the alleged contravention. Notwithstanding such investigation, the rights
of a shareholder to transfer the shares will not be restricted.

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

Audit and Annual Report

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

Company Acquisition of Equity Shares

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

Liquidation Rights

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

Material Contracts

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

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

Government of India policies permit a maximum level of foreign equity
investment of 74% in Internet service providers. Our license was reissued in
April 2002, allowing us a maximum level of foreign equity investment of 74% and
also permitting us to provide Internet telephony, subject to the terms of
operation as detailed in the license.

Our license also requires us to ensure that objectionable, obscene and
unauthorized content, or any other content, messages or communications
infringing copyrights, intellectual property rights and domestic and
international cyberlaws or which is inconsistent with the laws of India, is not
carried on our network. Although under the terms of our license we are free to
fix the prices we charge our subscribers, the TRAI may set prices for the
provision of Internet access services generally. We are permitted to use
encryption to safeguard information transmitted over our network. However, if
we use a higher level of encryption than that specified by the Government of
India, our license requires us to deposit a set of keys with the Government of
India. License fees are waived through October 31, 2003, and a nominal license
fee of Re.1 per annum is payable from November 1, 2003. Our obligations under
the license are secured by a performance bank guarantee in the amount of
Rs.29.2 million ($0.6 million) as of March 31, 2003.

Our company, Satyam Computer Services, SAIF Investment Company Limited and
VentureTech Solutions Private Limited are parties to an Investor Rights
Agreement with our company dated October 7, 2002. The Investor Rights
Agreement provides for, among other things, a Board of Directors comprised of
nine directors to be nominated as follows: SAIF  two nominees; VentureTech
 two nominees; Satyam Computer Services  two nominees; South Asia Regional
Fund  one nominee; one independent nominee; and one nominee who shall be the
Managing Director of Sify. The Investor Rights Agreement provides certain of
the stockholders with consent rights in connection with specified corporate
transactions.

In February 2002, we entered into Executive Employment Agreements with
each of Messrs. Ramaraj, Zacharias and Santhanakrishnan. Our agreement with
Mr. Ramaraj had a term of approximately 13 months, and our agreements with
Messrs Zacharias and Santhanakrishnan have a term of three years. Our
stockholders approved an extension of Mr. Ramarajs tenure as Managing Director
for an additional five years, effective April 1, 2003, retaining the terms as
per the Executive employment agreement. The material terms of the agreement
between us and the executives, are as follows:



| |  |  | during the term of employment, the executive shall be
entitled to compensation and benefits, subject to deduction of
tax per applicable law, as provided in the agreement;                                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the executive agreed not to disclose confidential
information and trade secrets to any third party except when
mandated by law and not to use such information for any purpose
except in the performance of his work for Sify;     
|
| |  |  | the executive agreed that all work of a copyrightable
or patentable nature done in the course of work for Sify belongs
to Sify and undertook to help in every way to duly register
Sifys ownership of such copyrights and patents;
|
| |  |  | Sify agreed to indemnify the executive, his executors,
administrators or assigns for all expenses which the executive
incurs or becomes legally obligated to pay in connection with any
proceedings;                               

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| |  |  | executive is entitled to full compensation and benefits
(excluding the performance bonus) up to the date of termination
of his employment, including a pro rated performance bonus up to
the date of termination of his employment in the event that
executives employment is terminated for good reason or within
one year after a change of control; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | executive is entitled to certain additional terminal
compensation of base salary in the event of the termination of
executives employment by Sify for any reason or by executive for
good reason.                                                                                                                                                         

Convertible notes of CricInfo Limited. On October 5, 2001, we entered into
an agreement to subscribe for unsecured convertible loan notes, or loan notes,
to be issued by CricInfo Limited in an aggregate amount of up to GBP 1.6
million to meet CricInfos short-medium term working capital requirements over
the ensuring year. These loan notes were redeemable on October 5, 2004, and
the terms of the loan note instrument provided for the payment of interest on
the principal amount at the rate of 8% per annum. We also entered into a Term
Loan Agreement with CricInfo for granting a term loan facility of GBP 0.1
million. The loan carried an interest rate of 4% per annum and was repayable on
December 31, 2004. This term loan and the convertible loan were secured by a
debenture executed by CricInfo.

In February 2003, CricInfo transferred its net assets (other than the loan
payable to our company and miscellaneous current assets and liabilities) to a
newly-formed company incorporated in the United Kingdom, Wisden Cricinfo
Limited. In consideration of its contribution of assets, CricInfo received a
33% equity stake in Wisden Cricinfo Limited and GBP 1.8 million. CricInfo
repaid our loan, including accrued interest of Rs.107.0 million, and
transferred its 33% stake in Wisden Cricinfo Limited to our company for a
consideration of Rs.22.6 million (GBP 0.3 million). Contemporaneously we
advanced Rs 23.0 million (GBP 0.3 million) to Wisden Cricinfo Limited.

Also in February 2003, we entered into a shareholders agreement providing
for, among other things, put and call options. The options were exercisable at
any time during three months from the year ended September 30, 2004, 2005 and
2006 or within three months of a material breach or in the event a liquidator
being appointed. The option price was based on a factor of profits and is fixed
at a minimum price of GBP 0.6 million and a maximum price of GBP 1.0 million.

Exchange Controls

General

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

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

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various kinds of capital account transactions, including aspects of the
purchase and issuance of shares of Indian companies. Therefore, transaction
involving foreign investment in Indian securities is regulated by the
provisions of the Indian Foreign Exchange Management Act, 1999 and continues to
be regulated by the Reserve Bank of India.

ADR Guidelines

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

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

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

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

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

The Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme
is distinct from other policies or facilities, as described below, relating to
investments in Indian companies by foreign investors. The issuance of ADSs
pursuant to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
Scheme also affords to owners of ADSs the benefits of Section 115AC of the
Indian Income-tax Act, 1961 for purposes of the application of Indian tax law.
For additional information, please see Taxation  Indian Taxation.

Foreign Direct Investment

Currently, subject to certain exceptions, foreign direct investment and
investment by individuals of Indian nationality or origin residing outside
India, or non-resident Indians, and overseas corporate bodies at least 60%
owned by such persons, or overseas corporate bodies, in Indian companies do not
require the specific prior approval of the Foreign Investment Promotion Board,
or FIPB, a body formed by the Government of India to negotiate with large
foreign companies interested in making long-term investments in India.
Furthermore, henceforth no prior approval of the Reserve Bank of India is
required although a post-investment declaration in giving details of the
foreign investment in the company pursuant to the ADR issue must be filed with
the Reserve Bank of India within thirty days of our ADR offering. However, the
waiver of approval by the FIPB and the RBI is unavailable in certain industries
which have been identified by the Government of India. The waiver of approval
would not apply in the following cases:



| |  |  | foreign investment in industries that require an industrial
license;                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------
|
| |  |  | foreign investment being more than 24% in the equity capital
of manufacturing items reserved for small scale industries;
|
| |  |  | all proposals in which the foreign collaboration has a
previous venture/tie-up in India in the relevant sector;         
|
| |  |  | all proposals relating to acquisition of shares in an existing company by a foreign investor;                           

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| |  |  | all proposals for investment in the industries specified by the Government of India; and                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | all proposals for investment in specified industries where
the proposed investment is in excess of the sectoral caps specified
therein.

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

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

In November 1998, the Reserve Bank of India issued a notification to the
effect that foreign investment in preferred shares will be considered as part
of the share capital of a company and the provisions relating to foreign direct
investment in the equity shares of a company discussed above would apply.
Investments in preferred shares are included as foreign direct investment for
the purposes of sectoral caps on foreign equity, if such preferred shares carry
a conversion option. If the preferred shares are structured without a
conversion option, they would fall outside the foreign direct investment limit.

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

Notwithstanding the foregoing, Government of India policies permit a
maximum level of foreign equity investment of 74% in Internet service
providers. Our license was reissued in April 2002, allowing us a maximum level
of foreign equity investment of 74% and also permitting us to provide Internet
telephony, subject to the terms of operation as detailed in the license.

Investment by Non-Resident Indians and Overseas Corporate Bodies

A variety of special facilities for making investments in India in shares
of Indian companies is available to individuals of Indian nationality or origin
residing outside India, or non-resident Indians, and to overseas corporate
bodies, or OCBs, at least 60% owned by such persons. These facilities permit
non-resident Indians and overseas corporate bodies to make portfolio
investments in shares and other securities of Indian companies on a basis not
generally available to other foreign investors. These facilities are different
and distinct from investments by foreign direct investors described above.

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

Investment by Foreign Institutional Investors

In September 1992, the Government of India issued guidelines which enable
foreign institutional investors, including institutions such as pension funds,
investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers, to make portfolio investments in
the securities of listed and unlisted companies in India. Under the
guidelines, foreign institutional investors must obtain an initial registration
from the Securities and Exchange Board of India to make these investments.
Foreign institutional investors must also comply with the provisions of the
Securities Exchange Board of India Foreign Institutional Investors Regulations,
1995. When it receives the initial registration, the foreign institutional
investor also obtains general permission from the Reserve Bank of India to
engage in transactions regulated under the Indian Foreign Exchange Regulation
Act. Together, the initial registration and the Reserve Bank of Indias
general permission enable the

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registered foreign institutional investor to buy, subject to the ownership
restrictions discussed below, and sell freely securities issued by Indian
companies whether or not they are listed, to realize capital gains on
investments made through the initial amount invested in India, to subscribe or
renounce rights offerings for shares, to appoint a domestic custodian for
custody of investments held and to repatriate the capital, capital gains,
dividends, income received by way of interest and any compensation received
towards sale or renunciation of rights offerings of shares. The foreign
institutional investor regulations also set out the general obligations and
responsibilities and investment conditions and restrictions applicable to
foreign institutional investors. One such restriction is that unless the
foreign Institutional Investor is registered as a debt fund with the Securities
Exchange Board of India, the total investment in equity and equity-related
instruments should not be less than 70% of the aggregate of all investments of
a foreign institutional investor in India.

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

Ownership Restrictions

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

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

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

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unlisted company, the provisions of the new regulations will not apply to
us. If our shares are listed on an Indian stock exchange in the future, the
new regulations will apply to the holders of our ADSs.

Open market purchases of securities of Indian companies in India by
foreign direct investors or investments by non-resident Indians, overseas
corporate bodies and foreign institutional investors above the ownership levels
set forth above require Government of India approval on a case-by-case basis.

Voting Rights of Deposited Equity Shares Represented by ADSs

Holders of ADSs generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the equity
shares represented by the related ADSs. At our request, the depositary bank
will mail to the holders of ADSs any notice of stockholders meeting received
from us together with information explaining how to instruct the depositary
bank to exercise the voting rights of the securities represented by ADSs.

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

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

Under Indian law, subject to the presence in person at a stockholder
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
a stockholder present in person at the meeting demands 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
depositary bank, are not counted in a vote by show of hands. As a result, only
in the event that a stockholder present at the meeting demands that a poll be
taken will the votes of ADSs holders be counted. Securities for which no
voting instructions have been received will not be voted on a poll.

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

Taxation

Indian Taxation

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

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.

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Residence. For purposes of the Income-tax Act, an individual is
considered to be a resident of India during any fiscal year if he or she is in
India in that year for:



| |  |  | a period or periods amounting to 182 days or more; or                                                                                                                                                                                                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 60 days or more and, in case of a citizen of India or a person of
Indian origin, who, being outside India, comes on a visit to India, is in
India for 182 days or more effective April 1, 1995 and in each case
within the four preceding years has been in India for a period or periods
amounting to 365 days or more.

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

Taxation of Distributions. There is no withholding tax on dividends paid
to stockholders. Dividend distribution tax is in addition to the normal
corporate tax of 35.9%, including the presently applicable surcharge of 2.5%
for fiscal 2004.

Any distributions of additional ADSs, equity shares or rights to subscribe
for equity shares made to non-resident holders with respect to ADSs or equity
shares will not be subject to Indian tax. Similarly, the acquisition by a
non-resident holder of equity shares upon redemption of ADSs will not
constitute a taxable event for Indian income tax purposes. Such acquisition
will, however, give rise to a stamp duty as described below under Stamp Duty
and Transfer Tax.

Taxation of Capital Gains. Any gain realized on the sale of ADSs or
equity shares by a non-resident holder to any non-resident outside India is not
subject to Indian capital gains tax.

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

Subject to any relief provided pursuant to an applicable tax treaty, any
gain realized on the sale of equity shares to an Indian resident or inside
India generally will be subject to Indian capital gains tax which is to be
withheld at the source by the buyer. However, the acquisition by non-resident
holders of equity shares in exchange for ADSs will not be subject to Indian
capital gains tax. Under the Issue of Foreign Currency Convertible Bonds and
Ordinary Shares Scheme, the cost of acquisition of equity shares received in
exchange for ADSs will be the cost of the underlying shares on the date that
the depositary gives notice to the custodian of the delivery of the equity
shares in exchange for the corresponding ADSs. In the case of companies listed
in India, the cost of acquisition of the equity shares would be the price of
the equity shares prevailing on the Stock Exchange, Mumbai or the National
Stock Exchange on the date the depositary gives notice to the custodian of the
delivery of the equity shares in exchange for the corresponding ADSs. However,
the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme and
Section 115AC do not provide for determination of the cost of acquisition for
the purposes of computing capital gains tax where the shares of the Indian
company are not listed on the Stock Exchange, Mumbai or the National Stock
Exchange in India. Therefore, in the case of our company, which is not listed
on either the Stock Exchange, Mumbai or the National Stock Exchange, the mode
of determination of the cost of acquisition of equity shares is unclear.
Therefore, the original cost of acquisition of the ADSs may be treated as the
cost of acquisition for the purposes of determining the capital gains tax.
According to the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares Scheme, a non-resident holders holding period for purposes of
determining the applicable Indian capital gains tax rate in respect of equity
shares received in exchange for ADSs commences on

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the date of the notice of the redemption by the depositary to the
custodian. The India-U.S. Treaty does not provide an exemption from the
imposition of Indian capital gains tax.

Under Section 115AC, taxable gain realized in respect of equity shares
held for more than 12 months, or long-term gain, is subject to tax at the rate
of 10%. Taxable gain realized in respect of equity shares held for 12 months
or less, or short-term gain, is subject to tax at variable rates with a maximum
rate of 48%. In addition, non-corporate foreign assessees are subject to a
surcharge of 5.0%. The actual rate of tax on short-term gain depends on a
number of factors, including the residential status of the non-resident holder
and the type of income chargeable in India.

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

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

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

Service Tax. Brokerage or commissions paid to stockbrokers in connection
with the sale or purchase of shares is subject to a service tax of 5.0%.
Effective May 14, 2003 service tax rates has been increased to 8.0%. The
stockbroker is responsible for collecting the service tax and paying it to the
relevant authority.

Income Tax Matters

As of March 31, 2003, we had a net tax loss carryforward of approximately
Rs. 4,470 million ($ 94.1 million) for financial reporting purposes. Under
Indian law, loss carryforwards from a particular year may be used to offset
taxable income over the next eight years.

The statutory corporate income tax rate and the surcharge thereon are
subject to change in line with the changes announced in the Union Budget each
year. For the fiscal ended 2003, the rate of corporate income tax was 35% with
a surcharge of 5% thereon, resulting in an effective tax rate of 36.8%. For
fiscal 2004, while the basic rate will remain at 35%, the surcharge has been
reduced to 2.5%, thereby resulting in an effective tax rate of 35.9%. 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 stockholders
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
Bill, 2003 proposes that after April 1, 2003, dividend income will be exempt
from tax for shareholders and that domestic companies will be liable to pay a
dividend distribution tax at the rate of 12.5% plus a surcharge at the time of
the distribution.

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United States Federal Taxation

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

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

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

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

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

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

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

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Estate Taxes. An individual stockholder who is a citizen or resident of
the United States for U.S. federal estate tax purposes will have the value of
the equity shares or ADSs owned by such holder included in his or her gross
estate for U.S. federal estate tax purposes.

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



| |  |  | 75% or more of its gross income for the taxable year is passive income;
or                                                                                                                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | on a quarterly average for the taxable year by value (or, if it is not
a publicly traded corporation and so elects, by adjusted basis) 50% or
more of its assets produce or are held for the production of passive
income.

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



| |  |  | pay an interest charge together with tax calculated at maximum ordinary
income rates on excess distributions, which is defined to include gain
on a sale or other disposition of equity shares;                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | if a qualified electing fund election is made, include in their taxable
income their pro rata share of undistributed amounts of our income; or                                                                                                                                          
|
| |  |  | if the equity shares are marketable and a mark-to-market election is
made, mark-to-market the equity shares each taxable year and recognize
ordinary gain and, to the extent of prior ordinary gain, ordinary loss
for the increase or decrease in market value for such taxable year.

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

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




Item 11. Quantitative and Qualitative Disclosures About Market Risk

Fair value estimates are made at a specific point in time and are based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

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We also face market risk relating to foreign exchange rate fluctuations,
principally relating to the fluctuation of U.S. dollar to Indian rupee exchange
rate. Our foreign exchange risk principally arises from accounts payable to
overseas vendors. This risk is partially mitigated as we hold balances in
foreign currency with overseas banks. Our foreign exchange gain/(loss) was
Rs.0.6 million, Rs.5.4 million, Rs.162 million, Rs. 44.5 million and Rs. 0.01
million for fiscal 1999, 2000, 2001, 2002 and 2003 respectively.




Item 12. Description of Securities Other Than Equity Securities

Not applicable.




PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable.




Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Under the Companies Act, 1956 of India, or Companies Act, a company
incorporated in India must offer its holders of equity shares preemptive rights
to subscribe and pay for a proportionate number of shares to maintain their
existing ownership percentages prior to the issuance of any new equity shares,
unless the preemptive rights have been waived by adopting a special resolution
by holders of three-fourths of the companys shares which are voted on the
resolution. At our 2000 Annual General Meeting, our stockholders approved a
special resolution permitting us to issue up to one million equity shares in
connection with acquisitions. We issued virtually all of these equity shares
in connection with our acquisitions of IndiaWorld Communications and
Indiaplaza.com and our investment in CricInfo Limited. At our 2001 Annual
General Meeting, our stockholders approved a special resolution permitting us
to issue up to four million additional equity shares in connection with
acquisitions or capital raising transactions, and ADS holders are deemed to
have waived their preemptive rights with respect to these shares. At our
December 2002 Extraordinary General Meeting, our stockholders approved a
special resolution permitting us to issue up to 12.5 million additional equity
shares (equivalent to 12.5 million ADSs) in connection with the sale of equity
shares to SAIF and VentureTech, and our ADS holders are deemed to have waived
their preemptive rights with respect to these shares and our Board of Directors
may approve the issuance of these shares without further action of our
stockholders.




Item 15. Controls and procedures

Evaluation of disclosure controls and procedures

Based on their evaluation as of a date within 90 days of the filing of
this Annual Report on Form 20-F, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures as
defined in Rules 13a-14(c) under the Securities Exchange Act of 1934 (the
Exchange Act) are effective to ensure 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 the Securities and Exchange Commission rules and forms.

Changes in internal controls

There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date
of their evaluation. There were no significant deficiencies or material
weaknesses, and therefore there were no corrective actions taken.

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Item 16A. Audit committee financial expert




Item 16B. Code of ethics




Item 16C. Principal Accountant Fees and Services




PART III




Item 17. Financial Statements

Not
applicable.

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ITEM 18. FINANCIAL STATEMENTS

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders

Sify Limited (formerly known as Satyam Infoway Limited)

We have audited the accompanying consolidated balance sheets of Sify
Limited (formerly known as Satyam Infoway Limited) and subsidiaries as of March
31, 2002 and 2003, and the related consolidated statements of operations,
stockholders equity and comprehensive income, and cash flows, for each of the
years in the three-year period ended March 31, 2003. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sify
Limited (formerly known as Satyam Infoway Limited) and subsidiaries as of March
31, 2002 and 2003, and the results of their operations and their cash flows for
each of the years in the three-year period ended March 31, 2003, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements as of and for the year
ended March 31, 2003 have been translated into United States dollars solely for
the convenience of the reader. We have audited the translation and, in our
opinion, the consolidated financial statements expressed in Indian Rupees have
been translated into dollars on the basis set forth in Note 3 of the notes to
the consolidated financial statements.

KPMG
Chennai, India
April 17, 2003

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SIFY LIMITED (formerly known as Satyam Infoway Limited) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data and as stated otherwise)

|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --- | --------------- | ------- | ---- | --- | ----------- | ------- |  | - | -------- | ------ | 
|                                                                                                                                                                      |                                                   |     | As at March 31,
|                                                                                                                                                                      |                                                   |     |                
|                                                                                                                                                                      |                                                   |     | 2002            |         | 2003 |     | 2003       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |            
|ASSETS                                                                                                                                                                |                                                   |     |                 |         |      |     |             |         |  |   |          |       
|Current assets:                                                                                                                                                       |                                                   |     |                 |         |      |     |             |         |  |   |          |       
|                                                                                                                                                                      | Cash and cash equivalents                         |     | Rs.             | 658,111 |      |     | Rs.         | 897,596 |  |   | $        | 18,885 | 
|                                                                                                                                                                      | Cash restricted                                   |     |                 | 52,389  |      |     |             | 74,612  |  |   |          | 1,570  | 
|                                                                                                                                                                      | Accounts receivable                               |     |                 | 419,961 |      |     |             | 346,270 |  |   |          | 7,285  | 
|                                                                                                                                                                      | Due from officers and employees                   |     |                 | 38,675  |      |     |             | 982     |  |   |          | 21     | 
|                                                                                                                                                                      | Due from related parties                          |     |                 | 8,137   |      |     |             | 16,016  |  |   |          | 337    | 
|                                                                                                                                                                      | Inventories                                       |     |                 | 35,426  |      |     |             | 39,971  |  |   |          | 841    | 
|                                                                                                                                                                      | Prepaid expenses                                  |     |                 | 114,755 |      |     |             | 124,785 |  |   |          | 2,625  | 
|                                                                                                                                                                      | Other current assets                              |     |                 | 76,891  |      |     |             | 72,948  |  |   |          | 1,535  | 
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total current assets                                                                                                                                                  |                                                   |     | 1,404,345       |         |      |     | 1,573,180   |         |  |   | 33,099   |       
|Cash restricted                                                                                                                                                       |                                                   |     | 100,000         |         |      |     | 100,010     |         |  |   | 2,104    |       
|Property, plant and equipment-net                                                                                                                                     |                                                   |     | 1,932,046       |         |      |     | 1,542,829   |         |  |   | 32,460   |       
|Goodwill and other intangible assets                                                                                                                                  |                                                   |     | 341,179         |         |      |     | 166,983     |         |  |   | 3,513    |       
|Investments in affiliated companies                                                                                                                                   |                                                   |     | 170,332         |         |      |     | 140,053     |         |  |   | 2,947    |       
|Investments in securities                                                                                                                                             |                                                   |     | 9,477           |         |      |     | 1,140       |         |  |   | 24       |       
|Other assets                                                                                                                                                          |                                                   |     | 188,895         |         |      |     | 176,192     |         |  |   | 3,707    |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total assets                                                                                                                                                          |                                                   | Rs. | 4,146,274       |         |      | Rs. | 3,700,387   |         |  | $ | 77,854   |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                  |                                                   |     |                 |         |      |     |             |         |  |   |          |       
|Current liabilities:                                                                                                                                                  |                                                   |     |                 |         |      |     |             |         |  |   |          |       
|                                                                                                                                                                      | Current installments of capital lease obligations |     |                 | 3,218   |      |     |             | 2,482   |  |   |          | 52     | 
|                                                                                                                                                                      | Trade accounts payable                            |     |                 | 243,099 |      |     |             | 89,259  |  |   |          | 1,878  | 
|                                                                                                                                                                      | Accrued liabilities                               |     |                 | 256,291 |      |     |             | 271,632 |  |   |          | 5,715  | 
|                                                                                                                                                                      | Deferred revenue                                  |     |                 | 144,519 |      |     |             | 289,297 |  |   |          | 6,087  | 
|                                                                                                                                                                      | Advances from customers                           |     |                 | 15,320  |      |     |             | 26,171  |  |   |          | 551    | 
|                                                                                                                                                                      | Other current liabilities                         |     |                 | 21,278  |      |     |             | 60,520  |  |   |          | 1,273  | 
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total current liabilities                                                                                                                                             |                                                   |     | 683,725         |         |      |     | 739,361     |         |  |   | 15,556   |       
|Capital lease obligations, excluding current installments                                                                                                             |                                                   |     | 3,922           |         |      |     | 3,767       |         |  |   | 79       |       
|Deferred Tax Liability                                                                                                                                                |                                                   |     | 13,388          |         |      |     |            |         |  |   |         |       
|Other liabilities                                                                                                                                                     |                                                   |     | 39,877          |         |      |     | 65,864      |         |  |   | 1,386    |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total liabilities                                                                                                                                                     |                                                   |     | 740,912         |         |      |     | 808,992     |         |  |   | 17,021   |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Minority interest                                                                                                                                                     |                                                   |     | 11,249          |         |      |     | 2,699       |         |  |   | 57       |       
|Stockholders equity                                                                                                                                                  |                                                   |     |                 |         |      |     |             |         |  |   |          |       
|Common stock, Rs 10 par value; 37,500,000 equity shares
authorized; Issued and outstanding: 23,202,176 shares as
of March 31,2002 and 32,795,200 as of March 31, 2003 |                                                   |     | 232,022         |         |      |     | 327,952     |         |  |   | 6,900    |       
|Additional paid-in capital                                                                                                                                            |                                                   |     | 13,649,324      |         |      |     | 14,326,742  |         |  |   | 301,425  |       
|Deferred compensation - employee stock offer plan                                                                                                                     |                                                   |     | (74,961         | )       |      |     | (24,839     | )       |  |   | (523     | )     
|Accumulated deficit                                                                                                                                                   |                                                   |     | (10,408,381     | )       |      |     | (11,737,769 | )       |  |   | (246,955 | )     
|Accumulated other comprehensive income                                                                                                                                |                                                   |     | (3,891          | )       |      |     | (3,390      | )       |  |   | (71      | )     
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total stockholders equity                                                                                                                                            |                                                   |     | 3,394,113       |         |      |     | 2,888,696   |         |  |   | 60,776   |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 
|Total liabilities and stockholders equity                                                                                                                            |                                                   | Rs. | 4,146,274       |         |      | Rs. | 3,700,387   |         |  | $ | 77,854   |       
|                                                                                                                                                                      |                                                   |     |                 |         |      |     |             |         |  |   |          |        | 

See accompanying notes to consolidated financial statements

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SIFY LIMITED (formerly known as Satyam Infoway Limited) and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data and as stated otherwise)

|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |        |  
|----------------------------------------------------------------------- | -------------------------------------------- | --- | -------------------- | --------- | ---- | --- | ---------- | ---------- | ---- | --- | ---------- | --------- | - | - | ---------- | ------ | -
|                                                                        |                                              |     | Year ended March 31,
|                                                                        |                                              |     |                     
|                                                                        |                                              |     | 2001                 |           | 2002 |     | 2003       |            | 2003
|                                                                        |                                              |     |                      |           |      |     |            |            |     
|                                                                        | Revenues                                     |     | Rs.                  | 1,200,833 |      |     | Rs.        | 1,493,636  |      |     | Rs.        | 1,862,585 |   |   | $          | 39,188 |  
|                                                                        | Initial services charges                     |     |                      | 19,691    |      |     |            | 66,652     |      |     |            | 97,270    |   |   |            | 2,046  |  
|                                                                        | Satyam Computer Services Limited             |     |                      | 4,957     |      |     |            | 17,200     |      |     |            | 34,345    |   |   |            | 723    |  
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Total Revenue                                                           |                                              |     | 1,225,481            |           |      |     | 1,577,488  |            |      |     | 1,994,200  |           |   |   | 41,957     |       
|Cost of revenues (excluding depreciation and
amortization)              |                                              |     | (1,177,106           | )         |      |     | (1,192,671 | )          |      |     | (1,264,101 | )         |   |   | (26,596    | )     
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |        |  
|Gross profit (excluding depreciation and
amortization)                  |                                              |     | 48,375               |           |      |     | 384,817    |            |      |     | 730,099    |           |   |   | 15,361     |       
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Operating expenses:                                                     |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Selling, general and administrative expenses                            |                                              |     | 1,855,864            |           |      |     | 1,860,967  |            |      |     | 1,635,103  |           |   |   | 34,401     |       
|Provision for doubtful receivables and advances                         |                                              |     | 31,460               |           |      |     | 101,500    |            |      |     | 156,233    |           |   |   | 3,287      |       
|Acquisition expenses                                                    |                                              |     |                     |           |      |     | 20,000     |            |      |     |           |           |   |   |           |       
|Amortisation / impairment of goodwill                                   |                                              |     | 931,967              |           |      |     | 4,420,644  |            |      |     |           |           |   |   |           |       
|Impairment of assets                                                    |                                              |     |                     |           |      |     |           |            |      |     | 246,999    |           |   |   | 5,197      |       
|Amortisation of deferred stock compensation expense                     |                                              |     | 61,451               |           |      |     | 9,686      |            |      |     | 57,729     |           |   |   | 1,215      |       
|Foreign exchange gain                                                   |                                              |     | (162,136             | )         |      |     | (44,520    | )          |      |     | 18         |           |   |   |           |       
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Total operating expenses                                                |                                              |     | 2,718,606            |           |      |     | 6,368,277  |            |      |     | 2,096,082  |           |   |   | 44,100     |       
|Operating loss                                                          |                                              |     | (2,670,231           | )         |      |     | (5,983,460 | )          |      |     | (1,365,983 | )         |   |   | (28,739    | )     
|Other income, net                                                       |                                              |     | 242,368              |           |      |     | 32,711     |            |      |     | 52,948     |           |   |   | 1,114      |       
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Loss before taxes, equity in losses of affiliates
and minority interest |                                              |     | (2,427,863           | )         |      |     | (5,950,749 | )          |      |     | (1,313,035 | )         |   |   | (27,625    | )     
|Equity in losses of affiliates                                          |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|                                                                        | Operating losses                             |     |                      | (263,178  | )    |     |            | (1,225,444 | )    |     |            | (50,689   | ) |   |            | (1,066 | )
|                                                                        | Gain on sale of investment in affiliates     |     |                      |          |      |     |            |           |      |     |            | 24,628    |   |   |            | 518    |  
|Minority interest                                                       |                                              |     | 11,137               |           |      |     | 17,928     |            |      |     | 12,564     |           |   |   | 264        |       
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Losses before income taxes                                              |                                              |     | (2,679,904           | )         |      |     | (7,158,265 | )          |      |     | (1,326,532 | )         |   |   | (27,909    | )     
|Taxes                                                                   |                                              |     | (1,707               | )         |      |     |           |            |      |     | (2,856     | )         |   |   | (60        | )     
|Loss from continuing operations                                         |                                              | Rs. | (2,681,611           | )         |      | Rs. | (7,158,265 | )          |      | Rs. | (1,329,388 | )         |   | $ | (27,969    | )     
|Discontinued operations                                                 |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|                                                                        | Income / (loss) from discontinued operations |     | Rs.                  | 172,581   |      |     | Rs.        | (125,373   | )    |     |            |          |   |   |            |       |  
|                                                                        | Profit on sale of discontinued operations    |     |                      |          |      |     | Rs.        | 81,121     |      |     |            |          |   |   |            |       |  
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |        |  
|Net loss                                                                |                                              | Rs. | (2,509,030           | )         |      | Rs. | (7,202,517 | )          |      | Rs. | (1,329,388 | )         |   | $ | (27,969    | )     
|                                                                        |                                              |     |                      |           |      |     |            |            |      |     |            |           |   |   |            |       
|Net loss per share - continuing operations                              |                                              |     | (117.34              | )         |      |     | (308.59    | )          |      |     | (51.15     | )         |   |   | (1.08      | )     
|Net loss per share - discontinued operations                            |                                              |     | 7.55                 |           |      |     | (1.91      | )          |      |     |           |           |   |   |           |       
|Net loss per share                                                      |                                              |     | (109.79              | )         |      |     | (310.50    | )          |      |     | (51.15     | )         |   |   | (1.08      | )     
|Weighted equity shares used in
computing loss per equity share          |                                              |     | 22,852,600           |           |      |     | 23,196,428 |            |      |     | 25,988,095 |           |   |   | 25,988,095 |       

See accompanying notes to consolidated financial statements

80



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##### Table of Contents



SIFY LIMITED (formerly known as Satyam Infoway Limited) and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data and as stated otherwise)

|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |        |        |  
|--------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------- | ---------- | -------------------- | -------- | ---- | ---------- | --------- | ------- | ---- | ---------- | -------- | ------- | - | ------- | ------ | ------ | -
|                                                                            |                                                     |                                                |            | Year ended March 31,
|                                                                            |                                                     |                                                |            |                     
|                                                                            |                                                     |                                                |            | 2001                 |          | 2002 |            | 2003      |         | 2003
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |     
|Net loss from continuing operations                                         |                                                     | Rs.                                            | (2,681,611 | )                    |          | Rs.  | (7,158,265 | )         |         | Rs.  | (1,329,388 | )        |         | $ | (27,969 | )     
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|                                                                            | Depreciation, amortization and impairment           |                                                |            | 1,431,459            |          |      |            | 5,020,600 |         |      |            | 854,182  |         |   |         | 17,971 |       
|                                                                            | Equity in losses of affiliates                      |                                                |            | 263,178              |          |      |            | 1,225,444 |         |      |            | 26,061   |         |   |         | 548    |       
|                                                                            | Gain on sale of investments                         |                                                |            | (28                  | )        |      |            |          |         |      |            | (1,495   | )       |   |         | (31    | )     
|                                                                            | Loss on sale of plant and equipment                 |                                                |            | 661                  |          |      |            | 3,652     |         |      |            | 2,552    |         |   |         | 54     |       
|                                                                            | Provision for doubtful receivables and advances     |                                                |            | 31,460               |          |      |            | 101,500   |         |      |            | 156,233  |         |   |         | 3,287  |       
|                                                                            | Deferred taxes                                      |                                                |            | (120                 | )        |      |            |          |         |      |            |         |         |   |         |       |       
|                                                                            | Inventory write down                                |                                                |            |                     |          |      |            | 22,085    |         |      |            | 6,720    |         |   |         | 141    |       
|                                                                            | Minority interest                                   |                                                |            | (11,137              | )        |      |            | (17,928   | )       |      |            | (12,564  | )       |   |         | (264   | )     
|                                                                            | Others                                              |                                                |            |                     |          |      |            |          |         |      |            | 7,106    |         |   |         | 150    |       
|                                                                            | Changes in assets and liabilities:                  |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |        |       
|                                                                            |                                                     | Accounts receivable                            |            |                      | (304,155 | )    |            |           | (15,997 | )    |            |          | (65,793 | ) |         |        | (1,384 | )
|                                                                            |                                                     | Due from officers and employees                |            |                      | (83,466  | )    |            |           | 26,152  |      |            |          | 62,552  |   |         |        | 1,316  |  
|                                                                            |                                                     | Due from related parties                       |            |                      | (30,041  | )    |            |           | 4,159   |      |            |          | (7,879  | ) |         |        | (166   | )
|                                                                            |                                                     | Inventories                                    |            |                      | (91,670  | )    |            |           | 50,557  |      |            |          | (11,265 | ) |         |        | (237   | )
|                                                                            |                                                     | Prepaid expenses                               |            |                      | 42,203   |      |            |           | 94,580  |      |            |          | (10,030 | ) |         |        | (211   | )
|                                                                            |                                                     | Other assets                                   |            |                      | (127,237 | )    |            |           | 21,815  |      |            |          | (24,962 | ) |         |        | (525   | )
|                                                                            |                                                     | Trade accounts payable and accrued liabilities |            |                      | 320,490  |      |            |           | (14,477 | )    |            |          | (78,836 | ) |         |        | (1,659 | )
|                                                                            |                                                     | Deferred revenue                               |            |                      | 33,298   |      |            |           | (39,484 | )    |            |          | 144,778 |   |         |        | 3,046  |  
|                                                                            |                                                     | Advances from customers                        |            |                      | 79,181   |      |            |           | (84,388 | )    |            |          | 10,851  |   |         |        | 228    |  
|                                                                            |                                                     | Other liabilities                              |            |                      | (5,900   | )    |            |           | (15,685 | )    |            |          | 32,904  |   |         |        | 692    |  
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash used in continuing operations                                      |                                                     | Rs.                                            | (1,133,435 | )                    |          | Rs.  | (775,680   | )         |         | Rs.  | (238,273   | )        |         | $ | (5,013  | )     
|Net cash provided by / (used in) discontinued operations                    |                                                     | Rs.                                            | (174,927   | )                    |          | Rs.  | 237,531    |           |         |      |           |          |         |   |        |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash used in operating activities                                       |                                                     | Rs.                                            | (1,308,362 | )                    |          | Rs.  | (538,149   | )         |         | Rs.  | (238,273   | )        |         | $ | (5,013  | )     
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Cash flows from investing activities:                                       |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|                                                                            | Expenditure on plant and equipment                  |                                                |            | (1,888,020           | )        |      |            | (181,217  | )       |      |            | (284,346 | )       |   |         | (5,982 | )     
|                                                                            | Proceeds from sale of plant and equipment           |                                                |            | 934                  |          |      |            | 12,559    |         |      |            | 12,055   |         |   |         | 254    |       
|                                                                            | Expenditure on investment in affiliates             |                                                |            | (163,627             | )        |      |            | (119,741  | )       |      |            | 29,162   |         |   |         | 614    |       
|                                                                            | Net movement in cash - restricted                   |                                                |            | (7,045               | )        |      |            | (122,287  | )       |      |            | (22,233  | )       |   |         | (468   | )     
|                                                                            | Purchase consideration for acquisition, net of cash |                                                |            | (2,233,121           | )        |      |            | (11,210   | )       |      |            |         |         |   |         |       |       
|                                                                            | Expenditure on intangible assets                    |                                                |            | (28,000              | )        |      |            | (59,240   | )       |      |            | (16,891  | )       |   |         | (355   | )     
|                                                                            | Proceeds from sale of investments                   |                                                |            | 147                  |          |      |            |          |         |      |            | 8,579    |         |   |         | 180    |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash used in continuing operations                                      |                                                     | Rs.                                            | (4,318,732 | )                    |          | Rs.  | (481,136   | )         |         | Rs.  | (273,674   | )        |         | $ | (5,757  | )     
|Net cash used in discontinued operations                                    |                                                     | Rs.                                            | (26,804    | )                    |          | Rs.  | (71,279    | )         |         |      |           |          |         |   |        |       
|Proceeds from sale of discontinued operation                                |                                                     |                                                |           |                      |          | Rs.  | 349,165    |           |         |      |           |          |         |   |        |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash used in investing activities                                       |                                                     | Rs.                                            | (4,345,536 | )                    |          | Rs.  | (203,250   | )         |         | Rs.  | (273,674   | )        |         | $ | (5,757  | )     
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Cash flows from financing activities:                                       |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|                                                                            | Principal payments of long-term debt                |                                                |            | (208,167             | )        |      |            |          |         |      |            |          |         |   |         |       |       
|                                                                            | Principal payments of short term loans              |                                                |            | (1,800               | )        |      |            |          |         |      |            |          |         |   |         |       |       
|                                                                            | Principal payments under capital lease obligations  |                                                |            | (6,568               | )        |      |            | (9,097    | )       |      |            | (1,696   | )       |   |         | (36    | )     
|                                                                            | Net proceeds from issuance of common stock          |                                                |            | 70                   |          |      |            |          |         |      |            | 760,473  |         |   |         | 16,000 |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash provided by /(used in) continuing operations                       |                                                     | Rs.                                            | (216,465   | )                    |          | Rs.  | (9,097     | )         |         | Rs.  | 758,776    |          |         | $ | 15,964  |       
|Net cash provided by/(used in) discontinued operations                      |                                                     |                                                |           |                      |          |      |           |           |         |      |           |          |         |   |        |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       
|Net cash provided by/(used in) financing activities                         |                                                     | Rs.                                            | (216,465   | )                    |          | Rs.  | (9,097     | )         |         | Rs.  | 758,776    |          |         | $ | 15,964  |       
|                                                                            |                                                     |                                                |            |                      |          |      |            |           |         |      |            |          |         |   |         |       

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|                                                           |                                                                  |     |            |                      |  |      |           |        |  |      |         |        |  |   |        |     |  | 
|---------------------------------------------------------- | ---------------------------------------------------------------- | --- | ---------- | -------------------- |  | ---- | --------- | ------ |  | ---- | ------- | ------ |  | - | ------ | --- |  | 
|                                                           |                                                                  |     |            | Year ended March 31,
|                                                           |                                                                  |     |            |                     
|                                                           |                                                                  |     |            | 2001                 |  | 2002 |           | 2003   |  | 2003
|                                                           |                                                                  |     |            |                      |  |      |           |        |  |     
|Effect of exchange rate changes on cash                    |                                                                  |     |           |                      |  |      | (5,598    | )      |  |      | (7,345  | )      |  |   | (155   | )  
|Net increase / (decrease) in cash and cash equivalents     |                                                                  |     | (5,870,363 | )                    |  |      | (756,094  | )      |  |      | 239,485 |        |  |   | 5,039  |    
|Cash and cash equivalents at the beginning of the year     |                                                                  |     | 7,284,568  |                      |  |      | 1,414,205 |        |  |      | 658,111 |        |  |   | 13,846 |    
|                                                           |                                                                  |     |            |                      |  |      |           |        |  |      |         |        |  |   |        |    
|Cash and cash equivalents at the end of the year           |                                                                  | Rs. | 1,414,205  |                      |  | Rs.  | 658,111   |        |  | Rs.  | 897,596 |        |  | $ | 18,885 |    
|                                                           |                                                                  |     |            |                      |  |      |           |        |  |      |         |        |  |   |        |    
|Supplementary Information                                  |                                                                  |     |            |                      |  |      |           |        |  |      |         |        |  |   |        |    
|                                                           | Cash paid towards interest                                       |     |            | 11,695               |  |      |           | 2,838  |  |      |         | 795    |  |   |        | 17  | 
|                                                           | Cash paid towards taxes                                          |     |            | 935                  |  |      |           | 44,958 |  |      |         | 20,048 |  |   |        | 422 | 
|Supplemental schedule of non cash financing activity       |                                                                  |     |            |                      |  |      |           |        |  |      |         |        |  |   |        |    
|Capital leases                                             |                                                                  |     | 12,994     |                      |  |      | 9,440     |        |  |      | 2,956   |        |  |   | 62     |    
|Additional common stock issued for acquisition of business |                                                                  |     | 3,131,364  |                      |  |      | 49,268    |        |  |      |        |        |  |   |       |    
|                                                           | Property plant and equipment purchased on credit
during the year |     |            | 93,660               |  |      |           | 80,148 |  |      |         | 20,397 |  |   |        | 429 | 

See accompanying notes to consolidated financial statements

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##### Table of Contents



SIFY LIMITED (formerly known as Satyam Infoway Limited) and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(in thousands, except share data and as stated otherwise)

|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |            |            |  
|----------------------------------------------------------- | -------- | --------------------------------------- | ---------- | ------------ |  | ---------- | ------- | ---------- | - | ------------- | ---------- | -------------- | - | ----------- | ---------- | ------------- | ---------- | ------ | ------ | ----------- | ------ | -------- | -------- | - | - |  | ----------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | -
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        | Accumulated |        | Deferred |          |   |   |  |             |            |            |  
|                                                            |          |                                         |            | Common Stock |  | Additional |         | Compre     |   | Other         |            | Compensation - |   |             |            |               |            | Total 
|                                                            |          |                                         |            |              |  | Paid       |         | -hensive   |   | comprehensive |            | Employee Stock |   | Accumulated |            | Stockholders
|                                                            |          |                                         |            | Shares       |  | Par Value  |         | In Capital |   | income        |            | income         |   | offer plan  |            | deficit       |            | Equity
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |       
|Balance as of March 31,
2000                                |          |                                         | 22,249,425 |              |  |            | 222,494 |            |   |               | 10,520,953 |                |   |             |           |               |            |        | 1,451  |             |        |          | (120,225 | ) |   |  | (696,834    | )          |            |   | 9,927,839  |           
|Issue of common stock
for acquisitions and
investments      |          |                                         | 933,678    |              |  |            | 9,337   |            |   |               | 3,122,097  |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   | 3,131,434  |           
|Compensation related to
stock option grants                 |          |                                         |            |              |  |            |        |            |   |               | 67,676     |                |   |             |           |               |            |        |       |             |        |          | (67,676  | ) |   |  |            |            |            |   |           |           
|Amortization of
compensation related to
stock option grants |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             |           |               |            |        |       |             |        |          | 86,796   |   |   |  |            |            |            |   | 86,796     |           
|Capital transaction of
investee                             |          |                                         |            |              |  |            |        |            |   |               | (41,156    | )              |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   | (41,156    | )         
|Comprehensive income                                        |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            | Net loss |                                         |            |              |  |            |         |           |   |               |            |               |   |             |            | (2,509,030    | )          |        |        |            |        |          |          |  |   |  |             | (2,509,030 | )          |   |            | (2,509,030 | )         
|Other comprehensive
income                                  |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            |          | Unrealized loss on
investments, net     |            |              |  |            |         |            |  |               |            |                |  |             |            |               | (7,547     | )      |        |             | (7,547 | )        |          |   |  |  |             |            |           |   |            |            | (7,547     | )
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           
|Comprehensive income                                        |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             | (2,516,577 | )             |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           
|Balance as of March 31,
2001                                |          |                                         | 23,183,103 |              |  |            | 231,831 |            |   |               | 13,669,570 |                |   |             |            |               |            |        | (6,096 | )           |        |          | (101,105 | ) |   |  | (3,205,864  | )          |            |   | 10,588,336 |           
|Issue of common stock
for acquisitions and
investments      |          |                                         | 19,073     |              |  |            | 191     |            |   |               | 49,077     |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   | 49,268     |           
|Compensation related to
stock option grants                 |          |                                         |            |              |  |            |        |            |   |               | 72,492     |                |   |             |           |               |            |        |       |             |        |          | (72,492  | ) |   |  |            |            |            |   |           |           
|Amortization of
compensation related to
stock option grants |          |                                         |            |              |  |            |        |            |   |               | (83,962    | )              |   |             |           |               |            |        |       |             |        |          | 98,636   |   |   |  |            |            |            |   | 14,674     |           
|Capital transaction of
investee                             |          |                                         |            |              |  |            |        |            |   |               | (57,853    | )              |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   | (57,853    | )         
|Comprehensive income                                        |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            |          | Net loss                                |            |              |  |            |         |            |  |               |            |                |  |             |            |               | (7,202,517 | )      |        |             |       |          |          |   |  |  |             |            | (7,202,517 | ) |            |            | (7,202,517 | )
|                                                            |          | Other comprehensive
income              |            |              |  |            |         |            |  |               |            |                |  |             |            |               |           |        |        |             |       |          |          |   |  |  |             |            |           |   |            |            |           |  
|                                                            |          | Unrealized loss
on investments,
net     |            |              |  |            |         |            |  |               |            |                |  |             |            |               | (356       | )      |        |             | (356   | )        |          |   |  |  |             |            |           |   |            |            | (356       | )
|                                                            |          | Foreign exchange
translation
adjustment |            |              |  |            |         |            |  |               |            |                |  |             |            |               | 2,561      |        |        |             | 2,561  |          |          |   |  |  |             |            |           |   |            |            | 2,561      |  
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           
|Comprehensive income                                        |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             | (7,200,312 | )             |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           
|                                                            |          |                                         |            |              |  |            |        |            |   |               |           |                |   |             |           |               |            |        |       |             |        |          |         |   |   |  |            |            |            |   |           |           
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           
|Balance as of March 31,
2002                                |          |                                         | 23,202,176 |              |  |            | 232,022 |            |   |               | 13,649,324 |                |   |             |            |               |            |        | (3,891 | )           |        |          | (74,961  | ) |   |  | (10,408,381 | )          |            |   | 3,394,113  |           
|                                                            |          |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |            |        |        |             |        |          |          |   |   |  |             |            |            |   |            |           

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|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |            |        |  
|----------------------------------------------------------- | -------------------------- | --------------------------------------- | ---------- | ------------ |  | ---------- | ------- | ---------- | - | ------------- | ---------- | -------------- | - | ----------- | ---------- | ------------- | ------ | ------ | ------ | ----------- | ------ | -------- | ------- | - | - |  | ----------- | ---------- | - |  | --------- | ---------- | ------ | -
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        | Accumulated |        | Deferred |         |   |   |  |             |            |   | 
|                                                            |                            |                                         |            | Common Stock |  | Additional |         | Compre     |   | Other         |            | Compensation - |   |             |            |               |        | Total 
|                                                            |                            |                                         |            |              |  | Paid       |         | -hensive   |   | comprehensive |            | Employee Stock |   | Accumulated |            | Stockholders
|                                                            |                            |                                         |            | Shares       |  | Par Value  |         | In Capital |   | income        |            | income         |   | offer plan  |            | deficit       |        | Equity
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |       
|Issue of common stock
(net of expenses)                     |                            |                                         | 9,593,024  |              |  |            | 95,930  |            |   |               | 664,542    |                |   |             |           |               |        |        |       |             |        |          |        |   |   |  |            |            |   |  | 760,472   |           
|Compensation related to
stock option grants                 |                            |                                         |            |              |  |            |        |            |   |               | 86         |                |   |             |           |               |        |        |       |             |        |          | (86     | ) |   |  |            |            |   |  |          |           
|Amortization of
compensation related to
stock option grants |                            |                                         |            |              |  |            |        |            |   |               | 12,789     |                |   |             |           |               |        |        |       |             |        |          | 50,208  |   |   |  |            |            |   |  | 62,997    |           
|Comprehensive income                                        |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           
|                                                            | Net loss                   |                                         |            |              |  |            |         |           |   |               |            |               |   |             |            | (1,329,388    | )      |        |        |            |        |          |         |  |   |  |             | (1,329,388 | ) |  |           | (1,329,388 | )     
|                                                            | Other comprehensive
income |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |            |       
|                                                            |                            | Unrealized loss
on investments,
net     |            |              |  |            |         |            |  |               |            |                |  |             |            |               | (1,253 | )      |        |             | (1,253 | )        |         |   |  |  |             |            |  |  |           |            | (1,253 | )
|                                                            |                            | Foreign exchange
translation
adjustment |            |              |  |            |         |            |  |               |            |                |  |             |            |               | 1,754  |        |        |             | 1,754  |          |         |   |  |  |             |            |  |  |           |            | 1,754  |  
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           
|Comprehensive income                                        |                            |                                         |            |              |  |            |        |            |   |               |           |                |   |             | (1,328,887 | )             |        |        |       |             |        |          |        |   |   |  |            |            |   |  |          |           
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           
|Balance as of March 31,
2003                                |                            |                                         | 32,795,200 |              |  |            | 327,952 |            |   |               | 14,326,742 |                |   |             |            |               |        |        | (3,390 | )           |        |          | (24,839 | ) |   |  | (11,737,769 | )          |   |  | 2,888,696 |           
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           
|Balance as of March 31,
2003 (in US$)                       |                            |                                         |            |              |  |            | 6,900   |            |   |               | 301,425    |                |   |             |            |               |        |        | (71    | )           |        |          | (523    | ) |   |  | (246,955    | )          |   |  | 60,776    |           
|                                                            |                            |                                         |            |              |  |            |         |            |   |               |            |                |   |             |            |               |        |        |        |             |        |          |         |   |   |  |             |            |   |  |           |           

See accompanying notes to consolidated financial statements

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SIFY LIMITED (formerly known as Satyam Infoway Limited)
Notes to Consolidated Financial Statements(In thousands, except share data and as stated otherwise)

1     Description of business

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

2     Change of name

The Company changed its name from Satyam Infoway Limited to Sify Limited effective January 6, 2003.

3     Summary of significant accounting policies

Basis of preparation of financial statements

The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (US GAAP) in
Indian Rupees (Rs.), the national currency of India. Solely for the
convenience of the reader, the financial statements as of and for the year
ended March 31, 2003 have been translated into United States dollars at the
noon buying rate in New York City on March 31, 2003 for cable transfers in
Indian rupees, as certified for customs purposes by the Federal Reserve Bank of
New York of US$1 = Rs. 47.53. No representation is made that the Indian rupee
amounts have been, could have been or could be converted into United States
dollars at such a rate or at any other rate on March 31, 2003 or at any other
date.

Use of estimates

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

Principles of consolidation

The consolidated financial statements of Sify include financial statements of
its majority-owned subsidiaries, which are more than 50% owned and where Sify
is able to exercise control over the operating and financial policies of the
investees. All material inter-company accounts and transactions are eliminated
on consolidation.

Investments in affiliates

The Company accounts by the equity method for investments between 20% and 50%
or where it would be otherwise able to exercise significant influence over the
operating and financial policies of the investees. Prior to the adoption of
Statement of Financial Accounting Standards (SFAS) No. 142, the excess of cost
of the stock of those affiliates over the Companys share of their net assets
at the acquisition date was recognized as goodwill and was being amortized on a
straight-line basis over 5 years. However, such goodwill was completely
written-off prior to the adoption of the SFAS No. 142. Subsequent to the
adoption of SFAS No. 142, the company will not amortise any goodwill recognised
from an investment in an affiliate. The Company would recognize a loss when
there is a loss in value in the equity method investment which is other than a
temporary decline.

Cash, cash equivalents and short-term investments

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

Revenue recognition

The operating segments of the Company include:



| |  |  | Corporate network/data services, which provides private
network services, messaging services and web hosting to businesses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Internet access services;                                                                                                  
|
| |  |  | Online portal services and content offerings ; and                                                                         
|
| |  |  | Other services such as development of e-learning software                                                                  

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These segments recognize revenues on the following basis:

Corporate network/data services

Corporate network service revenues primarily include connectivity services and,
to a lesser extent, the revenues from the sale of hardware and software
purchased from third party vendors, installation of the link, and other
ancilliary services such as e-mail, fax and domain registration. Generally,
these elements are sold as a package consisting of all or some of the elements.
This multiple element arrangement is recognized as separable elements because
each element constitutes a separate earnings 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. The Company provides connectivity for a fixed period of time at a
fixed rate regardless of usage. Connectivity is the last element that is
provided in the case of a bundled contract. The connectivity charges are the
same when sold alone or as part of a package. The revenue attributable to
connectivity services is recognized ratably over the period of the contract.
The hardware and software are standard products that are being freely traded in
and purchased from the market, have standard specifications and are not
otherwise customized for the specific needs of a customer. The software sold
by the Company is an off-the-shelf software, such as antivirus utilities and
firewalls. The fair value for the hardware and software is available from the
market. The revenue attributable to hardware/software is recognized on
delivery. Installation consists of commissioning of the last mile connectivity
to the customer premises from the carrier exchange (primarily Bharat Sanchar
Nigam Limited, or BSNL, a Government of India entity). However, once
commissioned this connection can be used by the customer to access any other
service provider. The installation normally takes 4-6 weeks. When the customer
has such last mile connectivity, the Company does not charge any installation
fee. The revenue attributable to the installation of the link is recognized on
completion of the installation work. When installation and connectivity
services are provided as a package, the value of the installation service is
based on the residual amount using the residual method as defined in SOP 98-9.
Revenue from ancillary services such as email facilities, fax facility and
domain registration are recognized over the period such facilities are
provided. All revenues are shown exclusive of sales tax and service tax and
net of applicable discounts and allowances.

Web hosting service revenues primarily include co-location services and
connectivity services. On occasion, the Company also sells related
hardware/software to its web hosting customers. At all times, such hardware
and software belongs to the customer. This hardware and software is purchased
from outside vendors and is freely traded in the market. The Company treats
each element of the arrangement as a separate earnings process based on the
guidelines of SOP 97-2, Software Revenue Recognition. The value of the hosting
service is determined based on vendor specific objective evidence from similar
services sold separately by the Company. When hardware and/or software is also
included with hosting services and sold as a package the vendor specific
objective evidence of the undelivered element is considered to arrive at the
residual value of the delivered element under SOP 98-9. Revenue from hosting
services is recognized over the period during which the service is provided.

Internet access services

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

Public Internet access is provided to customers through a chain of franchisee
cybercafé outlets and, to a lesser extent, Sify-owned cybercafés. Sify enters
into an arrangement with franchisees that provides for the payment of an
initial non-refundable franchisee fee in consideration for establishing the
franchisee relationship and providing certain initial services. These initial
services consist of a number of activities, including installing the broadband
receiver equipment at the cybercafé and connecting it to one of Sifys
broadcasting towers, obtaining regulatory approvals for clearance of the site
for wireless transmission at the allotted frequency range and other ancillary
services.

Initial franchisee fee revenue is recognized at the time of commencement of
operations by the franchisee, in accordance with SFAS No. 45, Accounting for
Franchisee Fee Revenue, because Sify believes that substantial performance for
which these non-refundable payments are received is completed at the time of
commencement of operations and no uncertainty exists with regard to the
collection of such fees. The amount of initial franchisee fee revenue
recognized during the year ending March 31, 2003 was Rs.21.4 million (US$ 0.45
million). As of March 31, 2003, Sify owned 27 of the 844 cybercafés. Internet
access revenue is recognized based on usage by the customer.

Online portal services

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 recognized based on actual
impressions/click throughs/ leads delivered. There are no performance
obligations or minimum guarantees. Revenues from electronic commerce
transactions are recognized when the transactions are completed.

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Other services

The Company provides e-learning software development services to facilitate
web-based learning in various organisations. Revenue from such projects is
recognised on the proportionate performance method.

Inventories

Inventories are generally stated at the lower of cost as determined using the
first-in-first-out method (FIFO), and net realisable value. The Company makes a
provision for the slow moving inventory on the basis of age of inventory.

Property, plant and equipment

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

|                       |  |          |  | 
|---------------------- |  | -------- |  | 
|Buildings              |  | 28 years
|Plant and machinery    |  | 5 years 
|Computer equipment     |  | 2 years 
|Office equipment       |  | 5 years 
|Furniture and fixtures |  | 5 years 
|Vehicles               |  | 5 years 

Software for internal use is acquired primarily from third-party vendors and is
in ready-to-use condition. Costs for acquiring such software are capitalized.
Capitalized software costs are amortized on a straight-line basis over the
estimated useful life of the software. Software acquired for internal use with
estimated useful life of less than one year is expensed upon acquisition.
Deposits paid towards the acquisition of plant and equipment outstanding at
each balance sheet date and the cost of property, plant and equipment not ready
to be put to use are disclosed under Construction-in-progress.

Gooodwill and intangible assets

The Company adopted the provisions of SFAS No. 141 for business combinations
initiated after June 30, 2001, which requires that all business combinations be
accounted for under the purchase method.

The Company adopted the provisions of SFAS No. 142, Goodwill and Other
Intangible Assets effective April 1, 2002. Under SFAS No. 142 we no longer
amortize goodwill or indefinite-lived intangible assets. The Company has
assessed the remaining useful lives of identified intangibles with definite
useful lives and provides for amortization over the determined useful life of
the asset. Goodwill carried in the book is tested for impairment periodically
and diminution in value, if any, is provided for through a charge in the
statement of operations. The Company does not have any intangible assets with
indefinite useful lives.

The Company assesses the recoverability of goodwill by reference to the
valuation methodology on the acquisition date. Accordingly, the Company
considers goodwill to be impaired when, in conjunction with its valuation
methodology, its expectations with respect to the acquisitions deteriorate
coupled with adverse market conditions. The Company would assess, to the
extent appropriate, at the enterprise level by comparing its market
capitalization to the carrying value of goodwill.

Prior to the adoption of SFAS No. 142, the Company recorded intangible assets
at cost or fair value and amortised such assets on a straight-line basis over
the economic lives of the respective assets. Goodwill was amortised on a
straight-line basis over 5 years.

Foreign currency translations

The functional and reporting currency of the Company is the Indian Rupee,
except that of India Plaza Inc. (a wholly owned subsidiary incorporated in
United States) whose functional currency is the US Dollar. The translation of
the US Dollar into Indian Rupee is performed for balance sheet accounts using
the exchange rate in effect at the balance sheet date and for revenue and
expense accounts using a monthly simple average exchange rate for the
respective periods. The gains or losses resulting from such translation are
reported in other comprehensive income, a separate component of shareholders
equity.

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Foreign currency transactions

Assets and liabilities denominated in foreign currencies are expressed in the
functional currency at the rates of exchange as of the balance sheet date. The
unrealized gain or loss resulting from this translation is reflected in the
statements of operations. Income and expenses in foreign currencies are
expressed in the functional currency at exchange rates prevailing when income
is earned or expenses are incurred.

Earnings per share

In accordance with SFAS No. 128, basic earnings per share are computed using
the weighted average number of common shares outstanding during the period.
Disclosure of diluted earnings per share is not applicable as the potential
equity shares are anti-dilutive. The Companys outstanding shares includes
shares held with a depositary to represent equity shares underlying the
Companys ADSs. Effective September 24, 2002, one ADS represented one equity
share. The Companys 1-for-4 ADS reverse ratio change on September 24, 2002
does not have any effect on our equity shares or per equity share amounts, as
the underlying shares representing ADSs were unchanged.

Income taxes

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

Advertising costs

Advertising costs incurred during the year have been expensed. The total
amount of advertising costs expensed was
Rs. 299,855, Rs. 25,800 and Rs. 29,329 for the years ended March 31, 2001,
2002 and 2003 respectively.

Retirement benefits to employees

Provident fund

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

Gratuity The Company provides for gratuity, a defined benefit retirement plan
(the Gratuity Plan) covering all employees. The Gratuity Plan commenced on
April 1, 1997. The plan provides a lump sum payment to vested employees at
retirement or termination of employment an amount based on the respective
employees salary and the years of employment with the Company. The Company
provides the gratuity benefit through annual contributions to a fund managed by
the Life Insurance Corporation of India (LIC). Under this scheme, the
settlement obligation remains with the Company, although the LIC administers
the scheme and determines the contribution premium required to be paid by the
Company. The gratuity plan is accounted for in accordance with SFAS No. 87.

Stock-based compensation

The Company applies the intrinsic-value-based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations including FASB Interpretation
No. 44, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, issued in March 2000, to account for its
fixed-plan stock options. Under this method, compensation expense is recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, the Company has elected to continue to apply
the intrinsic-value-based method of accounting described above, and has adopted
only the disclosure requirements of SFAS No. 123 as amended by SFAS No. 148
Accounting for Stock-Based Compensation  Transition and Disclosure.

The Company has adopted pro forma disclosure provisions of SFAS No. 123 and
SFAS No. 148. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of FASB statement No. 123, Accounting for Stock Based Compensation
to stock based employee compensation.

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|                                                                                                             |  |      |            |      |  |                      |            |   |  |  |            |  
|------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- |  | -------------------- | ---------- | - |  |  | ---------- | -
|                                                                                                             |  |      |            |      |  | Year ended March 31, |            |   |  | 
|                                                                                                             |  | 2001 |            | 2002 |  | 2003                
|                                                                                                             |  | Rs   |            | Rs   |  | Rs                  
|                                                                                                             |  |      |            |      |  |                     
|Net Loss  As reported                                                                                       |  |      | (2,509,030 | )    |  |                      | (7,202,517 | ) |  |  | (1,329,388 | )
|Less : Stock based
compensation expense included
in reported net loss                                        |  |      | 79,224     |      |  |                      | 14,673     |   |  |  | 62,997     |  
|Add: Total stock based
employee compensation expense
determined under fair value
based method for all awards |  |      | (336,160   | )    |  |                      | (306,645   | ) |  |  | (181,600   | )
|Pro forma net loss                                                                                           |  |      | (2,765,966 | )    |  |                      | (7,494,489 | ) |  |  | (1,210,785 | )
|Loss Per Share:                                                                                              |  |      |            |      |  |                      |            |   |  |  |            |  
|Basic and Diluted  as reported                                                                              |  |      | (109.79    | )    |  |                      | (310.50    | ) |  |  | (51.15     | )
|Basic and Diluted  pro forma                                                                                |  |      | (121.03    | )    |  |                      | (323.01    | ) |  |  | (46.59     | )

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

|                        |  |              |      |                          |  |              |       |   |  |  |     |  
|----------------------- |  | ------------ | ---- | ------------------------ |  | ------------ | ----- | - |  |  | --- | -
|                        |  | 2001         |      | Year
ended March 31,2002 |  | 2003        
|                        |  |              |      |                          |  |             
|Dividend yield          |  |              |     |                          |  |              |      |   |  |  |    |  
|Expected volatility     |  |              | 118  | %                        |  |              | 114   | % |  |  | 105 | %
|Risk-free interest rate |  |              | 9.50 | %                        |  |              | 7.5-9 | % |  |  | 6   | %
|Expected term           |  | 12-36 months |      | 12-36 months             |  | 12-36 months

Impairment of long-lived assets and long-lived assets to be disposed of

The Company adopted SFAS No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assetseffective April 1, 2002. Long-lived assets, including
amortizable intangibles, are tested for impairment if impairment triggers
occur. If an assessment indicates impairment, the impaired asset is written
down to its fair market value based on the best information available.
Estimated fair market value is generally measured using discounted estimated
cash flows.

Investment securities

The Company has evaluated its investment policies consistent with the
provisions of SFAS No 115, Accounting for Certain Investments in Debt and
Equity Securities, and determined that all of its investment securities are to
be classified as available-for-sale. Accordingly, such securities are carried
at fair value with unrealized gains and losses, net of taxes, reported as other
comprehensive income, a separate component of stockholders equity. Realized
gains and losses from the sale of available-for-sale securities are determined
on a specific-identification basis and included in other income.

Fair value of financial instruments

The carrying amounts reflected in the balance sheets for cash, cash
equivalents, accounts receivable and accounts payable approximate their
respective fair values due to the short maturities of these instruments.

Recent Accounting Pronouncements

In November 2002, the Emerging Issues Task Force reached a consensus on Issue
No. 00-21, Revenue Arrangements with Multiple Deliverablesapplicable for
fiscal periods beginning after June 2003. This issue addresses when and, if so,
how an arrangement involving multiple deliverables should be divided into
separate units of accounting, where the deliverables (the revenue generating
activities) are sufficiently separable and have standalone value to the
customer. It is also necessary that there exist sufficient evidence of fair
value to separately account for some or all of the deliverables. The Company is
currently evaluating the impact of Issue No. 00-21.

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In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees Including Indirect Guarantees of
Indebtedness of Others. The adoption of the Interpretation did not have a
material impact on the Companys accounting or disclosure policies.

In January 2003, the FASB issued interpretation No. 46 Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51, that applies to
variable interest entities created after January 31, 2003 and to variable
interest entities in which an enterprise obtains an interest after that date.
The Company has assessed the implication of this Interpretation and does not
have to consolidate or disclose information about variable interest entities
when the Interpretation becomes applicable to existing entities from July 1,
2003.

Reclassifications

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

4     Business acquisition

Kheladi.com

On October 12, 2000, Sify entered into an agreement (the Agreement) to acquire
a 100% equity stake in Kheladi.com (India) Private Limited (Kheladi), a sports
portal promoted by sports personalities in India. Sifys intention is to
assimilate the strengths of Kheladi, including the network of sports
personalities, into its sports portal, Khel.com. Sify issued an aggregate of
19,073 equity shares to the shareholders of Kheladi on July 20, 2001 of which
5,019 shares and 10,039 shares were subject to lock-in until September 14, 2001
and September 14, 2002, respectively. Sify paid Rs. 52,291 as consideration
for the above acquisition and the acquisition has been accounted for using
purchase method.

The acquisition was consummated on July 20, 2001 upon completion of regulatory
formalities and the acquisition has been accounted for under the purchase
method. The cost of acquisition has been allocated primarily to employment
contract-based intangible assets and the excess of cost over fair value of
assets acquired has been recognized as goodwill. In accordance with the
provisions of SFAS No. 142, the goodwill has not been amortized post
acquisition. The allocation of purchase price was as follows:

Estimated fair values

|                    |  |     |        | 
|------------------- |  | --- | ------ | 
|                    |  | Rs.
|Assets acquired     |  |     | 196    | 
|Intangible assets   |  |     | 37,500 | 
|Goodwill            |  |     | 14,595 | 
|                    |  |     |        | 
|Total consideration |  |     | 52,291 | 
|                    |  |     |        | 

The intangible assets relate to employment contracts with sports personalities,
which are being amortised over the contract period of 60 months. The terms of
the purchase also provide for contingent consideration of 3,089 equity shares
based on the achievement of certain specified profitability and revenue
targets. As at March 31, 2003 the contingency no longer exists due to the
expiry of the period to achieve the targets and hence no contingent
consideration is due to the erstwhile shareholders of Kheladi.

The following unaudited consolidated results of operations are presented as if
the acquisition of Kheladi was made at the beginning of the periods presented.
The proforma-consolidated results of operations reflect the amortization of
intangibles acquired in this transaction.

|                                                                          |  |                       |            |      |  |  |            |  
|------------------------------------------------------------------------- |  | --------------------- | ---------- | ---- |  |  | ---------- | -
|                                                                          |  | Years ended March 31,
|                                                                          |  |                      
|                                                                          |  | 2001                  |            | 2002
|                                                                          |  | Rs                    |            | Rs  
|                                                                          |  |                       |            |     
|Revenues                                                                  |  |                       | 1,225,601  |      |  |  | 1,577,488  |  
|Net loss                                                                  |  |                       | (2,516,530 | )    |  |  | (7,204,443 | )
|Loss per equity share                                                     |  |                       | (110.03    | )    |  |  | . (310.51  | )
|Weighted average equity share used in computing the loss per equity share |  |                       | 22,871,673 |      |  |  | 23,202,176 |  

5     Discontinued operations

On October 24, 2001, Sify announced its proposal to divest its software
services (e-business services) division to its parent company, Satyam Computer
Services. The software services division provided business-to-business
e-commerce and web site development that covered information technology
services in India, Australia and the U.S. Revenues from this segment
represented approximately 22% of Sifys total revenue for the year ended March
31, 2002. The objective of the divestment is to permit Satyam Computer Services
to concentrate on its core business of software services and to permit Sify to
concentrate on Internet services. Sale of this division to Satyam Computer
Services was completed for an aggregate consideration of Rs. 332.5

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million on February 28, 2002, the date on which requisite shareholders approval
was obtained. The results of operations of the discontinued e-business
division for all periods have been reported separately as Income / (loss) from
discontinued operations. The gain on disposal of the e-business division
amounting to Rs. 81,121 net of consultancy and other expenses incurred in
relation to the disposal of Rs. 37,510 has been reported separately in the
statements of operations.

The summarized information on the results of discontinued operations for the
years ended March 31, 2001 and 2002 is set forth below:

|                                                 |  |                       |         |      |  |  |          |  
|------------------------------------------------ |  | --------------------- | ------- | ---- |  |  | -------- | -
|                                                 |  | Years ended March 31,
|                                                 |  |                      
|                                                 |  | 2001                  |         | 2002
|                                                 |  | Rs                    |         | Rs  
|Revenues                                         |  |                       | 561,595 |      |  |  | 340,718  |  
|Operating expenses net of other income           |  |                       | 287,260 |      |  |  | 466,091  |  
|                                                 |  |                       |         |      |  |  |          |  
|Net income / (loss) from discontinued operations |  |                       | 172,581 |      |  |  | (125,373 | )
|                                                 |  |                       |         |      |  |  |          |  

6     Cash and cash equivalents

Cash and cash equivalents as on March 31, 2003 amounted to Rs. 897,596
(Rs.658,111 as on March 31, 2002). This excludes cash-restricted included in
current assets of Rs. 74,612 (Rs.52,389 as on March 31, 2002) and
cash-restricted included in non- current assets of Rs. 100,010 (Rs.100,000 as
on March 31, 2002), representing deposits held under lien against bank
guarantees given by the Company towards future performance obligations and
letters of credit given to suppliers of the Company against purchase
obligations.

Cash Restricted  Current

|                                      |  |                       |        |      |  |  |        | 
|------------------------------------- |  | --------------------- | ------ | ---- |  |  | ------ | 
|                                      |  | Years ended March 31,
|                                      |  |                      
|                                      |  | 2002                  |        | 2003
|                                      |  | Rs                    |        | Rs  
|Letter of Credit                      |  |                       | 30,034 |      |  |  | 40,444 | 
|Against future performance obligation |  |                       | 22,355 |      |  |  | 34,168 | 
|                                      |  |                       |        |      |  |  |        | 
|                                      |  |                       | 52,389 |      |  |  | 74,612 | 
|                                      |  |                       |        |      |  |  |        | 

Cash Restricted  Non current

|                                      |  |                       |         |      |  |  |         | 
|------------------------------------- |  | --------------------- | ------- | ---- |  |  | ------- | 
|                                      |  | Years ended March 31,
|                                      |  |                      
|                                      |  | 2002                  |         | 2003
|                                      |  | Rs                    |         | Rs  
|Against future performance obligation |  |                       | 100,000 |      |  |  | 100,010 | 
|                                      |  |                       |         |      |  |  |         | 
|                                      |  |                       | 100,000 |      |  |  | 100,010 | 
|                                      |  |                       |         |      |  |  |         | 

The fair values of cash and cash equivalents approximate their carrying values.

7     Accounts receivable

Accounts receivable as of March 31, 2002 and 2003 are stated net of allowance
for doubtful accounts. The Company maintains an allowance for doubtful
accounts based on age of the accounts. Accounts receivable are not
collateralised.

Accounts receivable consist of :

|                                       |  |                      |         |      |  |  |         | 
|-------------------------------------- |  | -------------------- | ------- | ---- |  |  | ------- | 
|                                       |  | Year ended March 31,
|                                       |  |                     
|                                       |  | 2002                 |         | 2003
|                                       |  | Rs                   |         | Rs  
|                                       |  |                      |         |     
|Customers                              |  |                      | 581,492 |      |  |  | 512,149 | 
|Less : allowance for doubtful accounts |  |                      | 161,531 |      |  |  | 165,879 | 
|                                       |  |                      |         |      |  |  |         | 
|Balance at the end of the year         |  |                      | 419,961 |      |  |  | 346,270 | 
|                                       |  |                      |         |      |  |  |         | 

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

|                                     |  |                      |         |      |  |  |         | 
|------------------------------------ |  | -------------------- | ------- | ---- |  |  | ------- | 
|                                     |  | Year ended March 31,
|                                     |  |                     
|                                     |  | 2002                 |         | 2003
|                                     |  | Rs                   |         | Rs  
|                                     |  |                      |         |     
|Balance at the beginning of the year |  |                      | 34,231  |      |  |  | 161,531 | 
|Add : Additional provision           |  |                      | 127,300 |      |  |  | 139,484 | 
|Less : Bad debts written off         |  |                      |        |      |  |  | 135,136 | 
|                                     |  |                      |         |      |  |  |         | 
|Balance at the end of the year       |  |                      | 161,531 |      |  |  | 165,879 | 
|                                     |  |                      |         |      |  |  |         | 

In addition to the above, the provision for receivables and advances include a provision of Rs. 16,749 for advances.

8     Investment securities

Investment securities consist of:

|                    |  |                      |       |               |  |                  |   |                  |  |  |       |  |  |  |       | 
|------------------- |  | -------------------- | ----- | ------------- |  | ---------------- | - | ---------------- |  |  | ----- |  |  |  | ----- | 
|                    |  | As at March 31, 2003
|                    |  |                     
|                    |  |                      |       |               |  | Gross unrealized |   | Gross unrealized |  |  |       | 
|                    |  | Cost                 |       | holding gains |  | holding losses   |   | Fair value      
|                    |  | Rs                   |       | Rs            |  | Rs               |   | Rs              
|                    |  |                      |       |               |  |                  |   |                 
|Available for sale: |  |                      |       |               |  |                  |   |                  |  |  |       |  |  |  |       | 
|Equity securities   |  |                      | 3,245 |               |  |                  |  |                  |  |  | 2,130 |  |  |  | 1,115 | 
|Mutual fund units   |  |                      | 25    |               |  |                  |  |                  |  |  |      |  |  |  | 25    | 
|                    |  |                      |       |               |  |                  |   |                  |  |  |       |  |  |  |       | 
|                    |  |                      | 3,270 |               |  |                  |  |                  |  |  | 2,130 |  |  |  | 1,140 | 
|                    |  |                      |       |               |  |                  |   |                  |  |  |       |  |  |  |       | 

|                    |  |                      |        |               |  |                  |     |                  |  |  |       |  |  |  |       | 
|------------------- |  | -------------------- | ------ | ------------- |  | ---------------- | --- | ---------------- |  |  | ----- |  |  |  | ----- | 
|                    |  | As at March 31, 2002
|                    |  |                     
|                    |  |                      |        |               |  | Gross unrealized |     | Gross unrealized |  |  |       | 
|                    |  | Cost                 |        | holding gains |  | holding losses   |     | Fair value      
|                    |  | Rs                   |        | Rs            |  | Rs               |     | Rs              
|                    |  |                      |        |               |  |                  |     |                 
|Available for sale: |  |                      |        |               |  |                  |     |                  |  |  |       |  |  |  |       | 
|Equity securities   |  |                      | 5,354  |               |  |                  | 151 |                  |  |  | 655   |  |  |  | 4,850 | 
|Mutual fund units   |  |                      | 5,000  |               |  |                  |    |                  |  |  | 373   |  |  |  | 4,627 | 
|                    |  |                      |        |               |  |                  |     |                  |  |  |       |  |  |  |       | 
|                    |  |                      | 10,354 |               |  |                  | 151 |                  |  |  | 1,028 |  |  |  | 9,477 | 
|                    |  |                      |        |               |  |                  |     |                  |  |  |       |  |  |  |       | 

9     Inventories

Inventories consist of:

|                       |  |  |  |  |  |                 |        |  |  |  |  |      |  |  |        | 
|---------------------- |  |  |  |  |  | --------------- | ------ |  |  |  |  | ---- |  |  | ------ | 
|                       |  |  |  |  |  | As at March 31,
|                       |  |  |  |  |  |                
|                       |  |  |  |  |  | 2002            |        |  |  |  |  | 2003
|                       |  |  |  |  |  |                 |        |  |  |  |  |     
|                       |  |  |  |  |  | RsS             |        |  |  |  |  | RsS 
|CDs                    |  |  |  |  |  |                 | 3,987  |  |  |  |  |      |  |  | 88     | 
|Communication hardware |  |  |  |  |  |                 | 22,490 |  |  |  |  |      |  |  | 26,460 | 
|Application software   |  |  |  |  |  |                 | 4,680  |  |  |  |  |      |  |  | 9,931  | 
|Others                 |  |  |  |  |  |                 | 4,269  |  |  |  |  |      |  |  | 3,492  | 
|                       |  |  |  |  |  |                 |        |  |  |  |  |      |  |  |        | 
|                       |  |  |  |  |  |                 | 35,426 |  |  |  |  |      |  |  | 39,971 | 
|                       |  |  |  |  |  |                 |        |  |  |  |  |      |  |  |        | 

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10     Other current assets

Other current assets consist of:

|                             |  |                 |        |      |  |  |        | 
|---------------------------- |  | --------------- | ------ | ---- |  |  | ------ | 
|                             |  | As at March 31,
|                             |  |                
|                             |  | 2002            |        | 2003
|                             |  |                 |        |     
|                             |  | Rs              |        | Rs  
|Vendor advances and deposits |  |                 | 36,978 |      |  |  | 26,044 | 
|Advances for expenses        |  |                 | 13,544 |      |  |  | 13,386 | 
|Accrued income               |  |                 | 6,978  |      |  |  | 2,375  | 
|Interest earned but not due  |  |                 | 3,227  |      |  |  | 12,887 | 
|Others                       |  |                 | 16,164 |      |  |  | 18,256 | 
|                             |  |                 |        |      |  |  |        | 
|                             |  |                 | 76,891 |      |  |  | 72,948 | 
|                             |  |                 |        |      |  |  |        | 

Vendor advances and deposits is net of a provision of Rs. 16,749 for
non-recoverability. This provision is included in provision for doubtful
receivables and advances in the statement of operation.

11     Investments in affiliates

Refco-Sify Securities India Private Limited

The Company holds 40% interest in Refco-Sify Securities India Private Limited
(Refco). Refco is engaged in Internet based trading and research services.
Sify has accounted for its 40% interest in Refco by the equity method. The
carrying value of the investment in Refco as of March 31, 2002 and 2003 was Rs.
120,882 and Rs. 101,792 respectively. Sifys equity in the losses of
Refco-Sify for the years ended March 31, 2002 and 2003 was Rs. 27,105 and Rs.
18,137 respectively.

Placements.com Limited

The Company held a 27% interest in Placements.com Limited (Placements) which
was sold on July 29, 2002 for a gain of Rs. 2,000. The Company had accounted
for its 27% interest in Placements by the equity method. The carrying value of
the investment in Placements as at March 31, 2002 was Rs. 628. Sifys equity in
the losses of Placements for the years ended March 31, 2001, 2002 and period
ended July 29, 2002 was Rs. 16,307, Rs. 8,565 and Rs. 628 respectively.

CricInfo Limited

On July 29, 2000, Sify acquired 25% of the outstanding shares of Cricinfo
Limited (Cricinfo), a private company incorporated in the United Kingdom and
the Company accounted for its interest in Cricinfo by the equity method. On
October 5, 2001, the Company entered into an agreement to subscribe for
unsecured convertible loan notes (loan notes) to be issued by Cricinfo in an
aggregate amount of up to GBP 1.6 million to meet Cricinfos short-medium term
working capital requirements over the next year. These loan notes were
redeemable on October 5, 2004 and the terms of the loan note instrument
provided for the payment of interest on the principal amount at the rate of 8%
per annum. The Company had also entered into a Term Loan Agreement with
Cricinfo for granting a term loan facility of GBP 0.1 million. The Loan would
carry an interest rate of 4 % per annum and was repayable on 31st December
2004. This term loan and the convertible loan had been secured by a Debenture
document executed by Cricinfo.

In February 2003, Cricinfo transferred its net assets other than the loan
payable to Sify and miscellaneous current assets and liabilities to a newly
formed company incorporated in the United Kingdom, Wisden Cricinfo Limited. In
consideration of its net assets, Cricinfo Limited received 33% equity stake in
Wisden Cricinfo Limited and GBP 1.8 million. Cricinfo Limited repaid Sifys
loan including accrued interest of Rs. 107 million and transferred its 33%
stake in Wisden Cricinfo Limited to Sify for a consideration of Rs. 22,646 (GBP
0.3 million).

Contemporaneously Sify advanced Rs. 22,951 (GBP 0.3 million) to Wisden Cricinfo
Limited. AS a result of the foregoing transactions including the loan to Wisden
Cricinfo, Sify recognized a gain of Rs. 22,628 being the difference between
proceeds received Rs. 126,948 and the net carrying value of the notes
(including accrued interest) of Rs 81,369 and a deferred gain of Rs. 22,951.

The carrying value of the investment in Cricinfo as of March 31, 2002 and 2003
was Rs. 186,695 and nil respectively. Sifys equity in the losses of Cricinfo
for the years ended March 31, 2002 and 2003 was Rs. 142,548 and Rs. 15,104
respectively.

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

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Balance Sheet

|                      |  |                 |          |      |  |  |         |  
|--------------------- |  | --------------- | -------- | ---- |  |  | ------- | -
|                      |  | As at March 31,
|                      |  |                
|                      |  | 2002            |          | 2003
|                      |  | Rs              |          | Rs  
|                      |  |                 |          |     
|Current assets        |  | Rs.             | 21,431   |      |  |  | 16,690  |  
|Current liabilities   |  |                 | (127,749 | )    |  |  | (17,538 | )
|Net liability         |  |                 | (106,318 | )    |  |  | (848    | )
|Non-current assets    |  |                 | 1,113    |      |  |  |        |  
|Net liability         |  |                 | (105,205 | )    |  |  | (848    | )
|Stockholders deficit |  |                 | (105,205 | )    |  |  | (848    | )

Statement of Operations

|                  |  |                              |          |      |  |  |         | 
|----------------- |  | ---------------------------- | -------- | ---- |  |  | ------- | 
|                  |  | For the year ended March 31,
|                  |  |                             
|                  |  | 2002                         |          | 2003
|                  |  | Rs                           |          | Rs  
|                  |  |                              |          |     
|Revenues          |  |                              | 70,609   |      |  |  | 96,281  | 
|Gross profit      |  |                              | 65,410   |      |  |  | 89,553  | 
|Net (loss)/profit |  |                              | (419,495 | )    |  |  | 114,876 | 

The net profit of Cricinfo for fiscal 2003 includes gain of Rs. 153,180 on
sale of its net assets to Wisden Cricinfo.

Wisden Cricinfo Limited

On February 24 , 2003, the company has purchased 33% stake in Wisden Cricinfo
Limited from Cricinfo Limited for a consideration of Rs. 22,646 (GBP 0.3
million). Wisden Cricinfo Limited is a private company incorporated in the
United Kingdom and was formed by the transfer of assets by Cricinfo Limited and
John Wisden & Co. Limited. In consideration for the transfer of its assets,
Cricinfo Limited received a 33% stake in Wisden Cricinfo Limited and Rs.138
million (GBP 1.8 million).

Sify has entered into a loan agreement with Wisden Cricinfo Limited granting a
term loan facility of Rs. 22,628 (GBP 0.3 million). The Loan will carry an
interest rate of LIBOR plus 3 % per annum.

The carrying value of the investment in Wisden Cricinfo including loan notes as
of March 31, 2003 was Rs. 38,261. Sifys equity in the losses of Wisden
Cricinfo Limited for the period ended March 31, 2003 was Rs. 4,027.

12    Property, plant and equipment

Property, plant and equipment consist of:

|                         |  |                 |            |      |  |  |            |  
|------------------------ |  | --------------- | ---------- | ---- |  |  | ---------- | -
|                         |  | As at March 31,
|                         |  |                
|                         |  | 2002            |            | 2003
|                         |  | Rs              |            | Rs  
|                         |  |                 |            |     
|Land                     |  |                 | 187,701    |      |  |  | 188,600    |  
|Building                 |  |                 | 480,272    |      |  |  | 485,156    |  
|Leasehold improvements   |  |                 | 109,139    |      |  |  | 111,806    |  
|Plant and machinery      |  |                 | 1,778,468  |      |  |  | 1,842,829  |  
|Computer equipment       |  |                 | 102,634    |      |  |  | 95,309     |  
|Office equipment         |  |                 | 51,475     |      |  |  | 54,384     |  
|Furniture and fixtures   |  |                 | 95,840     |      |  |  | 115,922    |  
|Vehicles                 |  |                 | 17,254     |      |  |  | 16,237     |  
|System software          |  |                 | 99,991     |      |  |  | 143,524    |  
|Construction-in-progress |  |                 | 138,847    |      |  |  | 94,371     |  
|                         |  |                 |            |      |  |  |            |  
|                         |  |                 | 3,061,621  |      |  |  | 3,148,138  |  
|Accumulated depreciation |  |                 | (1,129,575 | )    |  |  | (1,605,309 | )
|                         |  |                 |            |      |  |  |            |  
|                         |  |                 | 1,932,046  |      |  |  | 1,542,829  |  
|                         |  |                 |            |      |  |  |            |  

Depreciation expense amounted to Rs. 429,672, Rs. 574,867 and Rs. 474,261 for
the years ended March 31, 2001, 2002 and 2003 respectively.

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During the year, the Company identified certain assets whose carrying amounts
are not recoverable. The Company assessed recoverability under SFAS No. 144
and recorded asset impairment charges totaling to Rs.125,818. These charges
include the write-off of assets under development of Rs. 87,500 and write-off
of computer software costs of Rs. 29,178 and other assets of Rs. 8,836.

13     Goodwill and other intangible assets, net

Goodwill and other intangible assets consist of:

|                                              |                            |  |                 |           |      |  |           |           | 
|--------------------------------------------- | -------------------------- |  | --------------- | --------- | ---- |  | --------- | --------- | 
|                                              |                            |  | As at March 31,
|                                              |                            |  |                
|                                              |                            |  | 2002            |           | 2003
|                                              |                            |  | Rs              |           | Rs  
|                                              |                            |  |                 |           |     
|Goodwill                                      |                            |  |                 |           |      |  |           |          
|                                              | Acquisition of IndiaWorld  |  |                 | 5,005,107 |      |  |           | 5,005,107 | 
|                                              | Acquisition of India Plaza |  |                 | 444,585   |      |  |           | 444,585   | 
|                                              | Acquisition of Kheladi     |  |                 | 27,983    |      |  |           | 14,595    | 
|                                              | Other                      |  |                 | 2,775     |      |  |           | 2,775     | 
|Technical know-how                            |                            |  | 87,433          |           |      |  | 90,313    |          
|Portals and web content                       |                            |  | 97,630          |           |      |  | 98,030    |          
|Employment contracts                          |                            |  | 37,500          |           |      |  | 37,500    |          
|Customer contract                             |                            |  | 137,873         |           |      |  | 164,873   |          
|                                              |                            |  |                 |           |      |  |           |          
|Total                                         |                            |  | 5,840,886       |           |      |  | 5,857,778 |          
|Less: Accumulated amortization and impairment |                            |  | 5,499,707       |           |      |  | 5,690,795 |          
|                                              |                            |  |                 |           |      |  |           |           | 
|                                              |                            |  | 341,179         |           |      |  | 166,983   |          
|                                              |                            |  |                 |           |      |  |           |          

Amortisation/Impairment of goodwill during the years ended March 31, 2001 and
2002 was Rs 931,967 and Rs 4,420,644. The Company has stopped amortising
goodwill pursuant to SFAS No. 142 and has not recognised any impairment of
goodwill during the year.

Amortization of other intangible assets during the years ended March 31, 2001,
2002 and 2003 is Rs. 5,889, Rs. 29,337 and Rs. 69,907 respectively. During the
year the Company assessed the carrying value of intangible assets in the books
and recorded an impairment charge of Rs. 121,181.

The Company has adopted the provisions of SFAS No. 141 and 142, and has
accordingly assessed the remaining useful lives of identified intangibles with
definite useful lives and provides for amortization over the determined useful
life of the asset. The Company does not have any intangible assets with
indefinite useful life.

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At March 31, 2003, the Companys goodwill and other intangible assets amounted
to Rs. 27,983 and Rs. 152,562 respectively.

|                                         |  |                      |      |                 |  |                         |         |  |  |  |         | 
|---------------------------------------- |  | -------------------- | ---- | --------------- |  | ----------------------- | ------- |  |  |  | ------- | 
|Acquired and amortized intangible assets |  | As at March 31, 2003
|                                         |  | Weighted             |      | Gross           |  | Accumulated            
|                                         |  | average life         |      | carrying amount |  | amortization/Impairment
|Technical know how fees                  |  |                      | 4.89 |                 |  |                         | 90,313  |  |  |  | 34,494  | 
|Portals and web content                  |  |                      | 5.00 |                 |  |                         | 98,030  |  |  |  | 46,138  | 
|Employment contracts                     |  |                      | 5.00 |                 |  |                         | 37,500  |  |  |  | 12,900  | 
|Customer contracts and
others            |  |                      | 3.00 |                 |  |                         | 164,874 |  |  |  | 144,623 | 
|Total                                    |  |                      |      |                 |  |                         | 390,717 |  |  |  | 238,155 | 

Estimated amortization expense

|                   |  |  |        | 
|------------------ |  |  | ------ | 
|For the year ended |  |  |        | 
|March 31,          |  |  |        | 
|2004               |  |  | 54,963 | 
|2005               |  |  | 52,830 | 
|2006               |  |  | 36,381 | 
|2007               |  |  | 8,020  | 
|2008               |  |  | 20     | 

As required by SFAS No. 142, the Company identified its reporting units and
assigned assets and liabilities, including goodwill to the reporting units on
the date of adoption. Subsequently, the Company compared the fair value of the
reporting unit to its carrying value, to determine whether goodwill is impaired
at the date of adoption. Subsequent to the adoption of SFAS No. 142, the
Company does not amortize goodwill, but will instead test for impairment at
least annually. The following table discloses what reported net loss from
operations and loss per share would have been in all prior periods presented
excluding amortization of goodwill.

|                            |  |      |            |      |  |  |            |  
|--------------------------- |  | ---- | ---------- | ---- |  |  | ---------- | -
|                            |  | 2001 |            | 2002
|                            |  | Rs   |            | Rs  
|                            |  |      |            |     
|Reported net loss           |  | Rs   | (2,509,030 | )    |  |  | (7,202,517 | )
|Add: Goodwill amortization  |  |      | 931,967    |      |  |  | 292,964    |  
|Add: APB 18 Goodwill        |  |      | 201,332    |      |  |  | 75,210     |  
|Adjusted net loss           |  |      | (1,375,731 | )    |  |  | (6,834,343 | )
|Reported net loss per share |  |      | (109.79    | )    |  |  | (310.50    | )
|Add: Goodwill amortization  |  |      | 40.78      |      |  |  | 12.63      |  
|Add: APB 18 Goodwill        |  |      | 8.81       |      |  |  | 3.24       |  
|Adjusted net loss per share |  |      | (60.20     | )    |  |  | (294.63    | )

There is no goodwill associated with discontinued operations and no
extraordinary items.

14     Other assets

Other assets consist of:

|                                          |  |                 |         |      |  |  |         | 
|----------------------------------------- |  | --------------- | ------- | ---- |  |  | ------- | 
|                                          |  | As at March 31,
|                                          |  |                
|                                          |  | 2002            |         | 2003
|                                          |  | Rs              |         | Rs  
|                                          |  |                 |         |     
|Deposits                                  |  |                 | 109,582 |      |  |  | 96,138  | 
|Staff advances recoverable after one year |  |                 | 29,570  |      |  |  | 4,711   | 
|Tax deposits                              |  |                 | 49,743  |      |  |  | 75,343  | 
|                                          |  |                 |         |      |  |  |         | 
|                                          |  |                 | 188,895 |      |  |  | 176,192 | 
|                                          |  |                 |         |      |  |  |         | 

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15        Deferred revenue



| |  | Deferred revenue includes the amount of unearned income which were invoiced
as at the end of the period for the following segments :                                                        
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Corporate network / Data servicesrelates to the connectivity / hosting
charges which were invoiced and unearned as at the end of the period;                                                
|
| |  | Internet access services and online portal servicesrelates to the Internet
access charges and the advertisement charges which were invoiced and
unearned as at the end of the period;       
|
| |  | Other servicesrelates to the educational charges and digital certification
charges which were invoiced for which the term was not completed and remain
unearned as at the end of the period.
| |  |                                                                                                                                                                                             
| |  | The breakups of deferred revenue for these segments are :                                                                                                                                   

|                                  |  |                 |         |      |  |  |         | 
|--------------------------------- |  | --------------- | ------- | ---- |  |  | ------- | 
|                                  |  | As at March 31,
|                                  |  |                
|                                  |  | 2002            |         | 2003
|                                  |  | Rs              |         | Rs  
|                                  |  |                 |         |     
|Corporate network / Data services |  |                 | 52,303  |      |  |  | 107,598 | 
|Internet access services          |  |                 | 81,408  |      |  |  | 168,359 | 
|Online portal services            |  |                 | 2,997   |      |  |  | 927     | 
|Other services                    |  |                 | 7,811   |      |  |  | 12,413  | 
|                                  |  |                 |         |      |  |  |         | 
|                                  |  |                 | 144,519 |      |  |  | 289,297 | 
|                                  |  |                 |         |      |  |  |         | 

16     Leases

The gross amounts and related accumulated depreciation recorded for assets
acquired under capital leases are as follows:

|                               |  |                 |        |      |  |  |        | 
|------------------------------ |  | --------------- | ------ | ---- |  |  | ------ | 
|                               |  | As at March 31,
|                               |  |                
|                               |  | 2002            |        | 2003
|                               |  | Rs              |        | Rs  
|                               |  |                 |        |     
|Vehicles                       |  |                 | 14,484 |      |  |  | 16,689 | 
|Less: Accumulated depreciation |  |                 | 4,659  |      |  |  | 7,263  | 
|                               |  |                 |        |      |  |  |        | 
|                               |  |                 | 9,825  |      |  |  | 9,426  | 
|                               |  |                 |        |      |  |  |        | 

The following is a schedule of future minimum capital lease commitments as at
March 31, 2003:

|                                                                 |  |    |       | 
|---------------------------------------------------------------- |  | -- | ----- | 
|Due for the year ended March 31,                                 |  | Rs
|2004                                                             |  |    | 3,795 | 
|2005                                                             |  |    | 2,605 | 
|2006                                                             |  |    | 653   | 
|                                                                 |  |    |       | 
|Total minimum lease payments                                     |  |    | 7,053 | 
|Less: Interest                                                   |  |    | 804   | 
|                                                                 |  |    |       | 
|Present value of net minimum capital leases payments             |  |    | 6,249 | 
|Less: Current installments of obligations under capital leases   |  |    | 2,482 | 
|                                                                 |  |    |       | 
|Obligations under capital leases, excluding current installments |  |    | 3,767 | 
|                                                                 |  |    |       | 

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17     Accrued Liabilities

Accrued Liabilities consists predominantly of provisions for expenses amounting
to Rs. 198,035 and Rs. 194,861 as at March 31, 2002 and 2003 respectively.

18     Other liabilities

Other Liabilities consists predominantly of deposits from sales partners
amounting to Rs. 38,667 and Rs. 42,663 as at March 31, 2002 and 2003
respectively.

19     Income tax

The provision for income taxes consists of:

|         |  |                      |        |      |  |      |   |  |  |  |        |  
|-------- |  | -------------------- | ------ | ---- |  | ---- | - |  |  |  | ------ | -
|         |  | Year ended March 31,
|         |  |                     
|         |  | 2001                 |        | 2002 |  | 2003
|         |  | Rs                   |        | Rs   |  | Rs  
|         |  |                      |        |      |  |     
|Current  |  |                      | (1,827 | )    |  |      |  |  |  |  | (2,856 | )
|Deferred |  |                      | 120    |      |  |      |  |  |  |  |       |  
|         |  |                      |        |      |  |      |   |  |  |  |        |  
|         |  |                      | (1,707 | )    |  |      |  |  |  |  | (2,856 | )
|         |  |                      |        |      |  |      |   |  |  |  |        |  

The reported income tax expense differed from amounts computed by applying the
enacted tax rates to income from continuing operations before income taxes as
set out below:

|                                                 |                         |  |  |  |  |                      |            |         |  |      |            |           |  |  |            |        | 
|------------------------------------------------ | ----------------------- |  |  |  |  | -------------------- | ---------- | ------- |  | ---- | ---------- | --------- |  |  | ---------- | ------ | 
|                                                 |                         |  |  |  |  | Year ended March 31,
|                                                 |                         |  |  |  |  |                     
|                                                 |                         |  |  |  |  | 2001                 |            | 2002    |  | 2003
|                                                 |                         |  |  |  |  | Rs                   |            | Rs      |  | Rs  
|                                                 |                         |  |  |  |  |                      |            |         |  |     
|Net loss from continuing operations before taxes |                         |  |  |  |  | Rs                   | (2,691,041 | )       |  |      | (7,158,265 | )         |  |  | (1,329,388 | )     
|Enacted tax rates in India                       |                         |  |  |  |  |                      | 39.55      | %       |  |      | 35.70      | %         |  |  | 36.75      | %     
|                                                 |                         |  |  |  |  |                      |            |         |  |      |            |           |  |  |            |       
|Computed expected tax expense / (benefit)        |                         |  |  |  |  |                      | (1,064,307 | )       |  |      | (2,555,501 | )         |  |  | (488,550   | )     
|Permanent differences:                           |                         |  |  |  |  |                      |            |         |  |      |            |           |  |  |            |       
|                                                 | Amortization/Impairment |  |  |  |  |                      |            | 368,792 |  |      |            | 1,600,545 |  |  |            | 31,692 | 
|                                                 | Others                  |  |  |  |  |                      |            | 34,129  |  |      |            | 9,266     |  |  |            | 49,904 | 
|Change in valuation allowance                    |                         |  |  |  |  |                      | 665,523    |         |  |      | 860,921    |           |  |  | 405,079    |       
|Other                                            |                         |  |  |  |  |                      | 3,039      |         |  |      | 6,599      |           |  |  | 54,462     |       
|Effect of tax rate change                        |                         |  |  |  |  |                      | (5,469     | )       |  |      | 78,170     |           |  |  | (49,731    | )     
|                                                 |                         |  |  |  |  |                      |            |         |  |      |            |           |  |  |            |       
|Total income tax (benefit)/expense               |                         |  |  |  |  |                      | 1,707      |         |  |      |           |           |  |  | 2,856      |       
|                                                 |                         |  |  |  |  |                      |            |         |  |      |            |           |  |  |            |       

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The reported income tax expense differed from amounts computed by applying the
enacted tax rates to income from discontinued operations before income taxes as
set out below:

|                                                          |  |                      |         |      |  |      |         |   |  |  |   | 
|--------------------------------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ------- | - |  |  | - | 
|                                                          |  | Year ended March 31,
|                                                          |  |                     
|                                                          |  | 2001                 |         | 2002 |  | 2003
|                                                          |  | Rs                   |         | Rs   |  | Rs  
|                                                          |  |                      |         |      |  |     
|Net gain/(loss) from discontinued
operations before taxes |  |                      | 172,581 |      |  |      | (44,252 | ) |  |  |  | 
|Enacted tax rates in India                                |  |                      | 39.55   | %    |  |      | 35.7    | % |  |  |  | 
|                                                          |  |                      |         |      |  |      |         |   |  |  |   | 
|Computed expected tax expense                             |  |                      | 68,256  |      |  |      | (15,799 | ) |  |  |  | 
|Valuation allowance                                       |  |                      | (68,256 | )    |  |      | 15,799  |   |  |  |   | 
|                                                          |  |                      |         |      |  |      |         |   |  |  |   | 
|Total income tax (benefit)/expense                        |  |                      |        |      |  |      |        |   |  |  |  | 
|                                                          |  |                      |         |      |  |      |         |   |  |  |   | 

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

Significant components of deferred tax assets and liabilities included in the
balance sheet are as follows:

|                                                            |  |                 |            |      |  |  |            |  
|----------------------------------------------------------- |  | --------------- | ---------- | ---- |  |  | ---------- | -
|                                                            |  | As at March 31,
|                                                            |  |                
|                                                            |  | 2002            |            | 2003
|                                                            |  | Rs              |            | Rs  
|                                                            |  |                 |            |     
|Deferred tax assets:                                        |  |                 |            |      |  |  |            |  
|Operating loss carry forwards                               |  |                 | 989,192    |      |  |  | 1,440,918  |  
|Provision for accounts receivable and advances              |  |                 | 115,665    |      |  |  | 60,960     |  
|Property, plant and equipment and intangibles               |  |                 | 777        |      |  |  | 800        |  
|Accrual and expenses currently not allowed for tax purposes |  |                 | 50,079     |      |  |  | 42,487     |  
|Provision for valuation of closing stock                    |  |                 | 7,457      |      |  |  |           |  
|Investments in affiliates                                   |  |                 | 528,001    |      |  |  | 554,074    |  
|                                                            |  |                 |            |      |  |  |            |  
|Total gross deferred tax assets                             |  |                 | 1,691,171  |      |  |  | 2,099,239  |  
|                                                            |  |                 |            |      |  |  |            |  
|Less: valuation allowance                                   |  |                 | (1,679,730 | )    |  |  | (2,084,809 | )
|                                                            |  |                 |            |      |  |  |            |  
|Total deferred tax assets                                   |  |                 | 11,441     |      |  |  | 14,430     |  
|                                                            |  |                 |            |      |  |  |            |  

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|                               |  |                 |        |      |  |  |        | 
|------------------------------ |  | --------------- | ------ | ---- |  |  | ------ | 
|                               |  | As at March 31,
|                               |  |                
|                               |  | 2002            |        | 2003
|                               |  | Rs              |        | Rs  
|                               |  |                 |        |     
|Deferred tax liabilities:      |  |                 |        |      |  |  |        | 
|Property, plant and equipment  |  |                 | 13,658 |      |  |  | 4,425  | 
|Investments                    |  |                 | 736    |      |  |  | 1,028  | 
|Intangibles acquired           |  |                 | 13,388 |      |  |  | 8,977  | 
|Other                          |  |                 | (2,953 | )    |  |  |       | 
|                               |  |                 |        |      |  |  |        | 
|Total deferred tax liabilities |  |                 | 24,829 |      |  |  | 14,430 | 
|                               |  |                 |        |      |  |  |        | 
|Net deferred tax liability     |  |                 | 13,388 |      |  |  |       | 
|                               |  |                 |        |      |  |  |        | 



|20 |  | Stockholders equity
|-- |  | --------------------

The Company has only one class of capital stock referred to as equity shares.
All references in these financial statements to the number of shares, per share
amounts and market prices of the companys equity shares have been
retroactively restated to reflect stock splits made by the company.

Effective September 24, 2002, one ADS represented one equity share. The
Companys 1-for-4 ADS reverse ratio change on September 24, 2002 does not have
any effect on our equity shares or per equity share amounts, as the underlying
shares representing ADSs were unchanged.



|21 |  | Common Stock
|-- |  | ------------

Effective October 7, 2002, Sify entered into definitive agreements with two
investors in connection with a $20 million equity investment in Sify. Under the
agreements, (1) Softbank Asia Infrastructure Fund (SAIF) will purchase
approximately 7.56 million newly issued ADSs for $13.0 million, or $1.72 per
ADS, (2) VentureTech Solutions Private Ltd. (VentureTech) has purchased
approximately 2.03 million newly issued equity shares for the Indian Rupee
equivalent of $3.5 million, or $1.72 per equity share, and (3) VentureTech will
be obligated to purchase an additional approximately 2.03 million newly issued
equity shares for the Indian Rupee equivalent of $3.5 million, or $1.72 per
equity share, prior to May 1, 2003. The parties entered into a Shareholders
Agreement dated October 7, 2002 (effective on closure of the transaction
namely, December 17, 2002) providing for, among other things two nominees each
on a Board of Directors comprising nine directors and consent rights with
respect to specified corporate transactions.

On December 16, 2002, the US$ 13.0 million investment by SAIF and the first
tranche investment of US$3.5 million by VentureTech were completed. The
transactions was approved by Sifys stockholders at the Extraordinary General
Meeting on 9th December 2002. An aggregate of 7,558,140 ADS were issued to SAIF
and an aggregate of 2,034,884 equity shares were issued to VentureTech. The
securities issued to SAIF have been registered under the Securities Act of 1933
as securities sold to non-U.S. persons in a private placement. The common stock
was issued on December 16, 2002.

Upon completion of these transactions, the number of Sifys outstanding equity
shares has increased from 23.3 million to 32.8 million and the interest of
Satyam Computer Services in our company has reduced to approximately 37%.

On completion of the additional investment by VentureTech and pursuant to the
purchase of shares from Sterling Commerce by VentureTech , interest of SAIF,
VentureTech and Satyam Computer Services will be 21.7%, 13.1% and 35.0%
respectively.

Voting

Each holder of equity shares is entitled to one vote per share. The equity
shares represented by American Depositary Shares (ADS) carry similar rights to
voting and dividends as the other equity shares. One ADS represents one
underlying equity share.

Shareholding agreement

The Company, Satyam Computers Services Limited and South Asia Regional Fund
entered into an agreement ceding certain rights of consultation / ascent to
South Asia Regional Fund on February 5, 1999 as amended on September 14, 1999.
Most of these rights ceased consequent to the amendment to the Articles of
Association in December 2002.

The Company, Satyam Computers Services Limited, SAIF Investment Company Limited
and Venture Tech entered into a subscription agreement dated October 7, 2002
and entered into an investor rights agreement dated October 7, 2002 reserving
certain rights of consultation and veto for SAIF Investment Company Limited and
Venture Tech.

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Dividends

Should the Company declare and pay dividends, such dividends will be paid in
Indian Rupees. Indian law mandates that any dividend be declared out of
distributable profits only after the transfer of a specified percentage of net
income computed in accordance with current regulations to a general reserve.
Moreover, the remittance of dividends outside India is governed by Indian law
on foreign exchange and is subject to applicable taxes.

Liquidation

In the event of liquidation of the Company, the holders of common stock shall
be entitled to receive any of the remaining assets of the Company, after
distribution of all preferential amounts. The amounts will be in proportion to
the number of equity shares held by the stockholders.

Stock Options

There are no voting, dividend or liquidation rights to the holders of warrants
issued under the companys stock option plan.



|22 |  | Other income, net
|-- |  | -----------------

|                            |  |                              |         |      |  |      |         |   |  |  |        |  
|--------------------------- |  | ---------------------------- | ------- | ---- |  | ---- | ------- | - |  |  | ------ | -
|                            |  | For the year ended March 31,
|                            |  |                             
|                            |  | 2001                         |         | 2002 |  | 2003
|Other income consists of:   |  | Rs                           |         | Rs   |  | Rs  
|                            |  |                              |         |      |  |     
|Interest expense            |  |                              | (11,766 | )    |  |      | (4,780  | ) |  |  | (1,240 | )
|Other finance charges       |  |                              | (4,707  | )    |  |      | (14,506 | ) |  |  | (8,519 | )
|Interest income             |  |                              | 246,179 |      |  |      | 49,540  |   |  |  | 31,999 |  
|Others                      |  |                              | 12,662  |      |  |      | 2,457   |   |  |  | 30,708 |  
|                            |  |                              |         |      |  |      |         |   |  |  |        |  
|Other (expense)/income, net |  |                              | 242,368 |      |  |      | 32,711  |   |  |  | 52,948 |  
|                            |  |                              |         |      |  |      |         |   |  |  |        |  



|23 |  | Executive employment arrangements
|-- |  | ---------------------------------

Sify has entered into Executive Employment Agreements (the agreements) with
certain senior executive employees on February 20, 2002.

Under these agreements, in the event of termination of employment under certain
circumstances (all within the control of the Company), severance benefits are
payable to these senior executives. The maximum severance benefit so payable in
the event of all such senior executives leaving under the specified
circumstances is Rs. 16,237. This contractual obligation would expire on 17th
December 2003 (one year after change of control).

These senior executives were provided loans totaling Rs. 61,500 repayable with
interest after two years in fiscal 2001 and 2002. In certain circumstances
(including change of control death, specified terminations, or after the expiry
of a two year period) the Company agreed to pay an incentive to these
executives equal to the amount of the loan less the value of in the money stock
options granted to them earlier which together with the value of certain stock
options would be sufficient. This would enable the executive to repay the loan
and interest. The Company was providing for the incentive obligation in its
accounts over the period from the date of disbursement to the contracted date
of repayment. However, in the quarter ended 31st December 2002, consequent to a
change of control event, the entire unamortized portion of the loan was
amortized.

As of 31st March 2002, these incentive obligations of Rs. 61,500 have been
fully provided for.

In addition, due to the modification in the terms of the stock options, these
options are accounted in accordance with Emerging Issue Task Force publication
(EITF Issue) 00-23, as a variable plan. The Company has not incurred any
additional compensation charge under variable accounting, as the exercise price
has been higher than the market price.

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|24 |  | Employee Benefit Plan
|-- |  | ---------------------

The following table sets out the funded status of the Gratuity Plan and the
amounts recognized in Sifys balance sheet.

|                                                          |                                                  |  |                 |       |      |  |        |       | 
|--------------------------------------------------------- | ------------------------------------------------ |  | --------------- | ----- | ---- |  | ------ | ----- | 
|                                                          |                                                  |  | As of March 31,
|                                                          |                                                  |  |                
|                                                          |                                                  |  | 2002            |       | 2003
|                                                          |                                                  |  | Rs              |       | Rs  
|                                                          |                                                  |  |                 |       |     
|                                                          | Change in projected benefit obligation           |  |                 |       |      |  |        |       | 
|Projected benefit obligation at the beginning of the year |                                                  |  | 5,898           |       |      |  | 8,782  |      
|Service cost                                              |                                                  |  | 5,545           |       |      |  | 3,876  |      
|Interest cost                                             |                                                  |  | 531             |       |      |  | 789    |      
|Divestiture                                               |                                                  |  | (2,508          | )     |      |  |       |      
|Actuarial (gain)/loss                                     |                                                  |  | (607            | )     |      |  | (1,606 | )    
|Benefits paid                                             |                                                  |  | (77             | )     |      |  | (182   | )    
|                                                          |                                                  |  |                 |       |      |  |        |      
|Projected benefit obligation at the end of the year       |                                                  |  | 8,782           |       |      |  | 11,659 |      
|                                                          | Change in plan assets                            |  |                 |       |      |  |        |       | 
|Fair value of plan assets at the beginning of the year    |                                                  |  | 1,729           |       |      |  | 3,309  |      
|Actual return on plan assets                              |                                                  |  | 296             |       |      |  | 66     |      
|Employer contributions                                    |                                                  |  | 1,361           |       |      |  | 527    |      
|Benefits paid from plan assets                            |                                                  |  | (77             | )     |      |  | (182   | )    
|                                                          |                                                  |  |                 |       |      |  |        |      
|                                                          | Fair value of plan assets at the end of the year |  |                 | 3,309 |      |  |        | 3,720 | 
|                                                          | Funded status of the plans                       |  |                 | 5,474 |      |  |        | 7,939 | 
|Unrecognized transition obligation (asset)                |                                                  |  |                |       |      |  |       |      
|Unrecognized prior service cost (benefit)                 |                                                  |  |                |       |      |  |       |      
|Unrecognized net actuarial gain/(loss)                    |                                                  |  | 560             |       |      |  | 1,912  |      
|                                                          |                                                  |  |                 |       |      |  |        |      
|Accrued benefit cost                                      |                                                  |  | 6,034           |       |      |  | 9,851  |      
|                                                          |                                                  |  |                 |       |      |  |        |      

|                                                          |  |                              |       |      |  |      |       |   |  |    |       |  
|--------------------------------------------------------- |  | ---------------------------- | ----- | ---- |  | ---- | ----- | - |  | -- | ----- | -
|                                                          |  | For the year ended March 31,
|                                                          |  |                             
|                                                          |  | 2001                         |       | 2002 |  | 2003
|                                                          |  | Rs                           |       | Rs   |  | Rs  
|                                                          |  |                              |       |      |  |     
|The components of net gratuity costs are reflected below: |  |                              |       |      |  |      |       |   |  |    |       |  
|Service cost                                              |  | Rs                           | 3,844 |      |  | Rs   | 5,545 |   |  | Rs | 3,876 |  
|Interest cost                                             |  |                              | 182   |      |  |      | 531   |   |  |    | 789   |  
|Expected returns on plan assets                           |  |                              | (140  | )    |  |      | (227  | ) |  |    | (320  | )
|Amortization                                              |  |                              |      |      |  |      |      |   |  |    |      |  
|                                                          |  |                              |       |      |  |      |       |   |  |    |       |  
|Net gratuity costs                                        |  |                              | 3,886 |      |  |      | 5,849 |   |  |    | 4,345 |  
|                                                          |  |                              |       |      |  |      |       |   |  |    |       |  
|Principal actuarial assumptions:                          |  |                              |       |      |  |      |       |   |  |    |       |  
|Discount rate                                             |  |                              | 11    | %    |  |      | 9     | % |  |    | 8     | %
|Long-term rate of compensation increase                   |  |                              | 10    | %    |  |      | 8     | % |  |    | 7     | %
|Rate of return on plan assets                             |  |                              | 11    | %    |  |      | 9     | % |  |    | 7.5   | %

Provident fund

Sify contributed Rs. 11,675, Rs.19,797 and Rs.17,902 towards the Provident
fund during the years ended March 31, 2001, 2002 and 2003 respectively.

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|25 |  | Related Party Transactions
|-- |  | --------------------------

The Company has entered into transactions with the following related parties:



| |  | Satyam Computer Services Limited (formerly the parent company) where Sify provides
connectivity services and software development services for certain e-learning
projects.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Affiliated companies                                                                                                                                                       
| 
| |  | Employees of the Company                                                                                                                                                   

Given below is an analysis of transactions with Satyam Computer Services
Limited:

|                                                                            |  |                 |         |      |  |      |          |   |  |  |         |  
|--------------------------------------------------------------------------- |  | --------------- | ------- | ---- |  | ---- | -------- | - |  |  | ------- | -
|                                                                            |  | As at March 31,
|                                                                            |  |                
|                                                                            |  | 2001            |         | 2002 |  | 2003
|                                                                            |  | Rs              |         | Rs   |  | Rs  
|                                                                            |  |                 |         |      |  |     
|Due (to)/from Satyam Computer Services Limited at
the beginning of the year |  |                 | (17,115 | )    |  |      | 12,926   |   |  |  | 8,137   |  
|Allocation of facilities costs                                              |  |                 | (17,954 | )    |  |      | (485     | ) |  |  |        |  
|Sale of e-business division                                                 |  |                 |        |      |  |      | 332,500  |   |  |  |        |  
|Expenses incurred on behalf of the Company                                  |  |                 | (47,019 | )    |  |      | (136,230 | ) |  |  | (2,897  | )
|Capital expenses incurred on behalf of the Company                          |  |                 | (27,541 | )    |  |      | (4,015   | ) |  |  | (9,713  | )
|Purchases from Satyam Computer Services Limited                             |  |                 | (2,381  | )    |  |      | (19,061  | ) |  |  |        |  
|Sales to Satyam Computer Services Limited                                   |  |                 | 83,550  |      |  |      | 302,521  |   |  |  | 34,345  |  
|Collections from Satyam Computer Services Limited                           |  |                 |         |      |  |      | (480,019 | ) |  |  | (13,856 | )
|Payment to Satyam Computer Services Limited                                 |  |                 | 41,386  |      |  |      |         |   |  |  |        |  
|                                                                            |  |                 |         |      |  |      |          |   |  |  |         |  
|Due (to) / from Satyam Computer Services Limited                            |  |                 | 12,926  |      |  |      | 8,137    |   |  |  | 16,016  |  
|                                                                            |  |                 |         |      |  |      |          |   |  |  |         |  

The following is a summary of significant transactions with other related
parties:

|                              |  |                      |        |      |  |      |        |  |  |  |       | 
|----------------------------- |  | -------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ----- | 
|                              |  | Year ended March 31,
|                              |  |                     
|                              |  | 2001                 |        | 2002 |  | 2003
|                              |  | Rs                   |        | Rs   |  | Rs  
|                              |  |                      |        |      |  |     
|Sales to affiliates           |  |                      | 22,405 |      |  |      | 52,847 |  |  |  | 4,194 | 
|Interest on convertible notes |  |                      |       |      |  |      | 2,245  |  |  |  | 1,066 | 

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The Company has the following amounts due from related parties:

|               |               |  |                      |        |      |  |       |        | 
|-------------- | ------------- |  | -------------------- | ------ | ---- |  | ----- | ------ | 
|               |               |  | Year ended March 31,
|               |               |  |                     
|               |               |  | 2002                 |        | 2003
|               |               |  | Rs                   |        | Rs  
|               |               |  |                      |        |     
|Affiliates     |               |  |                      |        |      |  |       |       
|               | Against loans |  |                      | 74,561 |      |  |       | 22,951 | 
|               | Others        |  |                      | 5,684  |      |  |       |       | 
|Employee loans |               |  | 68,245               |        |      |  | 5,692 |       

The estimated fair value amounts of other employee loans were Rs. 66,908 and
ps. 4,217 as on March 31, 2002 and March 31, 2003 respectively. These amounts
are determined using available market information and appropriate valuation
methodologies. Considerable judgement is required to develop the estimates of
fair value. Thus, the estimates provided herein are not necessarily indicative
of the amounts the Company could realise in the market.

Repayable in the year ending March 31:

|           |  |    |       | 
|---------- |  | -- | ----- | 
|           |  | Rs
|2004       |  |    | 982   | 
|2005       |  |    | 726   | 
|2006       |  |    | 550   | 
|2007       |  |    | 544   | 
|2008       |  |    | 544   | 
|Thereafter |  |    | 2,346 | 



|26 |  | Stock-based compensation plans
|-- |  | ------------------------------

In fiscal 1999, the Company established the Employee Stock Offer Plan (ESOP),
which provides for the issuance of 825,000 warrants to eligible employees. The
warrants were issued to an employee welfare trust (the Trust) at Re 1 each on
September 28, 1999. The Trust holds the warrants and transfers them to
eligible employees over a period of three years. The warrants, which are to be
transferred to eligible employees at Re 1 each, entitles the holder to purchase
one equity share at an exercise price determined by the Compensation Committee.
The warrants and the equity shares received upon the exercise of warrants are
subject to progressive vesting over a three-year period from the date of issue
of warrants to employees. Deferred compensation is recorded in the event that
the exercise price of the warrant is determined to be less than the fair market
value of the underlying shares on the date of the grant. Deferred compensation
is amortized over the vesting period of the warrants. The warrants allotted
and the underlying equity shares are not subject to any repurchase obligations
by the Company. As discussed in Note 23 the terms of certain stock options
have been modified; these options are accounted in accordance with EITF Issue
00-23, as a variable plan. The Company has not incurred any additional
compensation charge under variable accounting, as the exercise price has been
higher than the market price.

The following table summarizes the stock option plan activity:

|                                     |  |                  |         |    |  |                  |       | 
|------------------------------------ |  | ---------------- | ------- | -- |  | ---------------- | ----- | 
|                                     |  |                  |         |    |  | Weighted average
|                                     |  |                  |         |    |  | exercise price  
|                                     |  | Number of shares |         | Rs
|                                     |  |                  |         |   
|For the year ended March 31, 2001    |  |                  |         |    |  |                  |       | 
|Balance at the beginning of the year |  |                  | 312,460 |    |  |                  | 2,338 | 
|Granted                              |  |                  | 342,800 |    |  |                  | 2,821 | 
|Exercised                            |  |                  | 200     |    |  |                  | 350   | 
|Forfeited / Expired                  |  |                  | 90,040  |    |  |                  | 2,409 | 
|Balance at the end of the year       |  |                  | 565,020 |    |  |                  | 2,621 | 

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|                                          |  |                  |        |    |  |                  |        | 
|----------------------------------------- |  | ---------------- | ------ | -- |  | ---------------- | ------ | 
|                                          |  |                  |        |    |  | Weighted average
|                                          |  |                  |        |    |  | exercise price  
|                                          |  | Number of shares |        | Rs
|                                          |  |                  |        |   
|Exercisable at the end of the year        |  |                  | 43,073 |    |  |                  | 2,338  | 
|Weighted average fair value on grant date |  |                  |        |    |  |                  | 511.22 | 

|                                          |  |                  |         |    |  |                  |        | 
|----------------------------------------- |  | ---------------- | ------- | -- |  | ---------------- | ------ | 
|                                          |  |                  |         |    |  | Weighted average
|                                          |  |                  |         |    |  | exercise price  
|                                          |  | Number of shares |         | Rs
|                                          |  |                  |         |   
|For the year ended March 31, 2002         |  |                  |         |    |  |                  |        | 
|Balance at the beginning of the year      |  |                  | 565,020 |    |  |                  | 2,621  | 
|Granted                                   |  |                  | 276,360 |    |  |                  | 174    | 
|Exercised                                 |  |                  |        |    |  |                  |       | 
|Forfeited / Expired                       |  |                  | 257,540 |    |  |                  | 2,504  | 
|Balance at the end of the year            |  |                  | 583,840 |    |  |                  | 1,515  | 
|Exercisable at the end of the year        |  |                  | 102,633 |    |  |                  | 2,385  | 
|Weighted average fair value on grant date |  |                  |         |    |  |                  | 343.27 | 

|                                          |  |                  |         |    |  |                  |       | 
|----------------------------------------- |  | ---------------- | ------- | -- |  | ---------------- | ----- | 
|                                          |  |                  |         |    |  | Weighted average
|                                          |  |                  |         |    |  | Exercise price  
|                                          |  | Number of shares |         | Rs
|                                          |  |                  |         |   
|For the year ended March 31, 2003         |  |                  |         |    |  |                  |       | 
|Balance at the beginning of the year      |  |                  | 583,840 |    |  |                  | 1,515 | 
|Granted                                   |  |                  | 15,480  |    |  |                  | 50    | 
|Exercised                                 |  |                  |        |    |  |                  |      | 
|Forfeited / Expired                       |  |                  | 208,760 |    |  |                  | 1,671 | 
|Balance at the end of the year            |  |                  | 390,560 |    |  |                  | 1,359 | 
|Exercisable at the end of the year        |  |                  | 177,393 |    |  |                  | 2,002 | 
|Weighted average fair value on grant date |  |                  |         |    |  |                  | 34.41 | 

The following table summarizes information about fixed price options
outstanding at March 31, 2003:

|                        |  |                    |         |                |  |                  |       |                    |  |                |      |  |  |                  |         |  |  |  |       | 
|----------------------- |  | ------------------ | ------- | -------------- |  | ---------------- | ----- | ------------------ |  | -------------- | ---- |  |  | ---------------- | ------- |  |  |  | ----- | 
|                        |  |                    |         |                |  | Weighted average |       | Weighted average   |  |                |      |  |  | Weighted average
|                        |  | Number outstanding |         | exercise price |  | remaining        |       | Number exercisable |  | exercise price
|Range of exercise price |  | at March 31, 2003  |         | Rs             |  | contractual life |       | at March 31, 2003  |  | Rs            
|Rs.49
 Rs.50           |  |                    | 15,000  |                |  |                  | 50    |                    |  |                | 2.53 |  |  |                  |        |  |  |  |      | 
|Rs.169
 Rs.376         |  |                    | 224,040 |                |  |                  | 172   |                    |  |                | 1.57 |  |  |                  | 74,680  |  |  |  | 172   | 
|Rs.724
 Rs.973         |  |                    | 17,100  |                |  |                  | 882   |                    |  |                | 0.74 |  |  |                  | 11,400  |  |  |  | 882   | 
|Rs.1,879
 Rs.3,809     |  |                    | 129,320 |                |  |                  | 3,345 |                    |  |                | 0.24 |  |  |                  | 86,213  |  |  |  | 3,345 | 
|Rs.5,892
 Rs.8,603     |  |                    | 5,100   |                |  |                  | 8,603 |                    |  |                |     |  |  |                  | 5,100   |  |  |  | 8,603 | 
|                        |  |                    |         |                |  |                  |       |                    |  |                |      |  |  |                  |         |  |  |  |       | 
|Rs.49
 Rs.8,603        |  |                    | 390,560 |                |  |                  | 1,359 |                    |  |                |     |  |  |                  | 177,393 |  |  |  | 2,002 | 
|                        |  |                    |         |                |  |                  |       |                    |  |                |      |  |  |                  |         |  |  |  |       | 

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|27 |  | Commitments and contingencies
|-- |  | -----------------------------



| |                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has outstanding performance guarantees for various statutory
purposes totaling Rs 135,855 and Rs. 174,622 as of March 31, 2002 and 2003,
respectively. These guarantees are generally provided to governmental
agencies.



|28 |  | Products and services
|-- |  | ---------------------



| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Breakup of revenues and cost of revenues against products and services are as follows :

|                                                           |          |     |                      |           |      |  |           |           |  |  |           |           | 
|---------------------------------------------------------- | -------- | --- | -------------------- | --------- | ---- |  | --------- | --------- |  |  | --------- | --------- | 
|                                                           |          |     | Year ended March 31,
|                                                           |          |     |                     
|                                                           |          |     | 2001                 |           | 2002 |  | 2003     
|                                                           |          |     | Rs                   |           | Rs   |  | Rs       
|                                                           |          |     |                      |           |      |  |          
|Revenue                                                    |          |     |                      |           |      |  |           |           |  |  |           |          
|                                                           | Products |     |                      | 204,995   |      |  |           | 204,472   |  |  |           | 215,559   | 
|                                                           | Services |     |                      | 1,020,486 |      |  |           | 1,370,016 |  |  |           | 1,778,641 | 
|                                                           |          |     |                      |           |      |  |           |           |  |  |           |           | 
|                                                           |          |     | 1,225,481            |           |      |  | 1,577,488 |           |  |  | 1,994,200 |          
|Cost of revenues
(excluding
depreciation and
amortization) |          |     |                      |           |      |  |           |           |  |  |           |          
|                                                           | Products |     |                      | 174,346   |      |  |           | 172,870   |  |  |           | 193,711   | 
|                                                           | Services |     |                      | 1,002,760 |      |  |           | 1,019,801 |  |  |           | 1,070,390 | 
|                                                           |          |     |                      |           |      |  |           |           |  |  |           |           | 
|                                                           |          | Rs. | 1,177,106            |           |      |  | 1,192,671 |           |  |  | 1,264,101 |          



|29 |  | Segment reporting
|-- |  | -----------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SFAS No 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the way that public business
enterprises report information about operating segments and related
disclosures about products and services, geographic areas and major
customers. The Companys operations predominantly relate to connectivity to
enterprises and providing Internet access to retail subscribers (both home
access and public access). The Company also operates a portal, Sify.com,
that provides a variety of India-related content to audiences both in India
and abroad, and which generates revenue from advertisements and other value
added services. The Company also has subsidiaries to exploit other
opportunities provided by the Internet in e-learning, business to business
marketplaces, digital signatures and Internet security.
|
| | The primary operating segments of the Company include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



| |  |  | Corporate network/data services, which provides private network services,
messaging services and web hosting to businesses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Internet access services; and                                                                                              
|
| |  |  | Online portals services and content offerings                                                                              
|
| |  |  | Other services such as development of e-learning software                                                                  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The chief operating decision maker (CODM) evaluates the Companys
performance and allocates 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 catered to. The measure of loss reviewed by the CODM
during fiscal 2002 and 2001 was Earnings/loss before interest, taxes,
depreciation and amortization.                                                                                                                                                                                                                       
|
| | Revenue in relation to segments is categorized based on items that are
individually identifiable to that segment. Bandwidth costs, which form a
significant part of the total expenses, are allocated primarily between the
corporate network/data services and Internet access service businesses as
follows:                                                                                                                                                                                                                                                                                                                    
|
| | Bandwidth costs in Sify are of three kinds: Last mile, Inter city and
International. Last mile is directly identifiable to the segment. Inter
city bandwidth is allocated based on the number of subscribers or iWay cafes
at non-gateway points and the bandwidth sold to and used by business
enterprises (determined using packet shapers). International bandwidth is
allocated amongst user population based on ports used and estimates of
bandwidth per port for retail consumers and bandwidth sold and peak
bandwidth used for corporate consumers. The Company believes that the
resulting allocations are reasonable.
|
| | Certain expenses, such as depreciation and technology, which form a
significant component of total expenses, are not specifically allocable to
specific segments as the underlying services are used interchangeably.
Management believes that it is not practical to provide segment disclosure
of these expenses and, accordingly, they are separately disclosed as
unallocated and adjusted only against the total income of the Company.                                                                                                                                                                                    

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

The Companys operating segment information for the years ended March 31,
2003, 2002 and 2001 are presented below:

|                                        |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  |            |  
|--------------------------------------- |  | ----------------------------------------- | -------- | --------------- |  | ------------- | -------- | -------- |  | ---------- | -------- | - |  |  | -------- | - |  |  | ---------- | -
|                                        |  | Year ended March 31, 2003 (all in Rupees)
|                                        |  |                                          
|                                        |  | Corporate Network /                       |          | Internet Access |  | Online Portal |          | Other    |  | Continuing
|                                        |  | Data Services                             |          | Services        |  | Services      |          | Services |  | operations
|Revenues                                |  |                                           | 997,976  |                 |  |               | 674,370  |          |  |            | 164,867  |   |  |  | 156,987  |   |  |  | 1,994,200  |  
|Operating expenses                      |  |                                           | (677,108 | )               |  |               | (933,751 | )        |  |            | (211,732 | ) |  |  | (106,079 | ) |  |  | (1,928,670 | )
|Equity in loss of affiliates            |  |                                           |         |                 |  |               |         |          |  |            | (35,884  | ) |  |  |         |   |  |  | (35,884    | )
|Minority interest                       |  |                                           |         |                 |  |               | 1,967    |          |  |            | 272      |   |  |  |         |   |  |  | 2,239      |  
|                                        |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  |            |  
|Segment operating income /
(loss)       |  |                                           | 320,868  |                 |  |               | (257,414 | )        |  |            | (82,477  | ) |  |  | 50,908   |   |  |  | 31,885     |  
|Corporate expenses                      |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (573,918   | )
|Foreign exchange gain                   |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (18        | )
|Other income / (expense), net           |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | 22,190     |  
|Impairment of investments in
affiliates |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (14,805    | )
|Impairment of assets                    |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (246,999   | )
|Profit from sale of business            |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | 24,628     |  
|Depreciation and amortization           |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (600,256   | )
|Interest income net                     |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | 30,758     |  
|Income taxes                            |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (2,856     | )
|                                        |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  |            |  
|Net (loss)/ profit                      |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  | (1,329,388 | )
|                                        |  |                                           |          |                 |  |               |          |          |  |            |          |   |  |  |          |   |  |  |            |  

|                                         |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|---------------------------------------- |  | ----------------------------------------- | -------- | --------------- |  | ------------- | ---------- | -------- |  | ---------- | -------- | ------------ |  |  | -------- | - |  |  | ---------- | - |  |  | -------- | -
|                                         |  | Year ended March 31, 2002 (all in Rupees)
|                                         |  |                                          
|                                         |  | Corporate Network /                       |          | Internet Access |  | Online Portal |            | Other    |  | Continuing |          | Discontinued
|                                         |  | Data Services                             |          | Services        |  | Services      |            | Services |  | operations |          | operations  
|Revenues                                 |  |                                           | 782,749  |                 |  |               | 515,960    |          |  |            | 207,105  |              |  |  | 71,674   |   |  |  | 1,577,488  |   |  |  | 340,718  |  
|Operating expenses                       |  |                                           | (558,538 | )               |  |               | (1,067,927 | )        |  |            | (279,817 | )            |  |  | (125,213 | ) |  |  | (2,031,495 | ) |  |  | (384,365 | )
|Equity in loss of affiliates             |  |                                           |         |                 |  |               |           |          |  |            | (81,867  | )            |  |  |         |   |  |  | (81,867    | ) |  |  |         |  
|Minority interest                        |  |                                           |         |                 |  |               | 16,650     |          |  |            | 411      |              |  |  | 867      |   |  |  | 17,928     |   |  |  |         |  
|                                         |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Segment operating income /
(loss)        |  |                                           | 224,211  |                 |  |               | (535,317   | )        |  |            | (154,168 | )            |  |  | (52,672  | ) |  |  | (517,946   | ) |  |  | (43,647  | )
|Corporate expenses                       |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (538,360   | ) |  |  |         |  
|Foreign exchange gain                    |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 44,520     |   |  |  |         |  
|Other income / (expense),
net            |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 2,457      |   |  |  | (16      | )
|Impairment of goodwill                   |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (4,127,680 | ) |  |  |         |  
|Impairment of investments
in affiliates  |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (1,089,871 | ) |  |  |         |  
|Depreciation and
amortization            |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (961,639   | ) |  |  | (81,710  | )
|Interest income                          |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 30,254     |   |  |  |         |  
|Profit on sale of
discontinued operation |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |           |   |  |  | 81,121   |  
|                                         |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Net (loss)/ profit                       |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (7,158,265 | ) |  |  | (44,252  | )
|                                         |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  

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|                                  |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|--------------------------------- |  | ----------------------------------------- | -------- | --------------- |  | ------------- | ---------- | -------- |  | ---------- | -------- | ------------ |  |  | -------- | - |  |  | ---------- | - |  |  | -------- | -
|                                  |  | Year ended March 31, 2001 (all in Rupees)
|                                  |  |                                          
|                                  |  | Corporate Network /                       |          | Internet Access |  | Online Portal |            | Other    |  | Continuing |          | Discontinued
|                                  |  | Data Services                             |          | Services        |  | Services      |            | Services |  | operations |          | operations  
|Revenues                          |  |                                           | 593,310  |                 |  |               | 469,705    |          |  |            | 144,417  |              |  |  | 18,049   |   |  |  | 1,225,481  |   |  |  | 561,595  |  
|Operating expenses                |  |                                           | (503,364 | )               |  |               | (1,009,793 | )        |  |            | (470,621 | )            |  |  | (173,427 | ) |  |  | (2,157,205 | ) |  |  | (334,788 | )
|Equity in loss of affiliates      |  |                                           |         |                 |  |               |           |          |  |            | (93,208  | )            |  |  |         |   |  |  | (93,208    | ) |  |  |         |  
|Minority interest                 |  |                                           |         |                 |  |               | 8,519      |          |  |            | 2,618    |              |  |  |         |   |  |  | 11,137     |   |  |  |         |  
|                                  |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Segment operating income /
(loss) |  |                                           | 89,946   |                 |  |               | (531,569   | )        |  |            | (416,794 | )            |  |  | (155,378 | ) |  |  | (1,013,795 | ) |  |  | 226,807  |  
|Corporate expenses                |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (486,956   | ) |  |  |         |  
|Foreign exchange gain             |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 162,136    |   |  |  |         |  
|Other income / (expense), net     |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 7,955      |   |  |  |         |  
|Depreciation and amortization     |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (1,583,657 | ) |  |  | (54,226  | )
|Interest income                   |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | 234,413    |   |  |  |         |  
|Income taxes                      |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (1,707     | ) |  |  |          |  
|                                  |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Net loss                          |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  | (2,681,611 | ) |  |  | 172,581  |  
|                                  |  |                                           |          |                 |  |               |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  



|30 |  | Legal proceedings
|-- |  | -----------------

Sify and certain of its officers and directors are named as defendants in
a securities class action lawsuit filed in the United States District Court for
the Southern District of New York. This action, which is captioned In reSatyam
Infoway Ltd. Initial Public Offering Securities Litigation, also names several
of the underwriters involved in Sifys initial public offering of American
Depositary Shares as defendants. This class action is brought on behalf of a
purported class of purchasers of Sifys ADSs from the time of Sifys IPO in
October 1999 through December 2000. The central allegation in this action is
that the underwriters in Sifys IPO solicited and received undisclosed
commissions from, and entered into undisclosed arrangements with, certain
investors who purchased Sifys ADSs in the IPO and the aftermarket. The
complaint also alleges that Sify violated the United States federal securities
laws by failing to disclose in the IPO prospectus that the underwriters had
engaged in these allegedly undisclosed arrangements. More than 300 issuers have
been named in similar lawsuits. In July 2002, an omnibus motion to dismiss all
complaints against issuers and individual defendants affiliated with issuers
was filed by the entire group of issuer defendants in these similar actions. In
October 2002, the Companys executive officers who were named as defendants in
this action were dismissed from the action without prejudice. In February 2003,
the court in this action issued its decision on defendants omnibus motion to
dismiss. This decision denied the motion to dismiss the Section 11 claim as to
the Company and virtually all of the other issuer defendants. The decision also
denied the motion to dismiss the Section 10(b) claim as to numerous issuer
defendants, including the Company. Although Sify is unable to estimate the
range of loss that is reasonably possible, Sify believes that it has
meritorious defenses and intends to defend this action vigorously. However,
Sify could be forced to incur material expenses in the litigation, and in the
event there is an adverse outcome, Sifys business could be harmed.

Sifys subsidiary IndiaWorld Communications was involved in litigation in
the United States relating to the IndiaWorld trademark which dispute was
settled during the quarter ended December 31, 2002 without any liability to
Sify or IndiaWorld Communications.

The charges for international gateways and other services presently being
provided by VSNL were the subject of a dispute pending before the Telecom
Regulatory Authority of India (TRAI) and the Telecom Disputes Settlement and
Appellate Tribunal between VSNL and private Internet service providers,
including Sify, represented by the Internet Service Providers Association of
India (ISPAI). VSNL has priced these services at levels which Sify believes
are inconsistent with the terms and conditions on which VSNL has secured the
bandwidth for its international gateways. The Telecom Disputes Settlement and
Appellate Tribunal remanded the matter back to the TRAI which decided against
the ISPAI. The ISPAI has not yet decided on a further course of action. Sify
is currently paying for bandwidth from VSNL at the higher rates.

Sify is party to additional legal actions arising in the ordinary course
of business. Based on information available as of March 31, 2003 Sify
believes that it has adequate legal defenses or insurance coverage for these
actions and that the ultimate outcome of these actions will not have a material
adverse effect on Sify.

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Item 19. Exhibits

|       |  |                                                                                                                                                                                                                                                                                       
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                       
|1.1    |  | Articles of Association of Sify Limited. (1)                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|1.2    |  | Amendment to Articles of Association. (11)                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                       
|1.3    |  | Memorandum of Association of Sify Limited. (1)                                                                                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                       
|1.4    |  | Amendment of Memorandum of Association. (11)                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.1    |  | Share Subscription and Shareholders Agreement, dated as of February
5, 1999 by and among Sify Limited, Satyam Computer Services Limited,
South Asia Regional Fund and Mr. B. Ramalinga Raju. (1)                                                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|2.2    |  | Amendment No. 1 to Share Subscription and Shareholders Agreement,
dated as of September 14, 1999, by and among Sify Limited, Satyam
Computer Services limited, South Asia Regional Fund and Mr. Ramalinga
Raju. (1)                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|2.3    |  | Deposit Agreement, dated as of October 18, 1999, among Sify Limited,
Citibank, N.A. and holders from time to time of American Depositary
Receipts issued thereunder (including, as an exhibit, the form of
American Depositary Receipt). (5)                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.4    |  | Amendment No. 1 to Deposit Agreement among Sify Limited, Citibank,
N.A. and holders from time to time of American Depositary Receipts
issued thereunder (including, as an exhibit, the form of American
Depository Receipt). (5)                                                      
|       |  |                                                                                                                                                                                                                                                                                       
|2.5    |  | Amendment No. 2 to Deposit Agreement among Sify Limited, Citibank,
N.A. and holders from time to time of American Depositary Receipts
issued thereunder (including, as an exhibit, the form of American
Depository Receipt). (10)                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|2.6    |  | Letter Agreement, dated as of September 4, 1999, by and between Sify
Limited and Sterling Commerce, Inc. (1)                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.7    |  | Stockholders Agreement, dated as of September 14, 1999, by and among
Sify Limited, Sterling Commerce, Inc. and Satyam Computer Services
Limited. (1)                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|2.8    |  | Registration Rights Agreement, dated as of September 14, 1999, by and
among Sify Limited, Sterling Commerce, Inc. and South Asia Regional
Fund. (1)                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                       
|2.9    |  | Registration Rights Agreement dated as of October 7, 2002 by and
between Sify Limited and SAIF Investment Company Limited. (9)                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                       
|2.10   |  | Subscription Agreement dated as of October 7, 2002 by and between
Sify Limited and SAIF Investment Company Limited. (9)                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                       
|2.11   |  | Subscription Agreement dated as of October 7, 2002 by and between
Sify Limited and VentureTech Solutions Private Limited. (9)                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                       
|2.12   |  | Investor Rights Agreement dated as of October 7, 2002 by and among
Sify Limited, SAIF Investment Company Limited, VentureTech Solutions
Private Limited and Satyam Computer Services Limited.(9)                                                                                      
|       |  |                                                                                                                                                                                                                                                                                       
|4.1    |  | Associate Stock Option Plan (including Deed of Trust). (3)                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                       
|4.2    |  | Form of Indemnification Agreement. (3)                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                       
|4.3    |  | License Agreement for Provision of Internet Service, including
Internet Telephony dated as of April 1, 2002 by and between Sify
Limited and the Government of India, Ministry of Communications and
Information Technology, Department of Telecommunications, Telecom
Commission. (11)
|       |  |                                                                                                                                                                                                                                                                                       
|4.4    |  | Bank Guarantee, dated as of November 4, 1998. (1)                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|4.5    |  | UUNet Technologies Strategic Alliance Agreement, dated as of April
18, 1997, by and between Sify Limited and UUNet Technologies. (3)                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|4.6    |  | CompuServe Network Services Strategic Alliance Agreement, dated as of
April 18, 1997, by and between Sify Limited and CompuServe
Incorporated. (3)                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                       
|4.7    |  | User Agreement, effective as of April 1, 1999 by and between Sify
Limited and Satyam Computer Services Limited. (1)                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                       
|4.8    |  | Share Purchase Agreement, dated November 29, 1999, by and among Sify
Limited, Indiaworld Communications Private Limited, Mr. Rajesh Jain
and the other shareholders of Indiaworld Communications Private
Limited listed on the signature pages thereto. (4)                           

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|       |  |                                                                                                                                                                                                                                                                           
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                           
|4.9    |  | Agreement for Option to Purchase Shares, dated November 29, 1999, by
and among Sify Limited, Indiaworld Communications Private Limited,
Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature paged thereto.
(4)
|       |  |                                                                                                                                                                                                                                                                           
|4.10   |  | Share Purchase Agreement, dated as of June 30, 2000, by and among
Rajesh Jain, Bhavana R. Jain, C.M. Jain Impex and Investments Private
Limited, Sify Limited and Indiaworld Communications Private Limited.
(7)                                                          
|       |  |                                                                                                                                                                                                                                                                           
|4.11   |  | Agreement for the Sale of Shares in CricInfo Limited by and between
Indigo Holdings Limited and Sify Limited. (8)                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                           
|4.12   |  | Subscription Agreement by and among CricInfo Limited, Sify Limited
and the Senior Management. (8)                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                           
|4.13   |  | Agreed Form of Shareholders Agreement by and among CricInfo Limited,
Sify Limited and the Non-SIL Shareholders. (8)                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                           
|4.14   |  | Letter Agreement between Sify Limited and Indigo Holdings Limited. (8)                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                           
|4.15   |  | Letter Agreement, dated May 17, 2002, between Sify Limited and
CricInfo Limited. (11)                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                           
|4.16   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and R. Ramaraj. (11)                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                           
|4.17   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and George Zacharias. (11)                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                           
|4.18   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and T.R. Santhanakrishnan. (11)                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.19   |  | Business Transfer Agreement, dated March 2002, between Sify Limited
and Satyam Computer Services Limited. (11)                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                           
|4.20   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Ajit Abraham. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.21   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Rahul Swarup. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.22   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Rustom Irani. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|8.1    |  | List of Subsidiaries.                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                           
|23.1   |  | Consent of KPMG                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                           
|99.1   |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                           
|99.2   |  | Certification of Chief Financial Officer                                                                                                                                                                                                                                  



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

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

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

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

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

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

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

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

(9)     Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on October 25, 2002 and incorporated herein by reference.

(10)     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.

(11)     Previously filed as an exhibit to the Annual Report on Form 20-F
filed with the Commission on July 1, 2002 and incorporated herein by reference.

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SIGNATURES

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

| |              |  |                          
| | ------------ |  | -------------------------
| | SIFY LIMITED
|
| | By:          |  | /s/ R. Ramaraj           
| |              | 
| | Name:        |  | R. Ramaraj               
| | Title:       |  | Chief Executive Officer  
| |              |  |                          
| | By:          |  | /s/ T.R. Santhanakrishnan
| |              | 
| | Name:        |  | T.R. Santhanakrishnan    
| | Title:       |  | Chief Financial Officer  

Date: June 30, 2003

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CHIEF EXECUTIVE OFFICER CERTIFICATION

I, R. Ramaraj, Chief Executive Officer and Managing Director of Sify
Limited, certify that:



| | 1. |  | I have reviewed this Annual Report on Form 20-F of Sify Limited;                                                                                                                                                                                                                                                        
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this Annual Report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this Annual Report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this Annual Report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Annual Report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrant board of directors (and persons
performing the equivalent functions):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and Report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls, and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |  |                                                        
|------------- |  | -------------------------------------------------------
|June 30, 2003 |  | /s/ R. Ramaraj                                         
|              |  |                                                        
|              |  | R Ramaraj
Chief Executive Officer
and Managing Director

113



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##### Table of Contents



CHIEF FINANCIAL OFFICER CERTIFICATION

I, T.R. Santhanakrishnan, Chief Financial Officer of Sify Limited, certify
that:



| | 1. |  | I have reviewed this Annual Report on Form 20-F of Sify Limited;                                                                                                                                                                                                                                                        
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Annual Report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this Annual Report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this Annual Report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (
as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:                                                                                              



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this Annual Report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this Annual Report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrant board of directors (and persons
performing the equivalent functions):
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and Report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls, and                                                                                                                                        



| | 6. |  | The registrants other certifying officers and I have indicated in
this Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |                                              
|------------------- |  | ---------------------------------------------
|Date: June 30, 2003 |  | /s/ T.R. Santhanakrishnan                    
|                    |  |                                              
|                    |  | T.R. Santhanakrishnan
Chief Financial Officer

114



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##### Table of Contents






Exhibit Index

|       |  |                                                                                                                                                                                                                                                                                       
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                                       
|1.1    |  | Articles of Association of Sify Limited. (1)                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|1.2    |  | Amendment to Articles of Association. (11)                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                       
|1.3    |  | Memorandum of Association of Sify Limited. (1)                                                                                                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                       
|1.4    |  | Amendment of Memorandum of Association. (11)                                                                                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.1    |  | Share Subscription and Shareholders Agreement, dated as of February
5, 1999 by and among Sify Limited, Satyam Computer Services Limited,
South Asia Regional Fund and Mr. B. Ramalinga Raju. (1)                                                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|2.2    |  | Amendment No. 1 to Share Subscription and Shareholders Agreement,
dated as of September 14, 1999, by and among Sify Limited, Satyam
Computer Services limited, South Asia Regional Fund and Mr. Ramalinga
Raju. (1)                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|2.3    |  | Deposit Agreement, dated as of October 18, 1999, among Sify Limited,
Citibank, N.A. and holders from time to time of American Depositary
Receipts issued thereunder (including, as an exhibit, the form of
American Depositary Receipt). (5)                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.4    |  | Amendment No. 1 to Deposit Agreement among Sify Limited, Citibank,
N.A. and holders from time to time of American Depositary Receipts
issued thereunder (including, as an exhibit, the form of American
Depository Receipt). (5)                                                      
|       |  |                                                                                                                                                                                                                                                                                       
|2.5    |  | Amendment No. 2 to Deposit Agreement among Sify Limited, Citibank,
N.A. and holders from time to time of American Depositary Receipts
issued thereunder (including, as an exhibit, the form of American
Depository Receipt). (10)                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|2.6    |  | Letter Agreement, dated as of September 4, 1999, by and between Sify
Limited and Sterling Commerce, Inc. (1)                                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                       
|2.7    |  | Stockholders Agreement, dated as of September 14, 1999, by and among
Sify Limited, Sterling Commerce, Inc. and Satyam Computer Services
Limited. (1)                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|2.8    |  | Registration Rights Agreement, dated as of September 14, 1999, by and
among Sify Limited, Sterling Commerce, Inc. and South Asia Regional
Fund. (1)                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                       
|2.9    |  | Registration Rights Agreement dated as of October 7, 2002 by and
between Sify Limited and SAIF Investment Company Limited. (9)                                                                                                                                                        
|       |  |                                                                                                                                                                                                                                                                                       
|2.10   |  | Subscription Agreement dated as of October 7, 2002 by and between
Sify Limited and SAIF Investment Company Limited. (9)                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                       
|2.11   |  | Subscription Agreement dated as of October 7, 2002 by and between
Sify Limited and VentureTech Solutions Private Limited. (9)                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                       
|2.12   |  | Investor Rights Agreement dated as of October 7, 2002 by and among
Sify Limited, SAIF Investment Company Limited, VentureTech Solutions
Private Limited and Satyam Computer Services Limited.(9)                                                                                      
|       |  |                                                                                                                                                                                                                                                                                       
|4.1    |  | Associate Stock Option Plan (including Deed of Trust). (3)                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                       
|4.2    |  | Form of Indemnification Agreement. (3)                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                       
|4.3    |  | License Agreement for Provision of Internet Service, including
Internet Telephony dated as of April 1, 2002 by and between Sify
Limited and the Government of India, Ministry of Communications and
Information Technology, Department of Telecommunications, Telecom
Commission. (11)
|       |  |                                                                                                                                                                                                                                                                                       
|4.4    |  | Bank Guarantee, dated as of November 4, 1998. (1)                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                       
|4.5    |  | UUNet Technologies Strategic Alliance Agreement, dated as of April
18, 1997, by and between Sify Limited and UUNet Technologies. (3)                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                       
|4.6    |  | CompuServe Network Services Strategic Alliance Agreement, dated as of
April 18, 1997, by and between Sify Limited and CompuServe
Incorporated. (3)                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                                       
|4.7    |  | User Agreement, effective as of April 1, 1999 by and between Sify
Limited and Satyam Computer Services Limited. (1)                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                       
|4.8    |  | Share Purchase Agreement, dated November 29, 1999, by and among Sify
Limited, Indiaworld Communications Private Limited, Mr. Rajesh Jain
and the other shareholders of Indiaworld Communications Private
Limited listed on the signature pages thereto. (4)                           





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##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                           
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                           
|4.9    |  | Agreement for Option to Purchase Shares, dated November 29, 1999, by
and among Sify Limited, Indiaworld Communications Private Limited,
Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature paged thereto.
(4)
|       |  |                                                                                                                                                                                                                                                                           
|4.10   |  | Share Purchase Agreement, dated as of June 30, 2000, by and among
Rajesh Jain, Bhavana R. Jain, C.M. Jain Impex and Investments Private
Limited, Sify Limited and Indiaworld Communications Private Limited.
(7)                                                          
|       |  |                                                                                                                                                                                                                                                                           
|4.11   |  | Agreement for the Sale of Shares in CricInfo Limited by and between
Indigo Holdings Limited and Sify Limited. (8)                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                           
|4.12   |  | Subscription Agreement by and among CricInfo Limited, Sify Limited
and the Senior Management. (8)                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                           
|4.13   |  | Agreed Form of Shareholders Agreement by and among CricInfo Limited,
Sify Limited and the Non-SIL Shareholders. (8)                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                           
|4.14   |  | Letter Agreement between Sify Limited and Indigo Holdings Limited. (8)                                                                                                                                                                                                    
|       |  |                                                                                                                                                                                                                                                                           
|4.15   |  | Letter Agreement, dated May 17, 2002, between Sify Limited and
CricInfo Limited. (11)                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                           
|4.16   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and R. Ramaraj. (11)                                                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                           
|4.17   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and George Zacharias. (11)                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                           
|4.18   |  | Executive Employment Agreement, dated February 20, 2002, by and
between Sify Limited and T.R. Santhanakrishnan. (11)                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.19   |  | Business Transfer Agreement, dated March 2002, between Sify Limited
and Satyam Computer Services Limited. (11)                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                           
|4.20   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Ajit Abraham. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.21   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Rahul Swarup. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|4.22   |  | Executive Employment Agreement, dated February 20, 2002, between Sify
Limited and Rustom Irani. (11)                                                                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                           
|8.1    |  | List of Subsidiaries.                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                           
|23.1   |  | Consent of KPMG                                                                                                                                                                                                                                                           
|       |  |                                                                                                                                                                                                                                                                           
|99.1   |  | Certification of Chief Executive Officer                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                           
|99.2   |  | Certification of Chief Financial Officer                                                                                                                                                                                                                                  



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

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

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

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

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

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





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##### Table of Contents



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

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

(9)     Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on October 25, 2002 and incorporated herein by reference.

(10)     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.

(11)     Previously filed as an exhibit to the Annual Report on Form 20-F
filed with the Commission on July 1, 2002 and incorporated herein by reference.