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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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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, 2002.
|- | ------------------------------------------------------------------------------------------------------------------------------

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

Satyam Infoway Limited

(Exact name of Registrant as specified in its charter)


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

Republic of India
(Jurisdiction of incorporation or organization)

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

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

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

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

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

23,202,176 Equity Shares were issued and outstanding as of March 31, 2002

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes x                    No o

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

Item 17 o                Item 18 x



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TABLE OF CONTENTS



|                                                   |                                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|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. RESERVED                                                                    
|                                                   | Item 16. RESERVED                                                                    
|PART III                                          
|                                                   | Item 17. FINANCIAL STATEMENTS                                                        
|                                                   | Item 18. FINANCIAL STATEMENTS                                                        
|                                                   | Item 18. FINANCIAL STATEMENTS                                                        
|                                                   | Item 19. EXHIBITS                                                                    
|SIGNATURES                                        
|EXHIBIT INDEX                                     
|EXHIBIT 1.2                                       
|EXHIBIT 1.4                                       
|EXHIBIT 4.3                                       
|EXHIBIT 4.15                                      
|EXHIBIT 4.16                                      
|EXHIBIT 4.17                                      
|EXHIBIT 4.18                                      
|EXHIBIT 4.19                                      
|EXHIBIT 4.20                                      
|EXHIBIT 4.21                                      
|EXHIBIT 4.22                                      
|EXHIBIT 8.1                                       



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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                                                   |   |  | 20 | 
|Item 5.                                            |  | Operating and Financial Review and Prospects                                 |   |  | 37 | 
|Item 6.                                            |  | Directors, Senior Management and Employees                                   |   |  | 47 | 
|Item 7.                                            |  | Major Stockholders and Related Party Transactions                            |   |  | 52 | 
|Item 8.                                            |  | Financial Information                                                        |   |  | 53 | 
|Item 9.                                            |  | The Offer and Listing                                                        |   |  | 54 | 
|Item 10.                                           |  | Additional Information                                                       |   |  | 56 | 
|Item 11.                                           |  | Quantitative and Qualitative Disclosures About Market Risk                   |   |  | 69 | 
|Item 12.                                           |  | Description of Securities Other Than Equity Securities                       |   |  | 69 | 
|                                                  
|PART II                                            |  |                                                                              |   |  | 69 | 
|                                                  
|Item 13.                                           |  | Defaults, Dividend Arrearages and Delinquencies                              |   |  | 69 | 
|Item 14.                                           |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |   |  |    | 
|Item 15.                                           |  | Reserved                                                                     |   |  | 69 | 
|Item 16.                                           |  | Reserved                                                                     |   |  | 69 | 
|                                                  
|PART III                                           |  |                                                                              |   |  | 69 | 
|                                                  
|Item 17.                                           |  | Financial Statements                                                         |   |  | 69 | 
|Item 18.                                           |  | Financial Statements                                                         |   |  | 70 | 
|Item 19.                                           |  | Exhibits                                                                     |   |  | 70 | 





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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 Satyam Infoway
Limited, a limited liability company organized under the laws of the Republic
of India. References to U.S. or the United States are to the United States
of America, its territories and its possessions. References to India are to
the Republic of India. We are presently a majority-owned subsidiary of Satyam
Computer Services Limited, a leading Indian information technology services
company which is traded on the New York Stock Exchange and the major Indian
stock exchanges. Satyam is a trademark owned by Satyam Computer Services,
which has licensed the use of the Satyam trademark to us subject to specified
conditions. Sify.com, Sify, 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 29, 2002, the last business day of March
2002, 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 29, 2002
was Rs.48.83 per $1.00.

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

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

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





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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 included elsewhere in
this annual report. The statement of operations data for the fiscal years
ended March 31, 1998, 1999, 2000, 2001 and 2002 and the balance sheet data as
of March 31, 1998, 1999, 2000, 2001 and 2002 are derived from our consolidated
audited financial statements which have been audited by KPMG India, independent
accountants. Our financial statements are prepared in Indian rupees and
presented in accordance with U.S. GAAP for the fiscal years ended March 31,
1998, 1999, 2000, 2001 and 2002. Financial statements for the year ended March
31, 2002 also 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 2 to our
consolidated financial statements appearing elsewhere in this annual
report. Please see Item 18. Financial Statements.

The selected consolidated historical financial data includes a
presentation of EBITDA. EBITDA represents earnings (loss) before depreciation
and amortization, interest income and expense, income tax expense (benefit) and
extraordinary items. EBITDA is presented because we believe some investors
find it to be a useful tool for measuring a companys ability to fund capital
expenditures or to service future debts. EBITDA is neither an Indian GAAP
measure nor a US 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. EBITDA excludes interest
expense and capital expenditures, and negative EBITDA would limit our ability
to fund capital expenditures and service future debt obligations. Our EBITDA
is not comparable to that of other companies which may determine EBITDA
differently.

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|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |        |       |         | 
|------------------------------------------------------------------------------ | -------------------------------------------------------------- | ------------------------- | ------------------------ | ------ | ----------------------------------------------- | ------ | ------------ | ------- | ------ | ------- | ---------- | ------- | ------ | ------- | ---------- | --------- | ------- | --------- | ---------- | --------- | ------- | --------- | ---------- | ------ | ----- | ------- | 
|                                                                               |                                                                |                           |                          |        | Fiscal Year Ended March 31,                     |        |              |         |       
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |       
|                                                                               |                                                                |                           |                          |        | 1998                                            |        | 1999         |         | 2000   |         | 2001       |         | 2002   |         | 2002      
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |           
|                                                                               |                                                                |                           |                          |        | Indian rupees                                   |        | U.S. dollars
|                                                                               |                                                                |                           |                          |        | (in thousands, except share and per share data)
|Statement of Operations Data:                                                  |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Revenues                                                                       |                                                                | Rs.                       | 6,805                    |        |                                                 | Rs.    | 103,344      |         |        | Rs.     | 622,725    |         |        | Rs.     | 1,225,481  |           |         | Rs.       | 1,577,488  |           |         | $         | 32,306     |       
|Cost of revenues (excluding
depreciation and amortization)                     |                                                                |                           | (19,498                  | )      |                                                 |        | (63,651      | )       |        |         | (281,431   | )       |        |         | (1,159,333 | )         |         |           | (1,187,684 | )         |         |           | (24,323    | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Gross profit (excluding depreciation
and amortization)                         |                                                                |                           | (12,693                  | )      |                                                 |        | 39,693       |         |        |         | 341,294    |         |        |         | 66,148     |           |         |           | 389,804    |           |         |           | 7,983      |       
|Operating expenses:                                                            |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|                                                                               | Selling, general and
administrative expenses                   |                           |                          | 80,394 |                                                 |        |              | 200,213 |        |         |            | 650,222 |        |         |            | 1,855,962 |         |           |            | 1,919,823 |         |           |            | 39,316 |      
|                                                                               | Acquisition expenses                                           |                           |                          |       |                                                 |        |              |        |        |         |            |        |        |         |            |          |         |           |            | 20,000    |         |           |            | 410    |      
|                                                                               | Amortization of goodwill                                       |                           |                          |       |                                                 |        |              |        |        |         |            | 115,992 |        |         |            | 931,967   |         |           |            | 292,964   |         |           |            | 6,000  |      
|                                                                               | Impairment of goodwill                                         |                           |                          |       |                                                 |        |              |        |        |         |            |        |        |         |            |          |         |           |            | 4,127,680 |         |           |            | 84,532 |      
|                                                                               | Amortization of deferred stock
compensation expense            |                           |                          |       |                                                 |        |              | 69      |        |         |            | 20,627  |        |         |            | 79,224    |         |           |            | 14,673    |         |           |            | 301    |      
|                                                                               | Foreign exchange (gain)/loss                                   |                           |                          | 6      |                                                 |        |              | (615    | )      |         |            | (5,414  | )      |         |            | (162,136  | )       |           |            | (44,520   | )       |           |            | (912   | )    
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|                                                                               |                                                                |                           | Total operating expenses |        |                                                 | 80,400 |              |         |        | 199,667 |            |         |        | 781,427 |            |           |         | 2,705,017 |            |           |         | 6,330,620 |            |        |       | 129,647 | 
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Operating loss                                                                 |                                                                |                           | (93,093                  | )      |                                                 |        | (159,974     | )       |        |         | (440,133   | )       |        |         | (2,638,869 | )         |         |           | (5,940,816 | )         |         |           | (121,664   | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Other (expense)/income, net                                                    |                                                                |                           | (7,498                   | )      |                                                 |        | (27,402      | )       |        |         | 71,852     |         |        |         | 242,368    |           |         |           | 32,711     |           |         |           | 670        |       
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Loss before equity in losses of
affiliates, income taxes and minority
interest |                                                                |                           | (100,591                 | )      |                                                 |        | (187,376     | )       |        |         | (368,281   | )       |        |         | (2,396,501 | )         |         |           | (5,908,105 | )         |         |           | (120,994   | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Equity in losses of affiliates                                                 |                                                                |                           |                         |        |                                                 |        |             |         |        |         |           |         |        |         | (294,540   | )         |         |           | (1,268,088 | )         |         |           | (25,969    | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Loss before income taxes and minority
interest                                 |                                                                |                           | (100,591                 | )      |                                                 |        | (187,376     | )       |        |         | (368,281   | )       |        |         | (2,691,041 | )         |         |           | (7,176,193 | )         |         |           | (146,963   | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Income taxes                                                                   |                                                                |                           |                         |        |                                                 |        |             |         |        |         | 1,478      |         |        |         | (1,707     | )         |         |           |           |           |         |           |           |       
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Minority interest                                                              |                                                                |                           |                         |        |                                                 |        |             |         |        |         | 1,799      |         |        |         | 11,137     |           |         |           | 17,928     |           |         |           | 367        |       
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Loss from continuing operations                                                |                                                                |                           |                         |        |                                                 |        |             |         |        |         | (365,004   | )       |        |         | (2,681,611 | )         |         |           | (7,158,265 | )         |         |           | (146,596   | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Discontinued operations                                                        |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|                                                                               | Income / (loss) from
discontinued operations                   |                           |                          |       |                                                 |        |              |        |        |         |            | (16,893 | )      |         |            | 172,581   |         |           |            | (125,373  | )       |           |            | (2,568 | )    
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|                                                                               | Profit on sale of discontinued
operations, net of direct costs |                           |                          |       |                                                 |        |              |        |        |         |            |        |        |         |            |          |         |           |            | 81,121    |         |           |            | 1,661  |      
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Net loss                                                                       |                                                                | Rs.                       | (100,591                 | )      |                                                 | Rs.    | (187,376     | )       |        | Rs.     | (381,897   | )       |        | Rs.     | (2,509,030 | )         |         | Rs.       | (7,202,517 | )         |         | $         | (147,503   | )     
|                                                                               |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|Net profit/ (loss) per equity share                                            |                                                                |                           |                          |        |                                                 |        |              |         |        |         |            |         |        |         |            |           |         |           |            |           |         |           |            |       
|                                                                               |                                                                | - continuing operations   |                          | Rs.    | (121.66                                         | )      |              | Rs.     | (17.31 | )       |            | Rs.     | (19.68 | )       |            | Rs.       | (117.34 | )         |            | Rs.       | (308.59 | )         |            | $      | (6.32 | )      
|                                                                               |                                                                | - discontinued operations |                          |        |                                                |        |              |         |       |         |            |         | (0.91  | )       |            |           | 7.55    |           |            |           | (1.91   | )         |            |        | (0.04 | )      
|Net loss per equity share                                                      |                                                                | Rs.                       | (121.66                  | )      |                                                 | Rs.    | (17.31       | )       |        | Rs.     | (20.59     | )       |        | Rs.     | (109.79    | )         |         | Rs.       | (310.50    | )         |         | $         | (6.36      | )     
|Weighted average equity shares used
in computing net loss per equity
share     |                                                                |                           | 826,805                  |        |                                                 |        | 10,824,826   |         |        |         | 18,545,399 |         |        |         | 22,852,600 |           |         |           | 23,196,428 |           |         |           | 23,196,428 |       

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|                                               |                      |     |                 |         |              |     |          |          |      |     |            |            |      |     |            |            |   |     |           |          |   |   |         |         |  
|---------------------------------------------- | -------------------- | --- | --------------- | ------- | ------------ | --- | -------- | -------- | ---- | --- | ---------- | ---------- | ---- | --- | ---------- | ---------- | - | --- | --------- | -------- | - | - | ------- | ------- | -
|                                               |                      |     | As of March 31, |         |              |     |         
|                                               |                      |     |                 |         |              |     |         
|                                               |                      |     | 1998            |         | 1999         |     | 2000     |          | 2001 |     | 2002       |            | 2002
|                                               |                      |     |                 |         |              |     |          |          |      |     |            |            |     
|                                               |                      |     | Indian rupees   |         | U.S. dollars
|                                               |                      |     | (in thousands) 
|Balance Sheet Data:                            |                      |     |                 |         |              |     |          |          |      |     |            |            |      |     |            |            |   |     |           |          |   |   |         |        
|Cash and cash equivalents                      |                      | Rs. | 9,912           |         |              | Rs. | 125,547  |          |      | Rs. | 7,307,625  |            |      | Rs. | 1,444,307  |            |   | Rs. | 810,500   |          |   | $ | 16,598  |        
|Total assets                                   |                      |     | 107,632         |         |              |     | 454,888  |          |      |     | 10,634,004 |            |      |     | 11,501,884 |            |   |     | 4,146,274 |          |   |   | 84,911  |        
|Long-term debt, including current
installments |                      |     | 134,455         |         |              |     | 259,256  |          |      |     | 215,537    |            |      |     |           |            |   |     |          |          |   |   |        |        
|Total stockholders equity / (deficit)         |                      |     | (52,560         | )       |              |     | 67,617   |          |      |     | 9,927,840  |            |      |     | 10,588,336 |            |   |     | 3,394,113 |          |   |   | 69,509  |        
|Other Financial Data:                          |                      |     |                 |         |              |     |          |          |      |     |            |            |      |     |            |            |   |     |           |          |   |   |         |        
|EBITDA                                         |                      | Rs. | (73,709         | )       |              | Rs. | (111,068 | )        |      | Rs. | (191,979   | )          |      | Rs. | (1,299,173 | )          |   | Rs. | (984,280  | )        |   | $ | (20,157 | )      
|Capital expenditures                           |                      |     | 77,070          |         |              |     | 144,331  |          |      |     | 643,097    |            |      |     | 1,916,020  |            |   |     | 240,457   |          |   |   | 4,924   |        
|Net cash provided by (used in):                |                      |     |                 |         |              |     |          |          |      |     |            |            |      |     |            |            |   |     |           |          |   |   |         |        
|                                               | Operating activities |     |                 | (73,950 | )            |     |          | (172,107 | )    |     |            | (527,248   | )    |     |            | (1,308,362 | ) |     |           | (538,149 | ) |   |         | (11,021 | )
|                                               | Investing activities |     |                 | (77,070 | )            |     |          | (144,196 | )    |     |            | (2,458,384 | )    |     |            | (4,338,491 | ) |     |           | (80,963  | ) |   |         | (1,658  | )
|                                               | Financing activities |     |                 | 159,449 |              |     |          | 431,939  |      |     |            | 10,167,709 |      |     |            | (216,465   | ) |     |           | (9,097   | ) |   |         | (186    | )
|Working capital (deficit)                      |                      |     | (5,355          | )       |              |     | (21,706  | )        |      |     | 7,503,518  |            |      |     | 1,912,968  |            |   |     | 820,620   |          |   |   | 16,806  |        

Risk Factors

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

Risks Related to Investments in Indian Companies

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



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

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



| |  | Conflicts in South Asia and terrorist attacks in the United States and South
Asia 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

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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. Both countries have amassed troops along their common
border. These events are widely believed to be provoking a further
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 on the market for our services.



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

Currently, there is no public trading market for our equity shares in
India or elsewhere nor can we assure you that we will take steps to develop
one. Our equity securities are not traded publicly in India, but are only
traded on Nasdaq through the ADSs as described in this annual report. 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 new 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 through a recognized stock exchange or
in connection with the offer made under the regulations regarding takeovers.
Since exchange controls still exist in India, the Reserve Bank of India will
approve the price at which the equity shares are transferred based on a
specified formula, and a higher price per share may not be permitted. Holders
who seek to convert the rupee proceeds from a sale of equity shares in India
into foreign currency and repatriate that foreign currency from India will have
to obtain Reserve Bank of India approval for each transaction. We cannot
assure you that any required approval from the Reserve Bank of India or any
other government agency can be obtained.



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

The exchange rate between the rupee and the U.S. dollar has changed
substantially in recent years and may fluctuate substantially in the future.
During the three-year period from April 1, 1999 through March 31, 2002, the
value of the rupee against the U.S. dollar declined by approximately 15.1%.
Devaluations of the rupee will result in higher expenses to our company for the
purchase of capital equipment, such as servers, routers, modems and other
telecommunications and computer equipment, which is generally manufactured in
the U.S. In addition, our market valuation could be materially adversely
affected by the devaluation of the rupee if U.S. investors analyze our value
based on the U.S. dollar equivalent of our financial condition and results of
operations.



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

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



| |  |  | Our Internet service provider license has a term of 15 years and
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
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | any reason, we will be unable to operate as an
Internet service provider in India and will lose one of our primary
sources of revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Telecom Regulatory Authority of India, or TRAI, a statutory
authority constituted under the Telecom Regulatory Authority of India
Act, 1997, maintains the right to regulate the prices we charge our
subscribers. The success of our business model depends on our ability
to price our services at levels we believe are appropriate. If the
TRAI sets a price floor, we may not be able to attract and retain
subscribers. Likewise, if the TRAI sets a price ceiling, we may not be
able to generate sufficient revenues to fund our operations.
Similarly, an action of the Indian Parliament may impact our ability to
set the prices for our services.
|
| |  |  | The Government of India maintains the right to take over our entire
operations or revoke, terminate or suspend our license for national
security and similar reasons without compensation to us. If the
Government of India were to take any of these actions, we would be
prevented from conducting all or part of our business.                                                                                                                                                                                                                                                                                                                                

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 has remanded
the matter back to the TRAI for denovoconsideration. This matter is pending
before the TRAI. The resolution of this dispute could have a material impact
on our business.



| |  | 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 2002, this tax rate was subject to a 2.0% surcharge resulting in an
effective tax rate of 35.7%. The tax surcharge for fiscal 2003 has been
increased to 5.0% resulting in an effective tax rate of 36.8%. We cannot
assure you that the surcharge will be in effect for a limited period of time or
that additional surcharges will not be implemented by the Government of India.
Until April 1, 2003, dividends declared, distributed or paid by an Indian
corporation are subject to a dividend tax of 10.5%, including the applicable
surcharge for fiscal 2003, of the total amount of the dividend declared,
distributed or paid. This tax is not paid by stockholders nor is it a
withholding requirement, but rather it is a direct tax payable by the
corporation before the distribution of a dividend. Effective April 1, 2003,
Indian companies will no longer be taxed on declared dividends.

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 will no longer be taxed on declared dividends.

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

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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 consumer
Internet access services division may generate.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The market penetration rates of personal computers and online access in
India are far lower than such rates in the United States. For example,
according to International Data Corporation, in 2000 the Indian market
contained approximately 4.4 million Internet users compared to a total
population in India of 1.0 billion, while the U.S. market contained
approximately 135 million Internet users compared to a total population in the
U.S. of 275 million. Alternate methods of obtaining access to the Internet,
such as through set-top boxes for televisions, are currently not popular in
India. There can be no assurance that the number or penetration rate of
personal computers in India will increase rapidly or at all or that alternate
means of accessing the Internet will develop and become widely available in
India. While the personal computer penetration level in India is relatively
low, we are addressing the demand for public Internet access through the
establishment of a retail chain of public Internet access centers, which we
refer to as cybercafés, under the iway brand name. 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 consumer
Internet access services division may generate.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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

Many of our existing and proposed products and services are designed to
facilitate electronic commerce in India, although there is relatively little
electronic commerce currently being conducted in India. Demand and market
acceptance for these products and services by businesses and consumers,
therefore, are highly uncertain. Many Indian businesses have deferred
purchasing Internet access and deploying electronic commerce initiatives for a
number of reasons, including the existence or perception of, among other
things:



| |  |  | inconsistent quality of service;                                               
| | - |  | -------------------------------------------------------------------------------
|
| |  |  | 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 products and services.

Risks Related to Satyam Infoway



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

We commenced operation of our private data network business in April 1998
and launched our Internet service provider operations and Internet portal
website in November 1998. Accordingly, we have a limited

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operating history to
evaluate our business. You must consider the risks and difficulties frequently
encountered by companies in the early stages of development, particularly
companies in the new and rapidly evolving Internet service markets. These
risks and difficulties include our ability to:



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

Not only is our operating history short, but we have determined to compete
in three businesses that we believe are complementary. These three businesses
are corporate network/data services, consumer Internet access services and
online portal and content offerings. On February 28, 2002, our stockholders
approved the sale of a fourth business (software services) to our
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 consumer Internet services as well as the loss of
advertising revenues.



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

Since our founding, we have incurred significant losses and negative cash
flows. As of March 31, 2002, we had an accumulated deficit of approximately
Rs.10,408.4 million ($213.2 million). We have not been profitable and expect
to incur operating losses as we expand our services, invest in expansion of our
network/data and technology infrastructure, 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.



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

VSNL is a provider of international telecommunications services in India
that, until recently, was controlled by the Government of India. 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%. VSNL had
approximately 587,000 subscribers as of March 31, 2002. VSNL enjoys
significant competitive advantages over our company, including the following:



| |  |  | Longer service history. VSNL started offering Internet service
provider services from August 1995, whereas we started offering
Internet service provider services only from November 1998.                                                                                               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Access to network infrastructure. Because VSNL was controlled by
the Government of India, it had direct access to network infrastructure
which was owned by the Indian government. We believe that this access
is continuing as a result of the Government of Indias investment in
VSNL.
|
| |  |  | Greater financial resources. VSNL has significantly greater total
assets and annual revenues than our company.                                                                                                                                                                           

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 international long distance telephone service. The charges for international gateways and other services presently being provided by

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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 has remanded the matter back to the TRAI for denovoconsideration.
This matter is pending before the TRAI. Unless there is a change in
government policy or favorable resolution of this dispute, or until we are able
to reduce our bandwidth costs through other means, we will continue to face
difficult market conditions in the consumer 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 products
and 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 Global E-Commerce Limited,
Sprint-RPG Limited and WIPRO-Customer Services Division. 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 December 31, 2001, approximately 442
companies had obtained Internet service provider licenses in India, including
79 companies which have obtained licenses to offer Internet service provider
services throughout India. New entrants into the national Internet service
provider market in India may enjoy significant competitive advantages over our
company, including greater financial resources, which could allow them to
charge Internet access fees that are lower than ours in order to attract
subscribers. Since May 2000, we have offered unlimited Internet access to
consumers for a fixed 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 consumer 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
SatyamOnline, Sify and iway brands could be unsuccessful or, if successful,
may not benefit our company if in the future we are no longer permitted to
use the Satyam trademark that we license from Satyam Computer Services.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In order to expand our customer base and increase traffic on our websites,
we must establish, maintain and strengthen the SatyamOnline, 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.

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Satyam is a trademark owned by Satyam Computer Services, our parent
company. We have a license to use the Satyam trademark for so long as Satyam
Computer Services continues to own at least 51% of our company. If its
ownership is reduced below 51%, however, Satyam Computer Services may terminate
our license to use the Satyam trademark upon two years prior written notice.
In October 2001, Satyam Computer Services announced its plan to divest its
investment in our company, and our license to use the Satyam trademark may be
terminated, subject to the two-year notice period, in connection with any such
divestment. Termination of our license to use the Satyam trademark would
require us to invest significant funds in building a new brand name and have a
material adverse effect on our business, results of operations and financial
condition.



| |  | If our efforts to retain our subscribers through investment in network
infrastructure, 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 invest significant resources in our network infrastructure, 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 consumer Internet access services
division. Therefore, we may not be able to realize sufficient future revenues
to offset our present investment in network infrastructure, 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. Our business involves significant capital
outlays and, thus, a significant portion of our investment and cost base is
relatively fixed in the short term. Our revenues for the foreseeable future
will depend on the following:



| |  |  | the 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 consumer 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 the expansion
of our operations could affect the expansion of our network or could
require us to generate additional revenue in order to be profitable;

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| |  |  | the timing and nature of our marketing efforts could affect the
number of our subscribers and the level of electronic commerce activity
on our websites;                                                                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to successfully integrate operations and technologies
from any acquisitions, joint ventures or other business combinations or
investments, including our acquisitions of IndiaWorld Communications,
Indiaplaza.com and Kheladi.com and our investment in CricInfo Limited;
|
| |  |  | the introduction of alternative technologies may require us to
reevaluate our business strategy and/or to adapt our products and
services to be compatible with such technologies; and                                                                                                
|
| |  |  | technical difficulties or system failures affecting the
telecommunication infrastructure in India, the Internet generally or
the operation of our websites.                                                                                                                           

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

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



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

We rely on the Internet and accordingly, depend upon the continuous,
reliable and secure operation of Internet servers, related hardware and
software and network infrastructure such as lines leased from 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. 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

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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.



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

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



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

Our success depends upon the continued service of our key personnel,
particularly Mr. Ramaraj, our Chief Executive Officer, Mr. Zacharias, our
President and Chief Operating Officer, Mr. Santhanakrishnan, our Chief
Financial Officer, and each other member of our senior management.
Substantially 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. We have entered into Executive
Employment Agreements with several executive employees which provide for
specified payments in connection with a termination of employment after a
change of control or in certain other circumstances. 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 growth strategy, upon which
the success of our business depends.



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

We rely on our arrangements with strategic partners to provide key network
products and 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 June 2002 announced its intention to restate its financial
statements for 2001 and the first quarter of 2002. 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. We also provide access to a co-branded version of the
AOL Instant Messenger service to our portal customers, and this proprietary
service is an important feature of our website.



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

On November 5, 2001, a securities class action lawsuit was filed in the
United States District Court for the Southern District of New York on behalf of
all persons who acquired our ADSs between October 20, 1999 and December 6,
2000. Our company, certain of our executive officers and certain underwriters
involved in our initial public offering of ADSs are named as defendants in the
complaint. This complaint alleges that certain of the underwriters of our
initial public offering violated the federal securities laws by failing to
disclose that they had solicited and received undisclosed commissions from, and
entered into undisclosed arrangements with, certain investors who purchased our
ADSs in our initial public offering, and had entered into undisclosed
arrangements with certain investors whereby the underwriters allocated ADSs in
our initial public offering to those investors in exchange for their agreement
to purchase our ADSs in the after-market at pre-determined prices. The
complaint also alleges that the defendants violated the federal securities laws
by issuing a registration statement in connection with our initial public
offering that contained material misstatements and/or omissions because it did
not disclose that

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these allegedly undisclosed arrangements had occurred. The
complaint seeks damages on behalf of all those who purchased or otherwise
acquired our ADSs during the period covered by the complaint. The deadline for
defendants to respond to the complaint has not yet expired. We believe 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 and our subsidiary IndiaWorld Communications are engaged in disputes
which, if resolved unfavorably, could impose material costs on us or have
other undesirable effects.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our subsidiary IndiaWorld Communications is involved in pending litigation
relating to the IndiaWorld trademark in Federal Court in San Diego, California
with a third party located in the United States. IndiaWorld Communications
commenced the lawsuit alleging, among other things, that the third party
fraudulently registered and used the IndiaWorld trademark, and committed
copyright infringement and misappropriation of content of IndiaWorld
Communications website. The third party filed a counterclaim against us and
IndiaWorld Communications alleging, among other things, that the activities of
IndiaWorld Communications infringe a United States trademark for the term
Indiaworld and associated logos and trade dress purportedly owned by this
third party, and that the third party has an ownership interest in the
underlying assets of IndiaWorld Communications. On August 9, 2001, the Court
granted our motion to dismiss us from this case because the Court found that it
did not have personal jurisdiction over us. IndiaWorld Communications is still
involved in the case. We have been advised by the prior owners of IndiaWorld
Communications that no infringement or misappropriation has taken place. Our
contract with the prior owners of IndiaWorld Communications includes an
indemnity for past infringement or misappropriation. We and IndiaWorld
Communications have also been contacted by a party that alleges, among other
things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as
to the possible outcome, including whether or not our indemnity will be
effective in protecting us, and also could divert management time and attention
away from our business. An adverse outcome that is not indemnified could be
material.



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

In November 1999, we acquired 24.5% of the outstanding shares of
IndiaWorld Communications, together with an option to acquire IndiaWorld
Communications remaining outstanding shares which we exercised in June 2000.
In May 2000, we entered into a strategic partnership with VeriSign to provide
managed digital certificate-based authentication services in India. In June
2000, we acquired a 25% stake in CricInfo Limited, entered into an agreement
with America Online to distribute a co-branded version of the AOL Instant
Messenger and made an investment in Refco Sify Securities India Private
Limited. In July 2000, we completed our investment in CricInfo Limited and
agreed to acquire Indiaplaza.com. In December 2000, we completed our
acquisition of Indiaplaza.com. These 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.

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

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could disrupt our ongoing business, distract our management and
employees and increase our expenses which could adversely affect our operating
results and cause the price of our ADSs to decline. Furthermore, we may incur
indebtedness or issue additional equity securities to pay for any future
acquisitions. The issuance of additional equity securities would dilute the
ownership interests of the holders of our ADSs.



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

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



| |  | Satyam Computer Services presently controls our company and it or a
successor may have interests which conflict with those of our other
stockholders or holders of our ADSs.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of the date of this annual report, Satyam Computer Services
beneficially owns approximately 52.5% of our equity shares. As a result, it is
presently able to exercise control over many matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions, such as the sale of our software services business. In
October 2001, Satyam Computer Services announced its intention to seek to
divest its Sify shares. 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
or a subsequent purchaser of the shares currently owned by Satyam Computer
Services could conflict with the interests of our other stockholders or holders
of our ADSs. Such a control stockholder could delay or prevent a change of
control of our company even if a transaction of that sort would be beneficial
to our other stockholders, including the holders of our ADSs. In addition, we
have an agreement with South Asia Regional Fund, an investor in our company,
which assures them a board seat and provides specified additional rights to
them.



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

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

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

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

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

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



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

Currently, only a relatively limited number of customers use our corporate
network, our Internet service provider services and our Internet portal. We
must continue to expand and adapt our network infrastructure to accommodate
additional users, increasing transaction volumes and changing customer
requirements. We may not be able to project accurately the rate or timing of
increases, if any, in the use of our websites or expand and upgrade our systems
and infrastructure to accommodate such increases. Our systems may not
accommodate increased use while maintaining acceptable overall performance.
Service lapses could cause our users to use the online services of our
competitors.



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

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

Risks Related to the Internet



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

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

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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.



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

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

Risk Related to the ADSs and Our Trading Market



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

Under the Companies Act, 1956 of India, or Companies Act, a public company
incorporated in India must offer its holders of equity shares preemptive rights
to subscribe and pay for a proportionate number of shares to maintain their
existing ownership percentages prior to the issuance of any new equity shares,
unless the preemptive rights have been waived by adopting a special resolution
by holders, 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 (equivalent to four
million ADSs) in connection with acquisitions. We issued virtually all of
these equity shares in connection with our acquisitions of IndiaWorld
Communications, Indiaplaza.com and Kheladi.com (India) 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 (equivalent to 16 million ADSs) 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 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

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consider at the time the decision must be made. We may elect
not to file a registration statement related to preemptive rights otherwise
available by law to our stockholders. In the case of future issuances, the new
securities may be issued to our depositary, which may sell the securities for
the benefit of the holders of the ADSs. The value, if any, our depositary
would receive upon the sale of such securities cannot be predicted. To the
extent that holders of ADSs are unable to exercise preemptive rights granted in
respect of the equity shares represented by their ADSs, their proportional
interests in our company would be reduced.



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

As a holder of ADSs, you generally have the right under the deposit
agreement to instruct the depositary bank to exercise the voting rights for the
equity shares represented by your ADSs. At our request, the depositary bank
will mail to you any notice of stockholders meeting received from us together
with information explaining how to instruct the depositary bank to exercise the
voting rights of the securities represented by ADSs. If the depositary bank
timely receives voting instructions from a holder of ADSs, it will endeavor to
vote the securities represented by the holders ADSs in accordance with such
voting instructions. However, the ability of the depositary bank to carry out
voting instructions may be limited by practical and legal limitations and the
terms of the securities on deposit. We cannot assure you that you will receive
voting materials in time to enable you to return voting instructions to the
depositary bank in a timely manner.

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 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.



| |  | 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
March 31, 2002 and, after giving effect to the 4-for-1 split of our ADSs in
January 2000, the trading price of our ADSs has ranged from a high of $113 per
ADS to a low of $0.87per 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 consumer Internet access services in India and the related
cost and availability of bandwidth;
|
| |  |  | the perceived attractiveness of investment in Indian companies;                                                                                                               

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| |  |  | acquisitions and alliances by us or others in the industry;                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | changes in estimates of our performance or recommendations by financial analysts;                                                 
|
| |  |  | market conditions in the industry and the economy as a whole;                                                                     
|
| |  |  | introduction of new services by us or our competitors;                                                                            
|
| |  |  | changes in the market valuations of other Internet service companies;                                                             
|
| |  |  | announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
|
| |  |  | additions or departures of key personnel; and                                                                                     
|
| |  |  | other events or factors, many of which are beyond our control.                                                                    

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



| |  | 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. The price of our
ADSs on the Nasdaq National Market has recently closed below $1.00.
Our equity share-to-ADS exchange ratio is currently 1-to-4, and we may
be required to adjust our equity share-to-ADS ratio in order to
maintain our National Market listing. Even if we adjust our equity
share-to-ADS ratio, 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.
For example, in October 2001 our parent company, Satyam Computer Services,
announced its intention to divest its investment in our company. Such sales
also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. We 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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Item 4. INFORMATION ON THE COMPANY

History and Development

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

Our company was formed as 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. 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 product and
service offerings to our corporate customers. In March 1998, we obtained
network certification for conformity with Indian and international network
operating standards from the Technical Evaluation Committee of India. In April
1998, we began offering private network services to businesses in India. Our
initial products and services included electronic data interchange, e-mail and
other messaging services, virtual private networks and related customer
support.

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

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

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

We acquired IndiaWorld Communications, a private company organized under
the laws of the Republic of India, in June 2000 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.

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

In July 2000, we acquired a 25% stake in CricInfo Limited, a private
company incorporated in the United Kingdom, through the issuance of 2,204,720
ADSs (representing 551,180 equity shares). Also in July 2000, we entered into
an agreement to acquire of the outstanding capital stock of Indiaplaza.com, a
private company incorporated in California. We completed our acquisition of
Indiaplaza.com in December 2000 through the issuance of an aggregate of 455,192
ADSs (representing 113,798 equity shares) to the former equity holders of
Indiaplaza.com. For U.S. GAAP reporting purposes, the financial statements of
Indiaplaza.com have been consolidated with our financials statements from and
after December 8, 2000.

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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 provide for an interest
rate of 8.0% per annum, are convertible into CricInfo shares by us at any time
and redeemable by CricInfo on October 5, 2004. On March 13, 2002, we entered
into an arrangement to subscribe to a further issue of convertible notes for an
additional amount of up to GBP 0.5 million by CricInfo that will be subject to
the same terms as the original issue, thereby increasing our total subscription
to GBP 1.5 million.

Also in October 2001, we announced our proposal to divest our software
services business, which principally involves business to business e-commerce
and website development services including our strategic relationships with
Open Market and Sterling Commerce, to our 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
an extraordinary general meeting held on February 28, 2002. The objective of
the divestment, is to permit Satyam Computer Services to concentrate on its
core business of software services and to permit us to concentrate on Internet
services.

Our foreign exchange gain/(loss) was Rs.(0.01) million, Rs.0.6 million,
Rs.5.4 million, Rs.162 million and Rs.44.5 million for fiscal 1998, 1999, 2000,
2001, and 2002 respectively.

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 products delivered over a common Internet backbone infrastructure.
Our primary businesses are the following:



| |  |  | corporate network/data services;      
| | - |  | --------------------------------------
|
| |  |  | consumer Internet access services; and
|
| |  |  | online portal and content offerings.  

Our comprehensive range of products and 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. On February 28, 2002 our stockholders approved the sale of a
fourth business (software services) to Satyam Computer Services.

We began providing corporate network/data services to businesses in April
1998, and as of March 31, 2002 we had more than 650 corporate customers. We
launched our Internet service provider business in November 1998, becoming the
first private Internet service provider to begin service after the Indian
government, opened the market to private competition. We currently have more
than 600,000 subscribers for our SatyamOnlineservices. 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 network services, data centre 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, 2002, we owned and operated 53 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.

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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 Indias government-controlled telecom providers. We intend
to continue to focus on providing superior network performance and high levels
of customer service and technical support to increase our customer base and
maximize customer satisfaction.

Industry Overview

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

Special Communications Needs of Businesses. As the Internet becomes more
developed and reliable, businesses are increasingly utilizing the Internet for
functions critical to their core business strategies such as sales and
marketing, customer service and project coordination. The Internet presents a
compelling profit opportunity for businesses by enabling them to reduce
operating costs, access valuable information and reach new markets. To
maintain a significant presence on the Internet, businesses typically purchase
Internet access services and establish a website. Internet access provides a
company with its basic gateway to the Internet, allowing it to transfer e-mail,
access information and connect with employees, customers and suppliers. A
website provides a company with a tangible identity and an interactive presence
on the Internet. Many corporations are also converting their information
systems and databases to web-enabled systems. According to International Data
Corporation, worldwide commerce spending grew 68% between 2000 and 2001
reaching more than $600 billion. International Data Corporation has forecast
that the e-commerce spending will pass the $1.0 trillion mark in 2002.

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

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

|                                                    |  |                                         |     |      |  |        |        |  |  |            |     |  
|--------------------------------------------------- |  | --------------------------------------- | --- | ---- |  | ------ | ------ |  |  | ---------- | --- | -
|                                                    |  |                                         |     |      |  |        |        |  |  | Annualized
|                                                    |  | 2000                                    |     | 2005 |  | Growth
|                                                    |  |                                         |     |      |  |       
|                                                    |  | (in millions, except annualized growth)
|Indian Internet users                               |  |                                         | 4.4 |      |  |        | 37.6   |  |  |            | 53  | %
|Indian installed personal and network computer base |  |                                         | 4.2 |      |  |        | 33.0   |  |  |            | 51  | %
|Indian Internet commerce revenues                   |  | $                                       | 393 |      |  | $      | 27,000 |  |  |            | 134 | %

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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. As of March 31, 2002, VSNL had approximately 587,000 subscribers.
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.
The Telecom Disputes Settlement and Appellate Tribunal has remanded this matter
back to the TRAI for denovoconsideration. This matter is pending before the
TRAI. VSNL has priced these services at levels which we believe are
inconsistent with the terms and conditions on which VSNL has secured the
bandwidth for its international gateways. This is a pending matter and, as of
the date of this annual report, no decision has been announced. The resolution
of this dispute could have a material impact on our business.

Sify Business Model

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



| |  |  | End-to-end network solutions for business customers. We provide
our business customers with a comprehensive range of Internet,
connectivity, 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, 2002, we owned and operated 53
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.                                                                                      
|
| |  |  | 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.
|
| |  |  | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |  |  | 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 SatyamOnlineaccess service. Our acquisitions of
IndiaWorld Communications and Indiaplaza and our relationship with
CricInfo Limited provide us with additional content sites tailored to
Indian interests worldwide.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
purchasing satellite earth stations or by leasing or purchasing
capacity on transoceanic fiber optic cables. In partnership with
Singapore Telecommunications Ltd., Cyberstar and New Skies, we have
deployed private international gateways that enable Internet users to
access globally available data faster and provide enhanced service to
customers. These gateways provide regional egress and ingress points.
They prevent international traffic transgressing through national
loops, thus avoiding congestion as well as reducing chances of failure.
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 SatyamOnline brand name to capitalize on our first mover
advantage in India.We intend to capitalize on our first-to-market
advantage in India to establish national service and a brand name in
advance of other private competitors. We are presently the largest
national independent Internet service provider in India, based on
number of subscribers. As of March 31, 2002, we had approximately
600,000 Internet access subscribers and there were 680 iwaycafés
operational in 10 cities providing Internet access to consumers on a
non-subscription basis. Approximately 40% 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Expand our products and services with new technologies to enable
our customers to use the Internet more effectively.We continually
seek to expand the breadth of our product and service offerings with
new technologies. For example, we 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 SatyamOnlinebrands and offer a full range of our
Internet connectivity services. We also introduced a number of other
products and 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 portal,
www.sify.com, functions as an initial gateway to the Internet, the
users starting point for web browsing and other Internet services, for
our consumer Internet service provider subscribers. Our portal is a
media rich, user friendly, interactive website offering hyperlinks to a
wide                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |   |  | 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. As the availability of Internet access expands in India, we
believe that increasing numbers of Internet users will be attracted to
our high quality websites and online content designed specifically for
the Indian consumer. We will seek to attract advertisers, electronic
commerce merchants and third-party content providers trying to reach
our users in order to generate additional revenues for sify.com.                                                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Expand our customer distribution channels through strategic
alliances to take advantage of the sales and marketing capabilities of
our strategic partners.We intend to continue to expand our customer
acquisition channels, for both our consumer Internet access and
corporate network/data services. We have arrangements with two leading
personal computer manufacturers, Compaq and Hewlett-Packard, to bundle
our SatyamOnlineInternet access service with the sale of their
personal computers in India. We have also formed strategic alliances
with computer and electronics retailers.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | Pursue selective strategic investments, alliances and acquisitions
to expand our customer base, increase utilization of our network and
add new technologies to our product mix.We believe that our growth
can be supplemented by selective acquisitions of complementary
businesses. We may seek to expand our market presence in our corporate
network business through the acquisition of web hosting, data center,
web implementation and/or systems integration companies. We will also
consider 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.

Service Offerings

Corporate Network/Data Services.

We offer a comprehensive suite of technology products and network-based
services that provide our corporate customers with comprehensive Internet and
private network access. Our products and services enable our corporate
customers to offer a full range of business-to-business and electronic
commerce-related services. In February 2002, we became the first Indian
company to be certified ISO 9001: 2000 for network services, data centre
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.

Our corporate network/data services consist of the following:

Premium Internet access. We offer continuous high-speed Internet access,
as well as dial-up Internet access, to businesses in India. Our dedicated
Internet access services are provided to corporate customers at speeds ranging
from 64 Kbps to 2 Mbps. We also offer an international roaming service which
caters to business executives who travel outside of India. Our principal
Internet access options for corporate customers include:

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|            |  |                                                                                |  |                    
|----------- |  | ------------------------------------------------------------------------------ |  | -------------------
|Service     |  | Summary Description                                                            |  | Pricing            
|            |  |                                                                                |  |                    
|Leased Line |  | Dedicated high speed Internet access at up to 64 Kbps                          |  | Rs.200,000 annually
|ISDN        |  | Dedicated high speed Internet access at up to 64 Kbps                          |  | Rs.200,000 annually
|PSTN        |  | Dedicated Internet access at up to 28.8 Kbps                                   |  | Rs.30,000 annually 
|NetWorld    |  | 25 Hours of Internet access over a 12-month period
while roaming outside India |  | Rs.7,000           

Virtual private network services. We offer virtual private network
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. Virtual
private network products, often in combination with a website, are also the
basis for offering intranet and extranet services. Intranets are corporate
networks that rely on Internet-based technologies to provide secure links
between corporate offices and secure access to internal company data.
Extranets expand the network to selected business partners through secure links
on the Internet. Our nationwide Lotus Notes management system provides the
software and framework for our customers to utilize their private network
systems to interlink their offices and exchange information. We also support
the Microsoft Exchange messaging system.

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

Web-based services. We also offer web hosting accounts for companies and
other organizations that wish to create their own websites without maintaining
their own web servers and Internet connections. Our web hosting services
feature 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 products.

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

New Initiatives in our corporate network and technology services business
include:



| |  |  | International Gateways. We have private international gateways to
the Internet in strategic partnership with Singapore Telecommunications
Ltd., Cyberstar and New Skies in twelve strategic cities in India.
These private international gateways enable Internet users to access
globally available data faster and provide enhanced service to
customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | 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 36.1%,
48.4% and 49.6% of our revenues in fiscal 2000, 2001 and 2002, respectively.
The increase in corporate network/data services division revenues as a
percentage of total revenues from fiscal 2000 to fiscal 2001 and from fiscal
2001 to fiscal 2002 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. In February
2002, we became the first Indian company to be certified ISO 9001: 2000 for
network services, data centre 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.

Consumer Internet access services.

We offer dial-up Internet access, e-mail and web page hosting to consumers
in India through convenient online registration and user-friendly software.
In November 1998 after deregulation of the Internet service provider market in
India, we launched our Internet service provider business and became the first
private Internet service provider in India. As of March 31, 2002, we had
approximately 600,000 consumer Internet subscribers.

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. We believe that iways will expand access to
our portal and websites to consumers who do not own a personal computer or have
Internet access at home. iways offer a full range of Internet connectivity
services. As of March 31, 2002, we operated 680 iways in 10 cities.

We are the largest national provider of Internet access and Internet
services to consumers and businesses in India, based on the number of
subscribers as of March 31, 2002. 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 service offerings come in a number of packages, designed to attract
beginning Internet users and service the needs of advanced users. All of our
Discover Internet access offerings are bundled with a package of value-added
products, including one megabyte of either POP3 or Imap e-mail, a one page
pre-templated web page, licensed software with a retail value of approximately
Rs.4,000, including a multimedia Internet training kit, FIRE antivirus and
parental control software and IndoMail, a multilingual mail in 14 Indian
languages, and our 24-hour-a-day, seven-day-a-week customer service. Our
Discover offerings are offered only on a prepaid basis and can be renewed
online. Our Venture Internet access offerings are bundled with additional
special features, including five user IDs, five email IDs and group account
management. Browsing between 11:00 p.m. and 8:00 a.m. is free or considered as
half time.

Since May 2000, we have offered unlimited Internet access to consumers for
a fixed price. Our Unltd... domestic packs for home personal computer users
offer unlimited Internet access for a period of one, three, 12 or 24 months
from the date of registration and are bundled with one megabyte of mailbox
storage. We expect the market

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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             
|Service                |  | Summary Description                                       |  | (as of 31.03.2002)
|                       |  |                                                           |  |                   
|Discover 25            |  | 25 hours of Internet access over a 6-month period         |  | Rs.299            
|Discover Net Blast 50  |  | 50 hours of Internet access over a 1-month period         |  | Rs.315            
|UnLtd... (1 month)     |  | Unlimited hours of Internet access over a 1-month
period  |  | Rs.429            
|Discover 50            |  | 50 hours of Internet access over a 9-month period         |  | Rs.550            
|Discover Net Blast 150 |  | 150 hours of Internet access over a 3-month period        |  | Rs.840            
|Discover 100           |  | 100 hours of Internet access over a 24-month period       |  | Rs.990            
|UnLtd... (3 month)     |  | Unlimited hours of Internet access over a 3-month
period  |  | Rs.1,229          
|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... (12 month)    |  | Unlimited hours of Internet access over a 12-month
period |  | Rs.4,200          
|Venture 750            |  | 750 hours of Internet access over a 12- month period      |  | Rs.5,465          
|Discover 1000          |  | 1000 hours of Internet access over a 36-month period      |  | Rs.5,900          
|UnLtd...(24 month)     |  | Unlimited hours of Internet access over a 24-month
period |  | Rs.7,200          
|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.

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

Our consumer Internet access services division accounted for approximately
57.7%, 38.3% and 32.7% of our revenues in fiscal 2000, 2001 and 2002
respectively. The decrease in consumer Internet access services division
revenues as a percentage of total revenues from fiscal 2000 to fiscal 2001 and
from fiscal 2001 to fiscal 2002 was due to the growth of our corporate customer
base combined with increased competition and pricing pressures in the consumer
Internet access services division.

Online portal and content offerings.

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

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revenues from advertising, sponsorship fees and electronic commerce transaction
commissions. Channels on www.sify.compresently include:

|               |  |                                                                                                                                                                            
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Channel        |  | Description                                                                                                                                                                
|               |  |                                                                                                                                                                            
|Astrology      |  | Portal offering horoscope, numerology and related information.                                                                                                             
|Auctions       |  | Internet auction site.                                                                                                                                                     
|Bawarchi       |  | Portal dedicated to Indian cuisine.                                                                                                                                        
|Carnatic Music |  | Indian classical music site where users may chat with artists, hear CD music
clips and buy concert tickets online. This site also contains a link to an
online music store.
|Carstreet      |  | Comparison shopping site for automobiles.                                                                                                                                  
|Cities         |  | Information channel offering content such as restaurants, shopping and
leisure activities specific to Bangalore, Delhi, Mumbai (Bombay) and Kolkata
(Calcutta)             
|Classified     |  | Online classified advertisements.                                                                                                                                          
|Clubs          |  | Portal facilitating online communities of users with common interests.                                                                                                     
|Discussions    |  | Discussion and chatroom site.                                                                                                                                              
|Education      |  | Learning and education portal.                                                                                                                                             
|Entertainment  |  | A comprehensive entertainment guide that covers film, television, music,
culture, people and performing arts.                                                              
|Gamermania     |  | A service that provides online games and contests.                                                                                                                         
|Greetings      |  | Online greeting card site.                                                                                                                                                 
|Home Décor     |  | Site dedicated to home furnishings and décor.                                                                                                                              
|Indiaplaza     |  | Online shopping mall offering Indian merchandise and travel-related services.                                                                                              
|Jobs           |  | Technology jobs and career portal.                                                                                                                                         
|Khel           |  | Site featuring sports-related news and information.                                                                                                                        
|Matrimonials   |  | Matrimonial matching site.                                                                                                                                                 
|Movies         |  | Indian movie channel featuring movie reviews, archives, interviews, chats
and local movie listings.                                                                        
|Music          |  | Music site featuring news, reviews and shopping.                                                                                                                           
|News           |  | Real-time news site with domestic and international news, weather and
entertainment.                                                                                       
|Real Estate    |  | Real estate channel.                                                                                                                                                       
|Samachar       |  | Indian news channel, which also offers a money transfer facility.                                                                                                          

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|            |  |                                                                                                                 
|----------- |  | ----------------------------------------------------------------------------------------------------------------
|Channel     |  | Description                                                                                                     
|            |  |                                                                                                                 
|Search      |  | Worldwide web search portal.                                                                                    
|Sifymall    |  | Online shopping channel.                                                                                        
|Travel      |  | Travel site offering online air travel, hotel and car hire services.                                            
|Walletwatch |  | Personal finance site featuring stock quotes, portfolio manager, links to
brokerage firms and editorial content.
|Weather     |  | Indian weather channel.                                                                                         
|Women       |  | Site featuring topics of particular interest to Indian women.                                                   
|Youth       |  | Indian youth channel.                                                                                           

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 2000, 2001 and 2002, our online portal and content offerings
division accounted for approximately 6.3%, 11.8% and 13.1% respectively, of our
total revenues.

Strategic Vendor Partnerships

We maintain a number of strategic relationships with key vendors of
Internet-related hardware, software and services. Some of these relationships
are exclusive to us in India, subject in some cases to minimum sales
thresholds. These relationships result in two significant benefits. First,
they provide us with the ability to offer valuable products and services to our
customers in India. In addition, these relationships help us market our
services by providing us with access to our partners customer bases. Our
network and related services are focused on meeting the needs of corporate
customers, particularly in manufacturing and service organizations, which have
a need to coordinate their activities with satellite operations such as
dealers, distributors, agents and suppliers. 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 650
customers. Our corporate customers for data/network services include
Accenture, Amway, Cable & Wireless, Crompton Greaves, Dabur, DCM Sriram
consolidated, Emerson, General Electric, Gillette India, Indian School of
Business, JM Morgan Stanley, Jet Airways, Lucent, Oracle, Ranbaxy, Reckitt
and Benkiser, Usha International and Whirlpool. No single customer accounted
for more than 10% of our revenues in fiscal 2002.

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 53 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.

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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,
2002, we had 43 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 have entered into arrangements with personal
computer manufacturers and vendors, including Compaq and Hewlett-Packard, to
have our Internet access software bundled with their computers.

Technology and Network Infrastructure

We operate a national Internet protocol private data network with 53
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
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 53 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, Jaipur, Jamnagar,
Jamshedpur, Jodhpur, Kanpur, Kakinada, Karnal, Kota, Ludhiana, Madurai,
Mangalore, Mysore, Nagpur, Nasik, Patna, Pondicherry, Raipur, Rajkot, Shimoga,
Siliguri, Surat, Thiruvananthapuram, Tiruvalla, Trichy, Varanasi, Vijayawada
and Vishakapatnam. Each point of presence contains data communications
equipment housed in a secure facility owned, leased or operated on an
infrastructure co-location basis by our company located near a Bharat Sanchar
Nigam Limited (BSNL) or Mahanagar Telephone Nigam Limited (MTNL) 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. This last mile solution helps in providing high uptime solution
to the corporate houses, thus controlling the overall quality of service to the
customer. 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 and these are interconnected using a high speed
interface. Our applications and network verification servers are manufactured
by Sun, Compaq, Dell and Hewlett-Packard.

The primary nodes on the backbone network are connected by up to 6 Mbps
high speed fiber optic lines that we lease from BSNL. The secondary nodes are
connected by 2 Mbps 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

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

Competition

General. We face competition in each of our markets and expect that this
competition will intensify as the markets in India for corporate network/data
services, Internet access services and online content develop and 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 Global Electronic Commerce Services, HCL Infinity and WiproNet Ltd.

Consumer Internet Access Services. Our principal competitor is VSNL, a
telecom provider that was controlled by the Government of India until recently.
As of December 31, 2001, approximately 442 companies had obtained Internet
service provider licenses in India. We expect other competitors to emerge in
the future. We also expect prices to continue to fall as more competitors
enter the market. Further, we believe that it is inevitable that the large,
foreign providers of Internet service provider services will eventually attempt
to enter the Indian market through local joint ventures or other means.

Since May 2000, we have offered unlimited Internet access to consumers for
a fixed price. A number of our competitors, including VSNL, Dishnet and
Mantra, also offer unlimited Internet access for a fixed price. In addition,
at least one of our competitors offers free Internet service. We expect the
market for consumer Internet access to 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
has remanded the matter back to the TRAI for denovoconsideration. This matter
is pending before the TRAI. Unless there is a change in government policy or
favorable resolution of this dispute, or until we are able to reduce our
bandwidth costs through other means, we will continue to face difficult market
conditions in the consumer access business.

In addition, we could face competition from companies that develop new and
innovative techniques to access the Internet. Although growing rapidly,
International Data Corporation estimates that India had an installed base of
only approximately 4.2 million personal computers in 2000. Technology
permitting a connection to the

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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 staffs;                             
|
| |  |  | greater name recognition and larger marketing budgets and resources;
|
| |  |  | larger subscriber bases; and                                        
|
| |  |  | substantially greater financial, technical and other resources.     

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

Intellectual Property

Our intellectual property rights are important to our business. We rely
on a combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property. We
require employees, independent contractors and, when possible, suppliers to
enter into confidentiality agreements upon the commencement of their
relationships with our company. These agreements generally provide that
confidential information developed or made known during the course of a
relationship with our company be kept confidential.

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

We could be subject to intellectual property infringement claims as the
number of our competitors grows and the content and functionality of our
website or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert managements attention from operating our company. If we
become liable to third parties for infringing their intellectual property
rights, we could be required to pay a substantial damage award and be forced to
develop non-infringing technology,

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obtain a license or cease selling the
applications that contain the infringing technology. We may be unable to
develop non-infringing technology or obtain a license on commercially
reasonable terms, or at all.

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

The trademark Satyam is owned by Satyam Computer Services, our parent
company, and licensed to our company for so long as Satyam Computer Services
continues to own at least 51% of our company. If its ownership in our company
is reduced below 51%, however, Satyam Computer Services may terminate our
license to use the Satyam trademark upon two years prior written notice. In
October 2001, Satyam Computer Services announced its plan to divest its
investment in our company, and our license to use the Satyam trademark may be
terminated, subject to the two-year notice period, in connection with any such
divestments. We have filed trademark applications for SatyamOnline,
Satyam.Net, satyamonline.com, sify.com and Satyam iway in India. These
applications are currently pending.

Our subsidiary IndiaWorld Communications is involved in pending litigation
relating to the IndiaWorld trademark in Federal Court in San Diego, California
with a third party located in the United States. IndiaWorld Communications
commenced the lawsuit alleging, among other things, that the third party
fraudulently registered and used the IndiaWorld trademark, and committed
copyright infringement and misappropriation of content of IndiaWorld
Communications website. The third party filed a counterclaim against us and
IndiaWorld Communications alleging, among other things, that the activities of
IndiaWorld Communications infringe a United States trademark for the term
Indiaworld and associated logos and trade dress purportedly owned by this
third party, and that the third party has an ownership interest in the
underlying assets of IndiaWorld Communications. On August 9, 2001, the Court
granted our motion to dismiss us from this case because the Court found that it
did not have personal jurisdiction over us. IndiaWorld Communications is still
involved in the case. We have been advised by the prior owners of IndiaWorld
Communications that no infringement or misappropriation has taken place. Our
contract with the prior owners of IndiaWorld Communications includes an
indemnity for past infringement or misappropriation. We and IndiaWorld
Communications have also been contacted by a party that alleges, among other
things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.

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.

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

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| |   |  | 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, 2002, we operated 53 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.

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.

In March 2002, the DOT issued a letter of intent permitting us to provide
international long distance services. 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.

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

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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Operating results

Significant
accounting policies used in the preparation of our financial
statements are summarized in Note 2 to our consolidated
financial statements appearing elsewhere in this annual report.
Please see Item 18. Financial Statements.

Revenues



| |   |  | For reporting purposes, we classify our revenues into three divisions:
| | - |  | ----------------------------------------------------------------------
|
| |  |  | corporate network/data services;                                      
|
| |  |  | consumer Internet access services; and                                
|
| |  |  | online portal and content offerings.                                  

Our corporate network/data services division derives its revenues from
dial-up and dedicated Internet access, electronic commerce, electronic data
interchange, e-mail and other messaging services, virtual private networks, web
hosting and web-based solutions. Revenues from corporate network/data services
are recognized over the period in which the related services are rendered.
Revenues from website hosting are recognized ratably over the period for which
the website is hosted. Revenues from the sale of communications hardware and
software that are required to provide our network-based services are recognized
upon delivery, or upon delivery and installation if the contract terms so
stipulate, of the related items. The value of installation services is based
on either vendor-specific objective evidence of fair value or residual amounts
using the residual method as defined in SOP 98-9. Revenues are shown exclusive
of sales tax and service tax and net of applicable discounts and allowances.

Our consumer Internet access services division derives its revenues
primarily from the SatyamOnlinedial-up business and the iway public
Internet access business. Dial-up Internet access is sold to customers either
for a specified number of hours or for unlimited usage within a specified
period of time. Customers purchase a CD-ROM that allows 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 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
Sify-owned cybercafé and franchisee cybercafé outlets. 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 certain initial services. This initial franchise fee revenue is
recognized at the time of commencement of operations by the franchisee, in
accordance with SFAS 45, Accounting for Franchise Fee Revenue.

Our online portal and content offerings division derives revenues from
third-party advertising and commissions from electronic commerce transactions
on our websites. Revenues from banner advertisements and sponsorship contracts
are recognized ratably over the period in which the advertisements are
displayed. Revenues from electronic commerce transactions are recognized when
the transactions are completed.

Expenses

Cost of revenues for the corporate network/data services division consists
of telecommunications costs necessary to provide services, customer support
costs and the cost of providing network operations.

Cost of revenues for the consumer Internet access services division
consists primarily of recurring telecommunications costs necessary to provide
service to subscribers. Telecommunications costs include the costs of
providing local telephone lines to our points of presence, the costs of using
third-party networks pursuant to service agreements and leased line costs.
Bandwidth costs are presently controlled to a significant extent by VSNL, a
telecom provider that competes with us in the Internet access business and
that, until recently, was controlled by the Government of India. We are
addressing these cost issues through alternative bandwidth sources and the
establishment of our own international access gateways. Private companies in
India were not previously permitted

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to operate their own international
gateways. Our initiatives are expected to result in bandwidth cost relief over
the next several quarters.

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

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

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

A total of 1.2 million equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. As of March 31, 2002, we had outstanding
an aggregate of 583,840 options (net of 353,280 options forfeited by employees
and 200 options exercised for equity shares) under our ASOP with a weighted
average exercise price equal to approximately Rs.1,515 per equity share. The
unamortized deferred compensation related to these grants amounted to Rs.75.0
million as of March 31, 2002.

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 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. 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
($84.2 million) to write-off all of the goodwill related to these
acquisitions. Impairment of Rs.15.0 million ($0.3 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 ($22.3 million) to reflect
an impairment of investment in affiliate related to our investment in CricInfo
Limited.

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 CricInfo Limited and Refco Sify Securities Private Limited.
These investments are accounted for under the equity method of accounting.

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

For fiscal 1998 through 2002, we incurred negative cash flow from
continuing operations of approximately Rs.74.0 million, Rs.172.1 million,
Rs.596.9 million, Rs.1,133.4 million and Rs.775.7 million ($15.9 million),
respectively. For fiscal 1998 through 2002, we incurred net losses of
approximately Rs.100.6 million, Rs.187.4 million, Rs.381.9 million, Rs.2,509.0
million and Rs.7,202.5 million ($147.5 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, 2002, we had an
accumulated deficit of approximately Rs.10,408.4 million ($213.2 million). For
additional information, see Item 3. Key
Information  Risk Factors.

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

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Results of Operations

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

Revenues. We recognized Rs.1,577.5 million ($32.3 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 Rs.352.0 million, or 28.7%. This increase was due to a Rs.189.4 million
increase in corporate services revenues, a Rs.46.3 million increase in Internet
access revenues, a Rs.62.7 million increase in online portal and content
offerings revenues and a Rs.53.6 million increase in revenue from subsidiaries.

Cost of Revenues. Cost of revenues for continuing operations was
Rs.1,187.7 million ($24.3 million) for the year ended March 31, 2002, compared
to Rs.1,159.3 million for the year ended March 31, 2001, representing an
increase of Rs.28.4 million. This increase was due to a Rs.9.6 million
increase in web development costs and a Rs.18.8 million increase in the cost of
hardware and software purchased for resale, leased line charges and other
costs.

Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.1,919.8 million ($39.3 million) for the year
ended March 31, 2002, compared to Rs.1,856.0 million for the year ended March
31, 2001, representing an increase of Rs.63.8 million, or 3.4%. This increase
was due to a Rs.265.5 million increase in personnel, administration and other
expenses, a Rs.70.0 million increase in provision for doubtful debts and a
Rs.147.3 million increase in depreciation, offset by a Rs.419 million decrease
in marketing promotion expenses.

Amortization of goodwill. Amortization of goodwill was Rs.293.0 million
($ 6.0 million) for the year ended March 31, 2002, compared to Rs.932.0 million
for the year ended March 31, 2001, representing a decrease of Rs.639.0 million.
Amortization of goodwill for the year ended March 31, 2002 consisted of
goodwill amortization of Indiaworld, Indiaplaza, Edumempire and Kheladi.com.
Please see Impact of Recently Issued Accounting Standards for a discussion
of proposed changes which may impact future periods.

Impairment of goodwill.Impairment of goodwill for the year ended March
31, 2002 was Rs.4,127.7 million ($84.5 million), compared to Rs. nil for the
year ended March 31, 2001. Impairment of goodwill for the year ended March
31, 2002 consisted of goodwill impairment of Indiaworld, Indiaplaza, Echem and
Eduempire.

Amortization of deferred compensation expense.Amortization of deferred
compensation expense was Rs.14.7 million ($0.3 million) for the year ended
March 31, 2002, compared to Rs.79.2 million for the year ended March 31, 2001,
representing a decrease of Rs.64.5 million, or 81.4%. The decrease in
amortization of deferred compensation expense was primarily due to forfeiture
of options.

Other income, net. Other income was Rs.32.7 million ($0.7 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%. The
decrease in other income was primarily due to a decrease in interest income.
Interest income was Rs.38.8 million for the year ended March 31, 2002, compared
to Rs.246.2 million for the year ended March 31, 2001, representing a decrease
of Rs.207.4 million, or 84.2%. This decrease was attributable to a reduction
in deposits held in banks. Interest expense was Rs.2.0 million for the year
ended March 31, 2002, compared to Rs.11.8 million for the year ended March 31,
2001, representing a decrease of Rs.9.7 million, or 82.2%. Finance charges
were Rs.6.5 million for the year ended March 31, 2002, compared to Rs.4.7
million for the year ended March 31, 2001, representing an increase of Rs.1.8
million. Income from other sources was Rs.2.4 million for the year ended
March 31, 2002, compared to Rs.12.6 million for the year ended March 31, 2001,
representing a decrease of Rs.10.2 million.

Equity in losses of affiliates.Equity in losses of affiliates was
Rs.1,268.1 ($26.0 million) for the year ended March 31, 2002, compared to
Rs.294.5 million for the year ended March 31, 2001, representing an increase of
Rs.973.6 million, or 330.6%. This increase is primarily due to impairment of
investment in affiliates of Rs.1,089.9 million and Rs.82.4 million of losses in
affiliates during the year ended March 31, 2002.

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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.

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.

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

Revenues. We recognized Rs.1225.5 million in revenues from continuing
operations for the year ended March 31, 2001, as compared to Rs.622.7 million
for the year ended March 31, 2000, representing an increase of Rs.602.8
million, or 96.8%. This increase was due to an increase in the corporate
services businesses which increased by Rs.368.8 million over the prior year.
The corporate services businesses successfully obtained a significant number of
new orders from prominent customers with operations throughout India. Internet
access revenues grew by Rs.110.6 million , which was less than proportionate to
the growth in number of subscribers due to continuing decreases in average
selling prices resulting from competition. Our online portal and content
offerings division accounted for Rs.144.4 million of revenues for the year
ended March 31, 2001, as compared to Rs.39.0 million for the year ended March
31, 2000. Revenues from subsidiaries amounted to Rs.18.0 million.

Cost of Revenues. Cost of revenues for continuing operations were
Rs.1,159.3 million for the year ended March 31, 2001, compared to Rs.281.4
million for the year ended March 31, 2000, representing an increase of Rs.877.9
million. This increase was due to an increase of Rs.563.0 million in leased
line charges due to the increased requirement for international bandwidth and
last mile connectivity, an increase of Rs.266.5 million in software and
hardware purchased for resale and an increase of Rs.48.4 million in web
development charges and customer technical support.

Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.1,856.0 million for the year ended March 31,
2001, compared to Rs.650.2 million for the year ended March 31, 2000,
representing an increase of Rs.1,205.8 million, or 185.5%. This increase was
due to an increase of Rs.402.1 million in marketing promotion expenses, an
increase of Rs.505.0 million in personnel, administration and other expenses,
an increase of Rs.269.0 million in depreciation and an increase of Rs.29.7
million in doubtful debts.

Amortization of goodwill. Amortization of goodwill for continuing
operations was Rs.932.0 million for the year ended March 31, 2001, compared to
Rs.116.0 million for the year ended March 31, 2000, representing an increase of
Rs.816.0 million. Amortization of goodwill for the year ended March 31, 2001
consisted of Rs.902.6 million in connection with our acquisition of IndiaWorld
Communications and Rs.29.4 million in connection with our acquisition of
Indiaplaza Please see Impact of Recently Issued Accounting Standards for a
discussion of proposed changes which may impact future periods.

Amortization of deferred compensation expense.Amortization of deferred
compensation expense was Rs.79.2 million for the year ended March 31, 2001,
compared to Rs.20.6 million for the year ended March 31, 2000, representing an
increase of Rs.58.6 million, or 284.5%. The increase in amortization of
deferred compensation expense was primarily due to additional option grants
during the fiscal year ended March 31, 2001.

Other income,net. Other income was Rs.242.4 million for the year ended
March 31, 2001, compared to Rs.71.9 million for the year ended March 31, 2000,
representing an increase of Rs.170.5 million, or 237.0%. The increase in other
income was primarily due to an increase in interest income accompanied by a
decrease in interest expense. Interest income was Rs.246.2 million for the
year ended March 31, 2001, compared to Rs.106.2 million for the year ended
March 31, 2000, representing an increase of Rs.140.0 million. This increase
was attributable to interest income from short-term deposits. Interest expense
was Rs.11.8 million for the year ended March 31, 2001, compared to Rs.30.5
million for the year ended March 31, 2000, representing a decrease of Rs.18.7
million. Other finance charges were Rs.4.7 million for the year ended March
31, 2001, compared to Rs.1.7 million for the year ended March 31, 2000
representing an increase of Rs.3.0 million. Income from other sources were
Rs.12.7 million

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for the year ended March 31, 2001, compared to an expense of
Rs.2.1 million for the year ended March 31, 2000, representing an increase of
Rs.14.8 million.

Equity in losses of affiliates.Equity in losses of affiliates was
Rs.294.5 million for the year ended March 31, 2001 consisting of losses of
Rs.9.9 million, Rs.16.3 million and Rs.67.0 million, respectively, in
connection with our investments in Refco Sify, Placements.com and CricInfo
Limited and amortization of goodwill pertaining to Cricinfo Limited of Rs.201.3
million. We had no equity in losses of affiliates for the year ended March 31,
2000.

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

Income/Loss from discontinued operations. Income from discontinued
operations for the year ended March 31, 2001 was Rs.172.5 million, compared to
a loss of Rs.16.9 million for the year ended March 31, 2000. This was
attributable to a Rs.513.3 million increase in revenue offset by a Rs.89.5
million increase in cost of revenues, a Rs.226.8 million increase in selling,
general and administrative expenses and a Rs.7.6 million increase in
amortization of deferred stock compensation expense.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through a
combination of equity sales and borrowings from institutions and banks. During
fiscal 1998, 1999 and 2000, we received Rs.38.5 million, Rs.307.5 million and
Rs.10,220.0 million, respectively, in net cash proceeds from the sale of equity
securities. We did not issue any equity shares in financing transactions in
fiscal 2001 or fiscal 2002.

On October 24, 2001, Satyam Computer Services released its financial
results for the September 30, 2001 fiscal quarter in a press release. That
press release included a section with comments on each significant subsidiary
of Satyam Computer Services. In that section, Satyam Computer Services
announced several initiatives involving Sify including:



| |  |  | the sale of our software services division to Satyam Computer Services;                                                                                                                                                                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the strategic decision by Satyam Computer Services to divest its investment in our company; and                                                                                                                                                                                                                            
|
| |  |  | the determination by Satyam Computer Services that, based on
our current financial status and the software services division
divestment transaction, Satyam Computer Services will not invest any
further funds in our company (none of which had been provided since
well prior to our initial public offering on Nasdaq).

Please see our Form 6-K dated October 24, 2001 for the full text of the
comments made by Satyam Computer Services and a related press release by us, as
well as the public filings of Satyam Computer Services, for additional
information.

We sold 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 parent
company, Satyam Computer Services, for approximately $7.2 million. This
transaction was approved by our stockholders at an extraordinary general
meeting held on February 28, 2002.

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

|                                                     |                           |     |                             |            |              |     |            |            |      |     |            |          |   |   |          |         |  
|---------------------------------------------------- | ------------------------- | --- | --------------------------- | ---------- | ------------ | --- | ---------- | ---------- | ---- | --- | ---------- | -------- | - | - | -------- | ------- | -
|                                                     |                           |     | Fiscal Year Ended March 31,
|                                                     |                           |     |                            
|                                                     |                           |     | 2000                        |            | 2001         |     | 2002       |            | 2002
|                                                     |                           |     |                             |            |              |     |            |            |     
|                                                     |                           |     | Indian rupees               |            | U.S. dollars
|                                                     |                           |     | (in thousands)             
|Net loss from continuing
operations                  |                           | Rs. | (365,004                    | )          |              | Rs. | (2,681,611 | )          |      | Rs. | (7,158,265 | )        |   | $ | (146,596 | )      
|Net decrease (increase) in working capital           |                           |     | (482,162                    | )          |              |     | (167,297   | )          |      |     | 27,232     |          |   |   | 558      |        
|Other adjustments for non-cash items                 |                           |     | 250,273                     |            |              |     | 1,715,473  |            |      |     | 6,355,353  |          |   |   | 130,153  |        
|Net cash provided by (used in) operating
activities  |                           |     |                             |            |              |     |            |            |      |     |            |          |   |   |          |        
|                                                     | - continuing operations   |     |                             | (596,893   | )            |     |            | (1,133,435 | )    |     |            | (775,680 | ) |   |          | (15,885 | )
|                                                     | - discontinued operations |     |                             | 69,645     |              |     |            | (174,927   | )    |     |            | 237,531  |   |   |          | 4,864   |  
|Net cash provided by (used in) investing
activities  |                           |     |                             |            |              |     |            |            |      |     |            |          |   |   |          |        
|                                                     | - continuing operations   |     |                             | (2,387,346 | )            |     |            | (4,311,687 | )    |     |            | (358,849 | ) |   |          | (7,349  | )
|                                                     | - discontinued operations |     |                             | (71,038    | )            |     |            | (26,804    | )    |     |            | (71,279  | ) |   |          | (1,460  | )
|Proceeds from sale of discontinued
operations        |                           |     |                            |            |              |     |           |            |      |     | 349,165    |          |   |   | 7151     |        
|Net cash provided by (used in) financing
activities  |                           |     | 10,167,709                  |            |              |     | (216,465   | )          |      |     | (9,097     | )        |   |   | (186     | )      
|Effect of exchange rate changes on cash              |                           |     |                            |            |              |     |           |            |      |     | (5,598     | )        |   |   | (115     | )      
|Net increase (decrease) in cash and cash
equivalents |                           |     | 7,182,077                   |            |              |     | (5,863,318 | )          |      |     | (633,807   | )        |   |   | (12,980  | )      

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

Cash balances held in foreign currency were Rs.3,365.6 million, Rs.1,344.3
million and Rs.252.8 million as of March 31, 2000, 2001 and 2002 respectively.
Cash balances held in Indian currency were Rs.3,942.0 million, Rs.100.0 million
and Rs.557.7 million as of March 31, 2000, 2001 and 2002 respectively.

Cash used in operating activities during fiscal 2002 was Rs.538.1 million
($11.0 million) attributable to cash used in continuing operations of Rs.775.7
million ($15.9 million), partially offset by cash provided by discontinued
operation of Rs.237.6 million ($4.9 million). Cash used in operating
activities of continuing operations for fiscal 2002 was attributable to a
Rs.7,158.3 million ($146.6 million) net loss from continuing operations, a
Rs.17.9 million ($0.3 million) minority interest, a Rs.15.9 million ($0.3
million) increase in account receivables, a Rs.84.4 million ($1.7 million)
decrease in advances from customers, a Rs.15.7 million ($0.3 million) decrease
in other liabilities, a Rs.14.5 million ($0.3 million) decrease in accrued
liabilities and a Rs.39.5 million ($0.8 million) decrease in deferred revenue,
offset by depreciation, amortization and write off of goodwill of Rs.4,978.0
million ($102.0 million), impairment of investment in affiliate of Rs.1,089.9
million ($22.3 million), equity in losses of affiliates of Rs.178.2 million
($3.7 million), loss on sale of plant and equipment of Rs.3.7 million ($0.1
million), provision for doubtful debts of Rs.101.5 million ($2.0 million),
inventory write down of Rs.22.0 million ($0.4 million), a Rs.50.5 million ($1.0
million) decrease in inventories, a Rs.26.1 million ($0.5 million) decrease in
due from officers and employees, a Rs.26.0 million ($0.5 million) decrease in
other assets and a Rs.94.6 million ($1.9 million) decrease in prepaid expenses.
Cash used in investing activities of continuing operations during fiscal 2002
was Rs.358.8 million ($7.3 million), principally as a result of the purchase
of routers, modems, ports, servers and other capital equipment in connection
with the expansion of our network of Rs.181.2 million ($3.8 million),
investment in affiliates of Rs.119.7 million ($2.4 million), payment of
license fees of Rs.59.2 million ($1.2 million)

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and purchase consideration for
acquisition of Rs.11.2 million ($0.2 million), offset by proceeds from sale of
plant and equipment of Rs.12.5 million ($0.3 million). Cash provided by
proceeds from sale of our software services division was Rs.349.2 million ($7.2
million). Cash used in investing activities of discontinued operations was
Rs.71.3 million ($1.5 million). Cash used in financing activities for fiscal
2002 was Rs.9.1 million ($0.2 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.4,311.7 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, 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.

Cash used in operating activities during fiscal 2000 was Rs.527.2 million
attributable to cash used in continuing operations of Rs.596.8 million, offset
by cash provided by discontinued operations of Rs.69.6 million. Cash used in
operating activities of continuing operations for fiscal 2000 was attributable
to a Rs.365.1 million net loss from continuing operations, a Rs.0.1 million
gain on sale of investments, Rs.1.7 million of deferred taxes, a Rs.1.8 million
minority interest, a Rs.178.9 million increase in accounts receivable, a Rs.5.8
million increase in due from officers and employees, a Rs.47.7 million decrease
in accrued liabilities, a Rs.9.7 million increase in inventories, a Rs.198.4
million increase in other assets and a Rs.181.2 million increase in prepaid
expenses, offset by depreciation, amortization and write off of goodwill of
Rs.252.2 million, provision for doubtful debts of Rs.1.7 million, a Rs.54.1
million increase in other liabilities, a Rs.78.0 million increase in deferred
revenue and a Rs.7.4 million increase in advance from customers. Cash used in
investing activities of continuing operations during fiscal 2000 was Rs.2,387.3
million, principally as a result of the purchase of routers, modems, ports,
servers and other capital equipment in connection with the expansion of our
network of Rs.643.0 million, purchase consideration for acquisition of
Rs.1,738.8 million and expenditure on investments of Rs.5.5 million. Cash used
in investing activities of discontinued operations was Rs.71.0 million. Cash
provided by financing activities for fiscal 2000 was Rs.10,167.7 million
attributable to proceeds from issuance of ADSs of Rs.10,220.0 million and
proceeds from issuance of long-term debt of Rs.107.5 million, offset by
repayment of principal of long term debt of Rs.157.8 million and repayment of
principal under capital lease obligations of Rs.2.0 million.

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

Our highest operational priority for the fiscal year ending March 31, 2002
was to reduce the negative cash flow incurred by our company during its rapid
growth stage. We intend to continue to focus on the accomplishment of
this
objective in fiscal 2003. Nonetheless, we expect to incur continued losses in
the near future. Based upon our present business and funding plans, including
the divestment of our software services division to Satyam Computer Services
for $7.2 million, we believe that our cash and cash equivalents of $16.6
million as of March 31, 2002 and, if necessary, other resources believed to be
available to us, are sufficient to meet our currently known

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requirements in the
foreseeable future. In light of the highly dynamic nature of our business,
however, we cannot assure you that our capital requirements and sources will
not change significantly in the future.

In order to provide further financial flexibility, we are actively
investigating opportunities to raise additional capital, which could be in the
form of debt, equity, or a combination. As noted elsewhere in this annual
report, our ability to raise funds through the sale of equity is limited by
foreign ownership restrictions imposed on us by Indian law and the terms of our
Internet service provider license. 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.

Commitments

As of March 31, 2002, we had spent approximately Rs.1,319.3 million to
develop and deploy our network infrastructure. As of March 31, 2002, our
future contractual obligations and commercial commitments were as follows:

|                              |  |       |     |                  |  |                        |     |             |  |               |     |  |  |  |     |  |  |  
|----------------------------- |  | ----- | --- | ---------------- |  | ---------------------- | --- | ----------- |  | ------------- | --- |  |  |  | --- |  |  | -
|                              |  |       |     |                  |  | Payments Due by Period |     | Rs. million
|                              |  |       |     |                  |  |                        |     |            
|Contractual                   |  |       |     |                  |  |                        |     |             |  | Rs. million   |     |  |  |  |     | 
|Obligations                   |  | Total |     | Less than 1 year |  | 1-3 years              |     | 4-5 years   |  | After 5 years
|                              |  |       |     |                  |  |                        |     |             |  |              
|Capital Lease Obligations     |  |       | 8.2 |                  |  |                        | 4.0 |             |  |               | 4.1 |  |  |  | 0.1 |  |  | 
|Total Contractual Obligations |  |       | 8.2 |                  |  |                        | 4.0 |             |  |               | 4.1 |  |  |  | 0.1 |  |  | 

|                             |  |           |       |                  |  |                                            |       |             |  |              |      |  |  |  |   |  |  |  |   | 
|---------------------------- |  | --------- | ----- | ---------------- |  | ------------------------------------------ | ----- | ----------- |  | ------------ | ---- |  |  |  | - |  |  |  | - | 
|                             |  |           |       |                  |  | Amount of Commitment Expiration Per Period
|                             |  | Total     |       |                 
|Other Commercial             |  | Amounts   |       |                  |  |                                            |       | Rs. million |  |              |      |  |  |  |   | 
|Commitments                  |  | Committed |       | Less than 1 year |  | 1-3 years                                  |       | 4-5 years   |  | Over 5 years
|                             |  |           |       |                  |  |                                            |       |             |  |             
|Standby Letters of Credit    |  |           | 16.9  |                  |  |                                            | 16.9  |             |  |              |     |  |  |  |  |  |  |  |  | 
|Guarantees                   |  |           | 37.6  |                  |  |                                            | 37.6  |             |  |              |     |  |  |  |  |  |  |  |  | 
|Other Commercial
Commitments |  |           | 74.9  |                  |  |                                            | 50.5  |             |  |              | 24.4 |  |  |  |  |  |  |  |  | 
|Total Commercial
Commitments |  |           | 129.4 |                  |  |                                            | 105.0 |             |  |              | 24.4 |  |  |  |  |  |  |  |  | 

Effects of Inflation

Inflation has not had a significant effect on our results of operations
and financial condition to date. However, India has experienced relatively
high rates of inflation. According to the Economist Intelligence Unit, the
rates of inflation in India for 1997 through 2001 were 7.2%, 13.2%, 5.0%, 4.3%
and 3.7% respectively. Under our Internet service provider license, we are
given the right to establish the prices we charge to our subscribers, as
determined by market forces. However, under the conditions of our license, the
TRAI of India may review and fix the prices we charge our subscribers at any
time. If the TRAI were to fix prices for the Internet service provider

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services we provide, we might not be able to increase the prices we charge our
subscribers to mitigate the impact of inflation, which could have a material
adverse effect on our business, results of operations and financial condition.

Exchange Rates

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

|              |  |      |       |     |  |     |       | 
|------------- |  | ---- | ----- | --- |  | --- | ----- | 
|Month         |  | High |       | Low
|              |  |      |       |    
|December 2001 |  | Rs.  | 48.29 |     |  | Rs. | 47.80 | 
|January 2002  |  |      | 48.56 |     |  |     | 48.27 | 
|February 2002 |  |      | 48.90 |     |  |     | 48.55 | 
|March 2002    |  |      | 48.83 |     |  |     | 48.71 | 
|April 2002    |  |      | 49.01 |     |  |     | 48.83 | 
|May 2002      |  |      | 49.07 |     |  |     | 48.97 | 

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
|                            |  |            |       |         |  |      |       |    
|1998                        |  | Rs.        | 39.50 |         |  | Rs.  | 37.18 |     |  | Rs. | 40.40 |  |  | Rs. | 35.33 | 
|1999                        |  |            | 42.44 |         |  |      | 42.08 |     |  |     | 43.68 |  |  |     | 39.25 | 
|2000                        |  |            | 43.63 |         |  |      | 43.34 |     |  |     | 43.82 |  |  |     | 42.20 | 
|2001                        |  |            | 46.85 |         |  |      | 45.70 |     |  |     | 46.91 |  |  |     | 43.56 | 
|2002                        |  |            | 48.83 |         |  |      | 47.71 |     |  |     | 48.91 |  |  |     | 46.58 | 

Foreign Exchange Gain /(Loss)

Our foreign exchange gain/(loss) was Rs.(0.01) million, Rs.0.6 million,
Rs.5.4 million, Rs.162.0 million and Rs.44.5 million for fiscal 1998, 1999,
2000, 2001, and 2002 respectively.

Impact of Recently Issued Accounting Standards

Recent Accounting Pronouncements

SFAS 141, 142

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, Business Combinationsand SFAS 142, Goodwill and Other Intangible Assets.
SFAS 141 requires that all business combinations be accounted for under the
purchase method. Use of the pooling-of-interest method is no longer permitted
and is effective for business combinations initiated after June 30, 2001. SFAS
142 requires that goodwill no longer be amortized to earnings, but instead be
reviewed for impairment and is effective for financial years beginning after
December 15, 2001 with earlier application permitted for entities with fiscal
years beginning after March 31, 2001.

At March 31, 2002, our goodwill and other intangible assets amounted to
Rs.27.98 million and Rs.175.32 million respectively. If either present
accounting principles or the new standards discussed above require that
impairment in value be recognized, we would be required to write down the
carrying value of the asset to its estimated fair value with an offsetting
charge to the statement of operations.

SFAS 143

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which it

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is incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, an entity either settles the obligation for
its recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002.

SFAS 144

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that
long-lived assets be measured at the lower of carrying amount or fair value
less cost to sell, whether reported in continuing operations or in discontinued
operations. Under SFAS No. 144, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet been incurred. The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001.

However, SFAS 143 is not applicable and SFAS 144 is not expected to have
any significant impact on our company.

SFAS 145

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This Statement rescinds FASB Statement No. 4, Reporting Gains and
Losses from Extinguishment of Debt,and an amendment of that Statement, FASB
Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements.This Statement also rescinds FASB Statement No. 44, Accounting
for Intangible Assets of Motor Carriers.This Statement amends FASB Statement
No. 13, Accounting for Leases,to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions.

We are currently evaluating the impact of SFAS 145 on our financial statements.

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Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Board of Directors and Senior Management Executives

The following table sets forth the name and, as of May 1, 2002, age and
position of each director and executive officer of our company :

|                         |  |     |    |          |  |                                      
|------------------------ |  | --- | -- | -------- |  | -------------------------------------
|Name                     |  | Age |    | Position
|                         |  |     |    |         
|R. Ramaraj               |  |     | 52 |          |  | Chief Executive Officer and Director 
|George Zacharias         |  |     | 43 |          |  | Chief Operating Officer              
|T.R. Santhanakrishnan    |  |     | 44 |          |  | Chief Financial Officer              
|Shrikant Joshi           |  |     | 45 |          |  | Vice President  Access Media        
|V V Kannan               |  |     | 43 |          |  | Vice President  Interactive Services
|K. Dasaratharaman        |  |     | 42 |          |  | Chief Executive Officer, Safescrypt  
|Rahul Swarup             |  |     | 42 |          |  | President, Enterprise Solutions      
|J. Avinash               |  |     | 40 |          |  | Vice President, Internet Data Centers
|Rustom Irani             |  |     | 39 |          |  | Chief Technology Officer             
|George A. Ajit           |  |     | 42 |          |  | Chief Human Resources Officer        
|B. Ramalinga Raju (1)(2) |  |     | 46 |          |  | Chairman of the Board of Directors   
|T.H. Chowdary            |  |     | 70 |          |  | Director                             
|Donald Peck (1)(2)       |  |     | 49 |          |  | Director                             
|C. Srinivasa Raju        |  |     | 40 |          |  | Director                             
|S. Srinivasan (1)(2)     |  |     | 67 |          |  | 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).

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

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

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 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

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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 2000, Mr. Swarup served as
Chief Technology Officer of our company. From 1989 to 1999, he was Vice
President of Citicorp Global Technology Infrastructure. Mr. Swarup received a
B.E. in Electrical Engineering from IIT Kanpur.

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

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

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

B. Ramalinga Raju is a co-founder of our company and has served as a
Director since 1995. Mr. B. Ramalinga Raju has served as the Chairman of the
Board of Directors since January 1996. Mr. B. Ramalinga Raju was the Chief
Executive Officer of Samrat Spinners Limited, a spinning mill, until 1995. Mr.
B. Ramalinga Raju is the Chairman of Satyam Computer Services and is a Director
of Vision Compass, Inc. Mr. B. Ramalinga Raju received an M.B.A. in Business
Management from Ohio State University.

T.H. Chowdary has served as a Director of our company since February 1996.
Mr. Chowdary retired as the Chief Executive Officer of VSNL.

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

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

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

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Board Composition

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



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

Mr. B. Ramalinga Raju is a permanent director not liable to retire by
rotation. Mr. Peck is a nominee of South Asian Regional Fund. The terms of
Messrs. Ramaraj and Chowdary will expire at our Annual General meeting in 2002.
The terms of Messrs. C. Srinivasa Raju and Srinivasan will expire at our
Annual General Meeting to be held in 2003. B. Ramalinga Raju and C. Srinivasa
Raju are brothers-in-law. There are no other family relationships between any
of the directors or executive officers of our company.

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



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

SARFs current nominee to our Board of Directors is Mr. Peck. Satyam Computer
Services current nominees to our Board of Directors are Messrs. Ramaraj, B.
Ramalinga Raju, T.H. Chowdary and C. Srinivasa Raju.

Board Committees

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

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

Director 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 2002, 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

49



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The following table sets forth all compensation paid by us during the
fiscal year ended March 31, 2002 to our executive officers.

|                           |  |               |      |       |  |           |      |          |      |                        |      |  |      |  |      | 
|-------------------------- |  | ------------- | ---- | ----- |  | --------- | ---- | -------- | ---- | ---------------------- | ---- |  | ---- |  | ---- | 
|Summary Compensation Table |  | (Rs. Million)
|                          
|                           |  |               |      |       |  |           |      |          |      | All Other Compensation
|                           |  |               |      |       |  |           |      |          |      |                       
|Name                       |  | Salary        |      | Bonus |  | Exec Empl |      | Def Comp
|                           |  |               |      |       |  |           |      |         
|R. Ramaraj                 |  |               | 2.29 |       |  | Nil       |      | Nil      |      |                        | 4.75 | 
|George Zacharias           |  |               | 5.17 |       |  |           | 0.83 |          |      |                        | 1.95 |  |      |  | 7.52 | 
|T.R. Santhanakrishnan      |  |               | 3.78 |       |  |           | 0.68 |          |      |                        | 1.95 |  |      |  | 3.68 | 
|Shrikant Joshi             |  |               | 1.00 |       |  | Nil       |      | Nil      |      | Nil                   
|V V Kannnan                |  |               | 2.36 |       |  |           | 0.50 |          |      |                        | 0.68 |  |      |  | 0.44 | 
|Rahul Swarup               |  |               | 3.80 |       |  |           | 0.84 |          |      |                        | 0.98 |  |      |  | 1.89 | 
|J. Avinash                 |  |               | 2.11 |       |  |           | 0.56 |          |      | Nil                    |      |  | 2.06 | 
|Rustom Irani               |  |               | 2.79 |       |  |           | 0.60 |          |      |                        | 0.57 |  |      |  | 3.51 | 
|George A. Ajit             |  |               | 2.51 |       |  |           | 0.59 |          |      |                        | 0.78 |  |      |  | 1.71 | 
|S Srinivasan               |  | Nil           |      | Nil   |  | Nil       |      |          | 1.51 |                       

The following table sets forth all stock options granted by us during the
fiscal year ended March 31, 2002 to our executive officers.

|                      |  |                   |        |                |  |                 |       |  |  |  |            | 
|--------------------- |  | ----------------- | ------ | -------------- |  | --------------- | ----- |  |  |  | ---------- | 
|Option Grant Table   
|                     
|                      |  | Equity Shares     |        |                |  |                 |       |  |  | 
|                      |  | Underlying Option |        |                |  |                 |       |  |  | 
|Name                  |  | Grant             |        | Exercise Price |  | Expiration Date
|                      |  |                   |        |                |  |                
|R. Ramaraj            |  |                   | 26,040 |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|George Zacharias      |  |                   | 20,040 |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|T.R. Santhanakrishnan |  |                   | 20,040 |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|Rahul Swarup          |  |                   | 12,840 |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|J. Avinash            |  |                   | 6,840  |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|Rustom Irani          |  |                   | 9,240  |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|George A. Ajit        |  |                   | 9,240  |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 
|S Srinivasan          |  |                   | 6,000  |                |  | Rs.             | 169.3 |  |  |  | 20-12-2004 | 

No executive officer exercised stock options during the fiscal year ended March
31, 2002.

In February 2000, we entered into Executive Employment Agreements with
each of Messrs. Ramaraj, Zacharias, Santhanakrishnan, Swarup, Irani and Ajit.
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. For additional information, please see the
Executive Employment Agreements filed as exhibits to this annual report.

Stock Ownership

The following table sets forth information with respect to the beneficial
ownership of our equity shares as of March 31, 2002 by each director and our
Chief Executive Officer. The table gives effect to equity shares issuable
within 60 days of March 31, 2002 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.

50



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|                  |  |                    |         |         |  |  |     | 
|----------------- |  | ------------------ | ------- | ------- |  |  | --- | 
|                  |  | Equity Shares     
|                  |  | Beneficially Owned
|                  |  |                   
|Beneficial Owner  |  | Number             |         | Percent
|                  |  |                    |         |        
|R. Ramaraj (1)    |  |                    | 370,000 |         |  |  | 1.6 | 
|B. Ramalinga Raju |  |                    | 100     |         |  |  | *   | 
|T. H. Chowdary    |  |                    |        |         |  |  |    | 
|Donald Peck       |  |                    |        |         |  |  |    | 
|C. Srinivasa Raju |  |                    |        |         |  |  |    | 
|S. Srinivasan     |  |                    |        |         |  |  |    | 



---

|*   |  | Less than 1% of total.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(1) |  | Excludes options to purchase (a) 20,000 equity shares with an exercise
price of $76.95 per share granted on June 1, 2000, (b) 2,500 equity shares
with an exercise price of $135.45 per share granted on January 26, 2000,
(c) 7,500 equity shares with an exercise price of Rs.350 per share granted
on September 20, 1999 and (d) 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.

As of March 31, 2002, we had 23,202,176 outstanding equity shares, of
which 12,840,573 are held in India. As of March 31, 2002, there were
approximately 45,000 record holders of ADRs evidencing 23,733,612 ADSs
(representing 5,933,403 equity shares).

Associate Stock Option Plan

We have an Associates Stock Option Plan, or ASOP, which provides for the
grant of options to employees of our company. The ASOP was approved by our
Board of Directors and our shareholders in March 1999. A total of 1.2 million
equity shares are reserved for issuance under our Associate Stock Option Plan.
As of March 31, 2002, we had outstanding an aggregate of 583,840 options (net
of 353,280 options forfeited by employees and 200 options exercised for equity
shares) under our ASOP with a weighted average exercise price equal to
approximately Rs.1,515 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, 2002, we had 887 employees. We anticipate maintaining the
current size of our employee base over the next year. We had 1,185 employees,
622 employees and 340 employees, respectively, as of March 31, 2001, March 31,
2000 and March 31, 1999. 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 to our parent company. Of our current employees, 101
are administrative, 215 form our sales and marketing staffs and 571 are
dedicated to

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technology, technical support and customer care. None of our
employees are represented by a union. We believe that our relationship with
our employees is good.




Item 7. MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS

Principal Stockholders

The following table sets forth information with respect to the beneficial
ownership of our equity shares as of March 31, 2002 by each person or group of
affiliated persons who is known by us to beneficially own 5% or more of our
equity shares. The table gives effect to equity shares issuable within 60 days
of March 31, 2002 upon the exercise of all options and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to equity shares. Unless otherwise
indicated, the persons named in the table have sole voting and sole investment
control with respect to all equity shares beneficially owned. Mr.B.Ramalinga
Raju, the Chairman of our Board of Directors, is the Chairman of the Board of
Directors and a stockholder of Satyam Computer Services. Messrs. Satyam
Ramnauth and Pierre Guy Noel, directors of International Venture Capital
Management, which manages South Asia Regional Fund, exercise voting control and
dispositive power over the equity shares owned by South Asia Regional Fund.
Mr. Peck, a director of our company, is affiliated with South Asia Regional
Fund.

|                                 |                          |        |                    |         |  |  |      |   | 
|-------------------------------- | ------------------------ | ------ | ------------------ | ------- |  |  | ---- | - | 
|                                 |                          |        | Equity Shares     
|                                 |                          |        | Beneficially Owned
|                                 |                          |        |                   
|Beneficial Owner                 |                          | Number |                    | Percent
|                                 |                          |        |                    |        
|Satyam Computer Services Limited |                          |        | 12,182,600         |         |  |  | 52.5 | %
|                                 | Mayfair Centre, S P Road |        |                    |         |  |  |      |   | 
|                                 | Secunderabad 500 003     |        |                    |         |  |  |      |   | 
|                                 | India                    |        |                    |         |  |  |      |   | 
|South Asia Regional Fund         |                          |        | 3,600,000          |         |  |  | 15.5 |  
|                                 | Les Cascades Building    |        |                    |         |  |  |      |   | 
|                                 | Edith Cavell Street      |        |                    |         |  |  |      |   | 
|                                 | Port Louis               |        |                    |         |  |  |      |   | 
|                                 | Mauritius                |        |                    |         |  |  |      |   | 

Control of Registrant

Satyam Computer Services beneficially owned approximately 52.5% of our
equity shares as of March 31, 2002. As a result, it is 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. However, approval of South Asia Regional Fund is required for
certain specified corporate transactions, even if the transaction otherwise
requires only a simple majority of our stockholders, in accordance with the
Share Subscription and Shareholders Agreement, dated February 5, 1999. 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;
|
| |  |  | commencing any new line of business; and                                                          
|
| |  |  | commencing a liquidation.                                                                         

Circumstances may arise in which the interests of Satyam Computer Services
or a subsequent purchaser of the shares owned by it could conflict with the
interest of our other stockholders or holders of our ADSs. Such a

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control
stockholder could prevent or delay a change in control of our company even if a
transaction of that sort would be beneficial to our other stockholders,
including the holders of our ADSs.

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

Related Party Transactions

Satyam Computer Services is our parent company. In fiscal 2002, we sold
an aggregate of Rs.178.9 million in services to Satyam Computer Services and
its affiliates. Also in fiscal 2002, we purchased an aggregate of Rs.23.8
million in software and services from Satyam Computer Services and its
affiliates. We believe that the foregoing transactions with Satyam Computer
Services and its affiliates were on terms no less favorable to our company than
could have been obtained from independent third parties.

In October 2001, we announced our proposal to divest our software services
business, which principally involves business to business e-commerce and
website development services including our strategic relationships with Open
Market and Sterling Commerce, to our parent company, Satyam Computer Services.
On February 28, 2002 our stockholders approved the divesture of our software
services business to Satyam Computer Services. We received $7.2 million of cash
proceeds in connection with this transaction. Our software services business
represented approximately 18% of our revenues for fiscal 2002. The objective
of the divestment, is to permit Satyam Computer Services to concentrate on its
core business of software services and to permit us to concentrate in Internet
services.

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 provide for an interest
rate of 8.0% per annum, are convertible into CricInfo shares by us at any time
and redeemable by CricInfo on October 5, 2004. On March 13, 2002, we entered
into an arrangement to subscribe to a further issue of convertible notes for an
additional amount of up to GBP 0.5 million by CricInfo that will be subject to
the same terms as the original issue, thereby increasing our total subscription
to GBP 1.5 million.




Item 8. FINANCIAL INFORMATION

Financial Statements

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

Legal Proceedings

On November 5, 2001, a securities class action lawsuit was filed in the
United States District Court for the Southern District of New York on behalf of
all persons who acquired our ADSs between October 20, 1999 and December 6,
2000. Satyam Infoway, certain of the executive officers of Satyam Infoway, and
certain underwriters involved in our initial public offering of ADSs are named
as defendants in the complaint. This complaint alleges that certain of the
underwriters of our initial public offering violated the federal securities
laws by failing to disclose that they had solicited and received undisclosed
commissions from, and entered into undisclosed arrangements with, certain
investors who purchased our ADSs in our initial public offering, and had
entered into undisclosed arrangements with certain investors whereby the
underwriters allocated shares in our initial public offering to those investors
in exchange for their agreement to purchase our ADSs in the after-market at
pre-determined prices. The complaint also alleges that the defendants violated
the federal securities laws by issuing a registration statement in connection
with the our initial public offering that contained material misstatements
and/or omissions because it did not disclose that these allegedly undisclosed
arrangements had occurred. The complaint seeks damages on behalf of all those
who purchased or otherwise acquired our ADSs during the period covered by the
complaint. The deadline

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for defendants to respond to the complaint has not yet
expired. We believe 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 is involved in pending litigation
relating to the IndiaWorld trademark in Federal Court in San Diego, California
with a third party located in the United States. IndiaWorld Communications
commenced the lawsuit alleging, among other things, that the third party
fraudulently registered and used the IndiaWorld trademark, and committed
copyright infringement and misappropriation of content of IndiaWorld
Communications website. The third party filed a counterclaim against us and
IndiaWorld Communications alleging, among other things, that the activities of
IndiaWorld Communications infringe a United States trademark for the term
Indiaworld and associated logos and trade dress purportedly owned by this
third party, and that the third party has an ownership interest in the
underlying assets of IndiaWorld Communications. On August 9, 2001, the Court
granted our motion to dismiss us from this case because the Court found that it
did not have personal jurisdiction over us. IndiaWorld Communications is still
involved in the case. We have been advised by the prior owners of IndiaWorld
Communications that no infringement or misappropriation has taken place. Our
contract with the prior owners of IndiaWorld Communications includes an
indemnity for past infringement or misappropriation. We and IndiaWorld
Communications have also been contacted by a party that alleges, among other
things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as
to the possible outcome, including whether or not our indemnity will be
effective in protecting us, and also could divert management time and attention
away from our business. An adverse outcome that is not indemnified could be
material.

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 has remanded
the matter back to the TRAI for denovoconsideration. This matter is pending
before the TRAI. The resolution of this dispute could have a material impact
on our business.

We are party to additional legal actions arising in the ordinary course of
business. Based on information available to us as of March 31, 2002 we believe
that we have adequate legal defenses or insurance coverage for these actions
and that the ultimate outcome of these actions will not have a material adverse
effect on our company.

Dividends

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

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




Item 9. THE OFFER AND LISTING

Trading Markets

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

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The number of outstanding equity shares in our company as of March 31,
2002 was 23,202,176. As of March 31, 2002, there were approximately 45,000
record holders of ADRs evidencing 23,733,612 ADSs (representing 5,933,403
equity shares).

Price History

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

Prior Fiscal Years

|                                            |  |             |        |     |  |   |      | 
|------------------------------------------- |  | ----------- | ------ | --- |  | - | ---- | 
|                                            |  | Price Range
|                                            |  |            
|Fiscal Year ended                           |  | High        |        | Low
|                                            |  |             |        |    
|March 31, 2000 (beginning October 19, 1999) |  | $           | 113.00 |     |  | $ | 7.50 | 
|March 31, 2001                              |  |             | 64.00  |     |  |   | 2.94 | 
|March 31, 2002                              |  |             | 4.40   |     |  |   | 0.72 | 

Quarters of Prior Fiscal Years

|                                 |  |   |       |  |  |   |       | 
|-------------------------------- |  | - | ----- |  |  | - | ----- | 
|Fiscal Year ended March 31, 2001 |  |   |       |  |  |   |       | 
|                                 |  |   |       |  |  |   |       | 
|First Quarter                    |  | $ | 64.00 |  |  | $ | 15.00 | 
|Second Quarter                   |  |   | 23.25 |  |  |   | 11.75 | 
|Third Quarter                    |  |   | 13.63 |  |  |   | 3.38  | 
|Fourth Quarter                   |  |   | 8.25  |  |  |   | 2.94  | 

|                                 |  |   |      |  |  |   |      | 
|-------------------------------- |  | - | ---- |  |  | - | ---- | 
|Fiscal Year ended March 31, 2002 |  |   |      |  |  |   |      | 
|                                 |  |   |      |  |  |   |      | 
|First Quarter                    |  | $ | 4.40 |  |  | $ | 2.50 | 
|Second Quarter                   |  |   | 3.55 |  |  |   | 0.72 | 
|Third Quarter                    |  |   | 3.19 |  |  |   | 0.85 | 
|Fourth Quarter                   |  |   | 2.79 |  |  |   | 1.46 | 

Months of Prior Fiscal Year

|              |  |             |      |     |  |  |      | 
|------------- |  | ----------- | ---- | --- |  |  | ---- | 
|              |  | Price Range
|              |  |            
|Month         |  | High        |      | Low
|              |  |             |      |    
|December 2001 |  |             | 2.74 |     |  |  | 1.45 | 
|January 2002  |  |             | 2.79 |     |  |  | 1.46 | 
|February 2002 |  |             | 2.20 |     |  |  | 1.57 | 
|March 2002    |  |             | 1.87 |     |  |  | 1.55 | 
|April 2002    |  |             | 1.61 |     |  |  | 1.03 | 
|May 2002      |  |             | 1.25 |     |  |  | 0.90 | 

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

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Item 10. ADDITIONAL INFORMATION

Memorandum and Articles of Association

Our authorized share capital is 35,000,000 shares, par value Rs.10 per
share. As of March 31, 2002, 23,202,176 equity shares were issued and
outstanding.

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

A total of 1.2 million equity shares are reserved for issuance under our
Associate Stock Option Plan, or ASOP. As of March 31, 2002, we had outstanding
an aggregate of 583,840 options (net of 353,280 options forfeited by employees
and 200 options exercised for equity shares) under our ASOP with a weighted
average exercise price equal to approximately Rs.1,515 per equity share. The
unamortized deferred compensation related to these grants amounted to Rs.75.0
million as of March 31, 2002.

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. Sterling Commerce has similar rights pursuant to the stockholders
agreement in connection with the sale of our equity shares to Sterling
Commerce. The Shareholders Agreement with SARF provides that upon the
occurrence of specified events, SARF may require Satyam Computer Services to
repurchase our equity shares owned by SARF. The Shareholders 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.

Dividends

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

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



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

For additional information, please see Item 8. Financial
Information-Dividends. 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 four million ADSs) in connection with
acquisitions, 268,500 of which we issued in connection with our acquisition of
IndiaWorld Communications, 551,180 of which we issued in connection with our
acquisition of a 25% stake in CricInfo Limited and 113,798 of which we issued
in connection with our acquisition of Indiaplaza.com. At our 2001 Annual
General Meeting, our stockholders approved a special resolution permitting us
to issue up to four million additional equity shares (equivalent to 16 million
ADSs) in connection with acquisitions or capital raising transactions, and ADS
holders are deemed to have waived their preemptive rights with respect to these
shares and our Board of Directors is able to 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.

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Annual General Meetings of Shareholders

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

The annual general meeting of shareholders must be held at our registered
office or at such other place within the city in which the registered office is
located. Meetings other than the annual general meeting may be held at any
other place if so determined by the Board. Our registered office is located at
Mayfair Trade Center, IInd Floor, 1-8-303/36, S.P. Road, Secunderabad 500 003,
India.

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

2002 Annual General Meeting

Our Annual General Meeting for the 2002 fiscal year was held on June 17,
2002 at 12:30 p.m. (local time) at the registered office of our company, II
Floor, Mayfair Centre, 1-8-303/36, S.P. Road, Secunderabad, 500 003, India The
matters brought in front of our stockholders at this meeting are described in a
Notice of Sixth Annual General Meeting were mailed to stockholders on or about
May 18, 2002 and were also filed with the Commission on a Form 6-K. Please see
that filing for a description of the matters to be considered by our
stockholders at the meeting. All of such matters were approved by our
stockholders at the meeting.

Voting Rights

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

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

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

Register of Shareholders; Record Dates; Transfer of Shares

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

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

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Following the introduction of the Depositories Act, 1996, and the repeal
of Section 22A of the Securities Contracts (Regulation) Act, 1956, which
enabled companies to refuse to register transfers of shares in some
circumstances, the equity shares of a public company are freely transferable,
subject only to the provisions of Section 111A of the Companies Act. Since we
are a public company, the provisions of Section 111A will apply to us. Our
Articles currently contain provisions which give our directors discretion to
refuse to register a transfer of shares in some circumstances. According to
our Articles, our directors are required to exercise this right in the best
interests of our company. While our directors are not required to provide a
reason for any such refusal in writing, they must give notice of the refusal to
the transferee within two month after receipt of the application for
registration of transfer by our company. In accordance with the provisions of
Section 111A(2) of the Companies Act, our directors may exercise this
discretion if they have sufficient cause to do so. If our directors refuse to
register a transfer of shares, the shareholder wishing to transfer his, her or
its shares may file a civil suit or an appeal with the Company Law Board, or
CLB. Pursuant to Section 111A(3), if a transfer of shares contravenes any of
the provisions of the Securities and Exchange Board of India Act, 1992 or the
regulations issued thereunder or the Sick Industrial Companies (Special
Provisions) Act, 1985 or any other Indian laws, the CLB may, on application
made by the company, a depositary incorporated in India, an investor, the
Securities and Exchange Board of India or other parties, direct the
rectification of the register of records. The CLB may, in its discretion,
issue an interim order suspending the voting rights attached to the relevant
shares before making or completing its investigation into the alleged
contravention. Notwithstanding such investigation, the rights of a shareholder
to transfer the shares will not be restricted.

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

Audit and Annual Report

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

Company Acquisition of Equity Shares

Under the Companies Act, approval of at least 75% 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. However, the Buy-back Regulations
apply only to public companies listed on a recognized Indian stock exchange and
will therefore not apply our company.

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Liquidation Rights

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

Material Contracts

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

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

Government of India policies permit a maximum level of foreign equity
investment of 74% in Internet service providers. Our license was reissued
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.

In March 2002, the DOT issued a letter of intent permitting us to provide
international long distance services. Our license also requires us to ensure
that objectionable, obscene and unauthorized content, or any other content,
messages or communications infringing copyrights, intellectual property rights
and domestic and international cyberlaws or which is inconsistent with the laws
of India, is not carried on our network. Although under the terms of our
license we are free to fix the prices we charge our subscribers, the TRAI may
set prices for the provision of Internet access services generally. We are
permitted to use encryption to safeguard information transmitted over our
network. However, if we use a higher level of encryption than that specified
by the Government of India, our license requires us to deposit a set of keys
with the Government of India. License fees are waived through October 31,
2003, and a nominal license fee of Rs.1 per annum is payable from November 1,
2003. Our obligations under the license are secured by a performance bank
guarantee in the amount of Rs.29.2 million ($0.6 million) as of March 31, 2002.

Sale of software services division. In October 2001, we announced our
proposal to divest our software services business, which principally involves
business to business e-commerce and website development services including our
strategic relationships with Open Market and Sterling Commerce, to our parent
company, Satyam Computer Services. On February 28, 2002 our stockholders
approved the divesture of the software services business to Satyam Computer
Services. We received $7.2 million of cash proceeds in connection with this
transaction. Our software services business represented approximately 18% of
our revenues for fiscal 2002. The objective of the divestment is to permit
Satyam Computer Services to concentrate on its core business of software
services and to permit us to concentrate in Internet services.

Convertible notes by CricInfo. 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 provide for an interest rate of 8.0% per annum, are convertible into
CricInfo shares by us at any time and redeemable by CricInfo on October 5,
2004. On March 13, 2002, we entered into an arrangement to subscribe to a
further issue of

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convertible notes for an additional amount of up to GBP 0.5
million by CricInfo that will be subject to the same terms as the original
issue, thereby increasing our subscription to GBP 1.5 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 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

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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;                                          
|
| |  |  | 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.

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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 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.

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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 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

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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.

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. Until April 1, 2002, however, the company paying the dividend
is subject to a dividend distribution tax of 10.2%, including the applicable
surcharge of 2.0%, on the total amount it distributes, declares or pays as a
dividend. This dividend distribution tax is in addition to the normal
corporate tax of 36.8%, including the presently applicable surcharge of 5.0%
for fiscal 2003.

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.

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

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

Under Section 115AC, taxable gain realized in respect of equity shares
held for more than 12 months, or long-term gain, is subject to tax at the rate
of 10%. Taxable gain realized in respect of equity shares held for 12 months
or less, or short-term gain, is subject to tax at variable rates with a maximum
rate of 48%. In addition, non-corporate foreign assessees are subject to a
surcharge of 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.

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

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

Income Tax Matters

As of March 31, 2002, we had a net tax loss carryforward of approximately
Rs.3,163.5 million ($64.8 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 2002, the rate of corporate income tax was 35% with
a surcharge of 2% thereon, resulting in an effective tax rate of 35.7%. For
fiscal 2003, while the basic rate will remain at 35%, the surcharge has been
increased to 5%, thereby resulting in an effective tax rate of 36.8%. 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 are no longer be taxed on declared dividends.

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

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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.

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.

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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

Our foreign exchange gain/(loss) was Rs.(0.01) million, Rs.0.6 million,
Rs.5.4 million, Rs.162 million and Rs. 44.5 million for fiscal 1998, 1999,
2000, 2001, and 2002 respectively

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.




Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.




PART II




Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.




Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

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




Item 15. RESERVED




Item 16. RESERVED




PART III




Item 17. FINANCIAL STATEMENTS

Not applicable.

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Item 18. FINANCIAL STATEMENTS

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders

Satyam Infoway Limited

We have audited the accompanying consolidated balance sheets of Satyam Infoway
Limited and subsidiaries as of March 31, 2002 and 2001, 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, 2002. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Satyam Infoway
Limited and subsidiaries as of March 31, 2002 and 2001, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements as of and for the year ended
March 31, 2002 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 2 of the notes to
the consolidated financial statements.

KPMG
Chennai, India
April 17, 2002





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SATYAM INFOWAY LIMITED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data and as otherwise stated)

|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | --- | --------------- | --------- | ---- | --- | ----------- | ------- |  | - | -------- | ------ | 
|                                                                                                                                                                                  |                                 |     | As at March 31,
|                                                                                                                                                                                  |                                 |     |                
|                                                                                                                                                                                  |                                 |     | 2001            |           | 2002 |     | 2002       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |            
|ASSETS                                                                                                                                                                            |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Current assets:                                                                                                                                                                   |                                 |     |                 |           |      |     |             |         |  |   |          |       
|                                                                                                                                                                                  | Cash and cash equivalents       |     | Rs.             | 1,444,307 |      |     | Rs.         | 810,500 |  |   | $        | 16,598 | 
|                                                                                                                                                                                  | Accounts receivable             |     |                 | 826,273   |      |     |             | 419,961 |  |   |          | 8,600  | 
|                                                                                                                                                                                  | Due from officers and employees |     |                 | 11,487    |      |     |             | 38,675  |  |   |          | 792    | 
|                                                                                                                                                                                  | Inventories                     |     |                 | 110,092   |      |     |             | 35,426  |  |   |          | 725    | 
|                                                                                                                                                                                  | Prepaid expenses                |     |                 | 209,335   |      |     |             | 114,755 |  |   |          | 2,350  | 
|                                                                                                                                                                                  | Other current assets            |     |                 | 161,653   |      |     |             | 85,028  |  |   |          | 1,741  | 
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total current assets                                                                                                                                                              |                                 |     | 2,763,147       |           |      |     | 1,504,345   |         |  |   | 30,806   |       
|Property, plant and equipment net                                                                                                                                                |                                 |     | 2,436,120       |           |      |     | 1,932,046   |         |  |   | 39,567   |       
|Goodwill and other intangible assets                                                                                                                                              |                                 |     | 4,478,753       |           |      |     | 203,306     |         |  |   | 4,164    |       
|Investments in affiliates                                                                                                                                                         |                                 |     | 1,506,244       |           |      |     | 308,205     |         |  |   | 6,312    |       
|Investments                                                                                                                                                                       |                                 |     | 9,834           |           |      |     | 9,477       |         |  |   | 194      |       
|Other assets                                                                                                                                                                      |                                 |     | 307,786         |           |      |     | 188,895     |         |  |   | 3,868    |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total assets                                                                                                                                                                      |                                 | Rs. | 11,501,884      |           |      | Rs. | 4,146,274   |         |  | $ | 84,911   |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Current liabilities:                                                                                                                                                              |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Current installments of capital lease obligations                                                                                                                                 |                                 |     | 4,807           |           |      |     | 3,218       |         |  |   | 66       |       
|Accrued Liabilities                                                                                                                                                               |                                 |     | 505,869         |           |      |     | 499,390     |         |  |   | 10,227   |       
|Deferred revenue                                                                                                                                                                  |                                 |     | 189,117         |           |      |     | 144,519     |         |  |   | 2,960    |       
|Advances from customers                                                                                                                                                           |                                 |     | 99,708          |           |      |     | 15,320      |         |  |   | 314      |       
|Other current liabilities                                                                                                                                                         |                                 |     | 50,678          |           |      |     | 21,278      |         |  |   | 435      |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total current liabilities                                                                                                                                                         |                                 |     | 850,179         |           |      |     | 683,725     |         |  |   | 14,002   |       
|Non-current liabilities:                                                                                                                                                          |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Capital lease obligations, excluding current installments                                                                                                                         |                                 |     | 8,028           |           |      |     | 3,922       |         |  |   | 80       |       
|Deferred Tax Liability                                                                                                                                                            |                                 |     |                 |           |      |     | 13,388      |         |  |   | 274      |       
|Other liabilities                                                                                                                                                                 |                                 |     | 26,164          |           |      |     | 39,877      |         |  |   | 816      |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total liabilities                                                                                                                                                                 |                                 |     | 884,371         |           |      |     | 740,912     |         |  |   | 15,172   |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Minority interest                                                                                                                                                                 |                                 |     | 29,177          |           |      |     | 11,249      |         |  |   | 230      |       
|Stockholders equity                                                                                                                                                              |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Common stock, Rs 10 par value; 35,000,000 equity shares
authorized; Issued and outstanding: 23,183,103 and 23,202,176
shares as of March 31, 2001 and March 31, 2002 respectively |                                 |     | 231,831         |           |      |     | 232,022     |         |  |   | 4,752    |       
|Additional paid-in capital                                                                                                                                                        |                                 |     | 13,669,570      |           |      |     | 13,649,324  |         |  |   | 279,527  |       
|Deferred compensation  employee stock offer plan                                                                                                                                 |                                 |     | (101,105        | )         |      |     | (74,961     | )       |  |   | (1,535   | )     
|Accumulated deficit                                                                                                                                                               |                                 |     | (3,205,864      | )         |      |     | (10,408,381 | )       |  |   | (213,155 | )     
|Accumulated other comprehensive income                                                                                                                                            |                                 |     | (6,096          | )         |      |     | (3,891      | )       |  |   | (80      | )     
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total stockholders equity                                                                                                                                                        |                                 |     | 10,588,336      |           |      |     | 3,394,113   |         |  |   | 69,509   |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       
|Total liabilities and stockholders equity                                                                                                                                        |                                 | Rs. | 11,501,884      |           |      | Rs. | 4,146,274   |         |  | $ | 84,911   |       
|                                                                                                                                                                                  |                                 |     |                 |           |      |     |             |         |  |   |          |       

See accompanying notes to financial statements



71



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##### Table of Contents



SATYAM INFOWAY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data and as otherwise stated)

|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |        |  
|----------------------------------------------------------------------- | -------------------------------------------------------------- | --- | -------------------- | ------- | ---- | --- | ---------- | ------- | ---- | --- | ---------- | -------- | - | - | ---------- | ------ | -
|                                                                        |                                                                |     | Year ended March 31,
|                                                                        |                                                                |     |                     
|                                                                        |                                                                |     | 2000                 |         | 2001 |     | 2002       |         | 2002
|                                                                        |                                                                |     |                      |         |      |     |            |         |     
|Revenues                                                                |                                                                | Rs. | 622,725              |         |      | Rs. | 1,225,481  |         |      | Rs. | 1,577,488  |          |   | $ | 32,306     |       
|Cost of revenues (excluding depreciation and amortization)              |                                                                |     | (281,431             | )       |      |     | (1,159,333 | )       |      |     | (1,187,684 | )        |   |   | (24,323    | )     
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Gross profit (excluding depreciation and amortization)                  |                                                                |     | 341,294              |         |      |     | 66,148     |         |      |     | 389,804    |          |   |   | 7,983      |       
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Operating expenses:                                                     |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Selling, general and administrative expenses                            |                                                                |     | 650,222              |         |      |     | 1,855,962  |         |      |     | 1,919,823  |          |   |   | 39,316     |       
|Acquisition expenses                                                    |                                                                |     |                     |         |      |     |           |         |      |     | 20,000     |          |   |   | 410        |       
|Amortisation of goodwill                                                |                                                                |     | 115,992              |         |      |     | 931,967    |         |      |     | 292,964    |          |   |   | 6,000      |       
|Impairment of goodwill                                                  |                                                                |     |                     |         |      |     |           |         |      |     | 4,127,680  |          |   |   | 84,532     |       
|Amortisation of deferred stock compensation expense                     |                                                                |     | 20,627               |         |      |     | 79,224     |         |      |     | 14,673     |          |   |   | 301        |       
|Foreign exchange gain                                                   |                                                                |     | (5,414               | )       |      |     | (162,136   | )       |      |     | (44,520    | )        |   |   | (912       | )     
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Total operating expenses                                                |                                                                |     | 781,427              |         |      |     | 2,705,017  |         |      |     | 6,330,620  |          |   |   | 129,647    |       
|Operating loss                                                          |                                                                |     | (440,133             | )       |      |     | (2,638,869 | )       |      |     | (5,940,816 | )        |   |   | (121,664   | )     
|Other income, net                                                       |                                                                |     | 71,852               |         |      |     | 242,368    |         |      |     | 32,711     |          |   |   | 670        |       
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Loss before taxes, equity in losses of affiliates and minority interest |                                                                |     | (368,281             | )       |      |     | (2,396,501 | )       |      |     | (5,908,105 | )        |   |   | (120,994   | )     
|Equity in losses of affiliates                                          |                                                                |     |                     |         |      |     | (294,540   | )       |      |     | (1,268,088 | )        |   |   | (25,969    | )     
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Losses before income taxes                                              |                                                                |     | (368,281             | )       |      |     | (2,691,041 | )       |      |     | (7,176,193 | )        |   |   | (146,963   | )     
|Taxes                                                                   |                                                                |     | 1,478                |         |      |     | (1,707     | )       |      |     |           |          |   |   |           |       
|Minority interest                                                       |                                                                |     | 1,799                |         |      |     | 11,137     |         |      |     | 17,928     |          |   |   | 367        |       
|Loss from continuing operations                                         |                                                                | Rs. | (365,004             | )       |      | Rs. | (2,681,611 | )       |      | Rs. | (7,158,265 | )        |   | $ | (146,596   | )     
|Discontinued operations                                                 |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|                                                                        | Income / (loss) from discontinued operations                   |     | Rs.                  | (16,893 | )    |     | Rs.        | 172,581 |      |     | Rs.        | (125,373 | ) |   | $          | (2,568 | )
|                                                                        | Profit on sale of discontinued operations, net of direct costs |     |                      |        |      |     |            |        |      |     | Rs.        | 81,121   |   |   | $          | 1,661  |  
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Net loss                                                                |                                                                | Rs. | (381,897             | )       |      | Rs. | (2,509,030 | )       |      | Rs. | (7,202,517 | )        |   | $ | (147,503   | )     
|                                                                        |                                                                |     |                      |         |      |     |            |         |      |     |            |          |   |   |            |       
|Net loss per share  continuing operations                              |                                                                | Rs. | (19.68               | )       |      | Rs. | (117.34    | )       |      | Rs. | (308.59    | )        |   | $ | (6.32      | )     
|Net loss per share  discontinued operations                            |                                                                |     | (0.91                | )       |      |     | 7.55       |         |      |     | (1.91      | )        |   | $ | (0.04      | )     
|Net loss per share                                                      |                                                                | Rs. | (20.59               | )       |      | Rs. | (109.79    | )       |      | Rs. | (310.50    | )        |   | $ | (6.36      | )     
|Weighted equity shares used in computing loss per equity share          |                                                                |     | 18,545,399           |         |      |     | 22,852,600 |         |      |     | 23,196,428 |          |   |   | 23,196,428 |       

See accompanying notes to financial statements

72



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##### Table of Contents



SATYAM INFOWAY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data and as stated otherwise)

|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |         |        |  
|----------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------- | ---------- | -------------------- | -------- | ---- | ---------- | ---------- | -------- | ---- | ---------- | --------- | ------- | - | -------- | ------- | ------ | -
|                                                                                          |                                                       |                                 |            | Year ended March 31,
|                                                                                          |                                                       |                                 |            |                     
|                                                                                          |                                                       |                                 |            | 2000                 |          | 2001 |            | 2002       |          | 2002
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |     
|Net loss from continuing operations                                                       |                                                       | Rs.                             | (365,004   | )                    |          | Rs.  | (2,681,611 | )          |          | Rs.  | (7,158,265 | )         |         | $ | (146,596 | )      
|Adjustments to reconcile net loss to net cash provided by/(used in)
operating activities: |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|                                                                                          | Depreciation, amortization and impairment of goodwill |                                 |            | 252,169              |          |      |            | 1,400,097  |          |      |            | 4,977,956 |         |   |          | 101,945 |       
|                                                                                          | Equity in losses of affiliates                        |                                 |            |                     |          |      |            | 294,540    |          |      |            | 1,268,088 |         |   |          | 25,969  |       
|                                                                                          | Gain on sale of investments                           |                                 |            | (99                  | )        |      |            | (28        | )        |      |            |          |         |   |          |        |       
|                                                                                          | Loss on sale of plant and equipment                   |                                 |            |                     |          |      |            | 661        |          |      |            | 3,652     |         |   |          | 75      |       
|                                                                                          | Provision for doubtful receivables                    |                                 |            | 1,695                |          |      |            | 31,460     |          |      |            | 101,500   |         |   |          | 2,079   |       
|                                                                                          | Deferred taxes                                        |                                 |            | (1,693               | )        |      |            | (120       | )        |      |            |          |         |   |          |        |       
|                                                                                          | Inventory write down                                  |                                 |            |                     |          |      |            |           |          |      |            | 22,085    |         |   |          | 452     |       
|                                                                                          | Minority interest                                     |                                 |            | (1,799               | )        |      |            | (11,137    | )        |      |            | (17,928   | )       |   |          | (367    | )     
|                                                                                          | Changes in assets and liabilities:                    |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |         |       
|                                                                                          |                                                       | Accounts receivable             |            |                      | (178,941 | )    |            |            | (304,155 | )    |            |           | (15,997 | ) |          |         | (328   | )
|                                                                                          |                                                       | Due from officers and employees |            |                      | (5,814   | )    |            |            | (83,466  | )    |            |           | 26,152  |   |          |         | 536    |  
|                                                                                          |                                                       | Inventories                     |            |                      | (9,639   | )    |            |            | (91,670  | )    |            |           | 50,557  |   |          |         | 1,035  |  
|                                                                                          |                                                       | Prepaid expenses                |            |                      | (181,208 | )    |            |            | 42,203   |      |            |           | 94,580  |   |          |         | 1,937  |  
|                                                                                          |                                                       | Other assets                    |            |                      | (198,392 | )    |            |            | (157,278 | )    |            |           | 25,974  |   |          |         | 532    |  
|                                                                                          |                                                       | Accrued Liabilities             |            |                      | (47,686  | )    |            |            | 320,490  |      |            |           | (14,477 | ) |          |         | (296   | )
|                                                                                          |                                                       | Deferred revenue                |            |                      | 77,967   |      |            |            | 33,298   |      |            |           | (39,484 | ) |          |         | (809   | )
|                                                                                          |                                                       | Advances from customers         |            |                      | 7,403    |      |            |            | 79,181   |      |            |           | (84,388 | ) |          |         | (1,728 | )
|                                                                                          |                                                       | Other liabilities               |            |                      | 54,148   |      |            |            | (5,900   | )    |            |           | (15,685 | ) |          |         | (321   | )
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in continuing operations                                                    |                                                       | Rs.                             | (596,893   | )                    |          | Rs.  | (1,133,435 | )          |          | Rs.  | (775,680   | )         |         | $ | (15,885  | )      
|Net cash provided by / (used in) discontinued operations                                  |                                                       | Rs.                             | 69,645     |                      |          | Rs.  | (174,927   | )          |          | Rs.  | 237,531    |           |         | $ | 4,864    |        
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in operating activities                                                     |                                                       | Rs.                             | (527,248   | )                    |          | Rs.  | (1,308,362 | )          |          | Rs.  | (538,149   | )         |         | $ | (11,021  | )      
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Cash flows from investing activities:                                                     |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|                                                                                          | Expenditure on plant and equipment                    |                                 |            | (643,097             | )        |      |            | (1,888,020 | )        |      |            | (181,217  | )       |   |          | (3,711  | )     
|                                                                                          | Proceeds from sale of plant and equipment             |                                 |            |                     |          |      |            | 934        |          |      |            | 12,559    |         |   |          | 257     |       
|                                                                                          | Expenditure on investment in affiliates               |                                 |            |                     |          |      |            | (163,627   | )        |      |            | (119,741  | )       |   |          | (2,452  | )     
|                                                                                          | Purchase consideration for acquisition, net of cash   |                                 |            | (1,738,825           | )        |      |            | (2,233,121 | )        |      |            | (11,210   | )       |   |          | (230    | )     
|                                                                                          | Expenditure on license fee                            |                                 |            |                     |          |      |            | (28,000    | )        |      |            | (59,240   | )       |   |          | (1,213  | )     
|                                                                                          | Proceeds from sale of investments                     |                                 |            |                     |          |      |            | 147        |          |      |            |          |         |   |          |        |       
|                                                                                          | Expenditure on investments                            |                                 |            | (5,424               | )        |      |            |           |          |      |            |          |         |   |          |        |       
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in continuing operations                                                    |                                                       | Rs.                             | (2,387,346 | )                    |          | Rs.  | (4,311,687 | )          |          | Rs.  | (358,849   | )         |         | $ | (7,349   | )      
|Net cash used in discontinued operations                                                  |                                                       | Rs.                             | (71,038    | )                    |          | Rs.  | (26,804    | )          |          | Rs.  | (71,279    | )         |         | $ | (1,460   | )      
|Proceeds from sale of discontinued operations                                             |                                                       | Rs.                             | 0          |                      |          | Rs.  | 0          |            |          | Rs.  | 349,165    |           |         | $ | 7,151    |        
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in investing activities                                                     |                                                       | Rs.                             | (2,458,384 | )                    |          | Rs.  | (4,338,491 | )          |          | Rs.  | (80,963    | )         |         | $ | (1,658   | )      
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Cash flows from financing activities:                                                     |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|                                                                                          | Principal payments of long-term debt                  |                                 |            | (157,833             | )        |      |            | (208,167   | )        |      |            |          |         |   |          |        |       
|                                                                                          | Proceeds from issuance of long-term debt              |                                 |            | 107,551              |          |      |            |           |          |      |            |          |         |   |          |        |       
|                                                                                          | Principal payments of short term loans                |                                 |            |                     |          |      |            | (1,800     | )        |      |            |          |         |   |          |        |       
|                                                                                          | Principal payments under capital lease obligations    |                                 |            | (2,050               | )        |      |            | (6,568     | )        |      |            | (9,097    | )       |   |          | (186    | )     
|                                                                                          | Net proceeds from issuance of common stock            |                                 |            | 10,220,041           |          |      |            | 70         |          |      |            |          |         |   |          |        |       
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in continuing operations                                                    |                                                       | Rs.                             | 10,167,709 |                      |          | Rs.  | (216,465   | )          |          | Rs.  | (9,097     | )         |         | $ | (186     | )      
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Net cash used in financing activities                                                     |                                                       | Rs.                             | 10,167,709 |                      |          | Rs.  | (216,465   | )          |          | Rs.  | (9,097     | )         |         | $ | (186     | )      
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Effect of exchange rate changes on cash                                                   |                                                       |                                 |           |                      |          |      |           |            |          |      | (5,598     | )         |         |   | (115     | )      
|Net increase / (decrease) in cash and cash equivalents                                    |                                                       |                                 | 7,182,077  |                      |          |      | (5,863,318 | )          |          |      | (633,807   | )         |         |   | (12,980  | )      
|Cash and cash equivalents at the beginning of the year                                    |                                                       |                                 | 125,548    |                      |          |      | 7,307,625  |            |          |      | 1,444,307  |           |         |   | 29,578   |        
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Cash and cash equivalents at the end of the year                                          |                                                       | Rs.                             | 7,307,625  |                      |          | Rs.  | 1,444,307  |            |          | Rs.  | 810,500    |           |         | $ | 16,598   |        
|                                                                                          |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Supplementary Information                                                                 |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|                                                                                          | Cash paid towards interest                            |                                 |            | 26,356               |          |      |            | 11,695     |          |      |            | 2,838     |         |   |          | 58      |       
|                                                                                          | Cash paid towards taxes                               |                                 |            | 425                  |          |      |            | 935        |          |      |            | 44,958    |         |   |          | 921     |       
|Supplemental schedule of non cash financing and investing activities                      |                                                       |                                 |            |                      |          |      |            |            |          |      |            |           |         |   |          |        
|Capital leases                                                                            |                                                       |                                 | 7,704      |                      |          |      | 12,994     |            |          |      | 9,440      |           |         |   | 193      |        
|Additional common stock issued for acquisition of business                                |                                                       |                                 |           |                      |          |      | 3,131,364  |            |          |      | 49,268     |           |         |   | 1,009    |        
|Property plant and equipment purchased on credit during the year                          |                                                       |                                 | 170,587    |                      |          |      | 93,660     |            |          |      | 80,148     |           |         |   | 1,641    |        

See accompanying notes to financial statements

73



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##### Table of Contents



SATYAM INFOWAY LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(in thousands, except share data and as stated otherwise)



|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|------------------------------------------------------------------ | -------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | ------------ |  | ---------- | ------- | ------------- |  | ------ | ---------- | - |  | --- | ---------- | ---------- | ------ | -
|                                                                   |                            |                                                                                                                                                                                   |            | Common Stock |  | Additional |         |               |  |       
|                                                                   |                            |                                                                                                                                                                                   |            |              |  | Paid In    |         | Comprehensive
|                                                                   |                            |                                                                                                                                                                                   |            | Shares       |  | Par Value  |         | Capital       |  | income
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |       
|Balance as of March 31, 1999                                       |                            |                                                                                                                                                                                   | 15,750,000 |              |  | Rs.        | 157,500 |               |  | Rs.    | 226,636    |   |  |     |            |           
|Common stock issued to the parent Company                          |                            |                                                                                                                                                                                   | 150,000    |              |  |            | 1,500   |               |  |        | 76,620     |   |  |     |            |           
|Common stock issued during the period                              |                            |                                                                                                                                                                                   | 6,349,425  |              |  |            | 63,494  |               |  |        | 10,078,427 |   |  |     |            |           
|Compensation related to stock option grants                        |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | 139,270    |   |  |     |            |           
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|                                                                   | Net loss                   |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     | Rs.        | (381,897   | )     
|                                                                   | Other comprehensive income |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |       
|                                                                   |                            | Unrealized gain on investments                                                                                                                                                    |            |              |  |            |         |               |  |        |            |   |  |     |            |            | 1,451  |  
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |        |               |  |        |           |   |  |     | (380,446   | )         
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Balance as of March 31, 2000                                       |                            |                                                                                                                                                                                   | 22,249,425 |              |  |            | 222,494 |               |  |        | 10,520,953 |   |  |     |            |           
|Issue of common stock for acquisitions and investments             |                            |                                                                                                                                                                                   | 933,678    |              |  |            | 9,337   |               |  |        | 3,122,097  |   |  |     |            |           
|Compensation related to stock option grants                        |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | 67,676     |   |  |     |            |           
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | 86,796     |   |  |     |            |           
|Capital transaction of investee                                    |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | (41,156    | ) |  |     |            |           
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|                                                                   | Net loss                   |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            | (2,509,030 | )     
|                                                                   | Other comprehensive income |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |       
|                                                                   |                            | Common stock, Rs 10 par value; 35,000,000 equity shares
authorized; Issued and outstanding: 23,183,103 and 23,202,176
shares as of March 31, 2001 and March 31, 2002 respectively |            |              |  |            |         |               |  |        |            |   |  |     |            |            | (7,547 | )
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |        |               |  |        |           |   |  |     | (2,516,577 | )         
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Balance as of March 31, 2001                                       |                            |                                                                                                                                                                                   | 23,183,103 |              |  |            | 231,831 |               |  |        | 13,669,570 |   |  |     |            |           
|Issue of common stock for acquisitions and investments             |                            |                                                                                                                                                                                   | 19,073     |              |  |            | 191     |               |  |        | 49,077     |   |  |     |            |           
|Net reversal of compensation related to employee stock option plan |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | (11,471    | ) |  |     |            |           
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|Capital transaction of investee                                    |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        | (57,852    | ) |  |     |            |           
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|Net loss                                                           |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     | (7,202,517 | )         
|Other comprehensive income                                         |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |           
|Unrealized loss on investments, net                                |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     | (357       | )         
|Foreign exchange translation adjustment                            |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     | 2,562      |           
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Comprehensive income                                               |                            |                                                                                                                                                                                   |            |              |  |            |        |               |  |        |           |   |  | Rs. | (7,200,312 | )         
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Balance as of March 31, 2002                                       |                            |                                                                                                                                                                                   | 23,202,176 |              |  | Rs.        | 232,022 |               |  | Rs.    | 13,649,324 |   |  |     |            |           
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  
|Balance as of March 31, 2002                                       |                            |                                                                                                                                                                                   | 23,202,176 |              |  | $          | 4,752   |               |  | $      | 279,527    |   |  | $   | (147,457   | )         
|                                                                   |                            |                                                                                                                                                                                   |            |              |  |            |         |               |  |        |            |   |  |     |            |            |        |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|------------------------------------------------------------------ | -------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------------- | ------ | -------------- | -------- | ----------- |  | ------------- | ----------- | ---------- | - | --- | ---------- | ---------- | ------ | -
|                                                                   |                            |                                                                                                                                                                                  |        | Accumulated   |        |                |          |             |  |               |             |            |   |     |            |           
|                                                                   |                            |                                                                                                                                                                                  |        | Other         |        | Compensation - |          |             |  |               |             | Total     
|                                                                   |                            |                                                                                                                                                                                  |        | comprehensive |        | Employee Stock |          | Accumulated |  | Stockholders'
|                                                                   |                            |                                                                                                                                                                                  |        | income        |        | offer plan     |          | deficit     |  | Equity       
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |              
|Balance as of March 31, 1999                                       |                            |                                                                                                                                                                                  |        |               |        | Rs.            | (1,582   | )           |  | Rs.           | (314,937    | )          |   | Rs. | 67,617     |           
|Common stock issued to the parent Company                          |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | 78,120     |           
|Common stock issued during the period                              |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | 10,141,921 |           
|Compensation related to stock option grants                        |                            |                                                                                                                                                                                  |        |               |        |                | (139,270 | )           |  |               |             |            |   |     |           |           
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                  |        |               |        |                | 20,627   |             |  |               |             |            |   |     | 20,627     |           
|Comprehensive income                                               |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |           
|                                                                   | Net loss                   |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             | (381,897   | ) |     |            | (381,897   | )     
|                                                                   | Other comprehensive income |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |       
|                                                                   |                            | Unrealized gain on investments                                                                                                                                                   |        | Rs.           | 1,451  |                |          |             |  |               |             |            |   |     |            |            | 1,451  |  
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Comprehensive income                                               |                            |                                                                                                                                                                                  |       |               |        |                |         |             |  |               |            |            |   |     |           |           
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Balance as of March 31, 2000                                       |                            |                                                                                                                                                                                  | 1,451  |               |        |                | (120,225 | )           |  |               | (696,834    | )          |   |     | 9,927,839  |           
|Issue of common stock for acquisitions and investments             |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | 3,131,434  |           
|Compensation related to stock option grants                        |                            |                                                                                                                                                                                  |        |               |        |                | (67,676  | )           |  |               |             |            |   |     |           |           
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                  |        |               |        |                | 86,796   |             |  |               |             |            |   |     |            |           
|Capital transaction of investee                                    |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | (41,156    | )         
|Comprehensive income                                               |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |           
|                                                                   | Net loss                   |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             | (2,509,030 | ) |     |            | (2,509,030 | )     
|                                                                   | Other comprehensive income |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |       
|                                                                   |                            | Common stock, Rs 10 par value; 35,000,000 equity shares
authorized; Issued and outstanding: 23,183,103 and 23,202,176
shares as of March 31,2001 and March 31, 2002 respectively |        |               | (7,547 | )              |          |             |  |               |             |            |   |     |            |            | (7,547 | )
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Comprehensive income                                               |                            |                                                                                                                                                                                  |       |               |        |                |         |             |  |               |            |            |   |     |           |           
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Balance as of March 31, 2001                                       |                            |                                                                                                                                                                                  | (6,096 | )             |        |                | (101,105 | )           |  |               | (3,205,864  | )          |   |     | 10,588,336 |           
|Issue of common stock for acquisitions and investments             |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | 49,268     |           
|Net reversal of compensation related to employee stock option plan |                            |                                                                                                                                                                                  |        |               |        |                | (31,327  | )           |  |               |             |            |   |     | (42,798    | )         
|Amortization of compensation related to stock option grants        |                            |                                                                                                                                                                                  |        |               |        |                | 57,471   |             |  |               |             |            |   |     | 57,471     |           
|Capital transaction of investee                                    |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     | (57,852    | )         
|Comprehensive income                                               |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |           
|                                                                   | Net loss                   |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             | (7,202,517 | ) |     |            | (7,202,517 | )     
|                                                                   | Other comprehensive income |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |       
|                                                                   |                            | Unrealized loss on investments, net                                                                                                                                              |        |               | (357   | )              |          |             |  |               |             |            |   |     |            |            | (357   | )
|                                                                   |                            | Foreign exchange translation adjustment                                                                                                                                          |        |               | 2,562  |                |          |             |  |               |             |            |   |     |            |            | 2,562  |  
|Comprehensive income                                               |                            |                                                                                                                                                                                  |       |               |        |                |         |             |  |               |            |            |   |     |           |           
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Balance as of March 31, 2002                                       |                            | Rs.                                                                                                                                                                              | (3,891 | )             |        | Rs.            | (74,961  | )           |  | Rs.           | (10,408,381 | )          |   | Rs. | 3,394,113  |           
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  
|Balance as of March 31, 2002                                       |                            | $                                                                                                                                                                                | (80    | )             |        | $              | (1,535   | )           |  | $             | (213,155    | )          |   | $   | 69,509     |           
|                                                                   |                            |                                                                                                                                                                                  |        |               |        |                |          |             |  |               |             |            |   |     |            |            |        |  

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

---

1 Description of business

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

Satyam headquartered in Chennai, India is a majority owned subsidiary of
Satyam Computer Services Limited (Satyam Computer Services). Satyam
Computer Services holds 52.5% of the Company as of March 31, 2002 and is a
publicly listed company in the United States and in India.

2 Summary of significant accounting policies

Basis of preparation of financials statements

The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (US GAAP) in
Indian Rupees (Rs.), the national currency of India. Solely for the
convenience of the reader, the financial statements as of and for the year
ended March 31, 2002 have been translated into United States dollars at the
noon buying rate in New York City on March 29, 2002, the last business day
of March 2002, for cable transfers in Indian rupees, as certified for
customs purposes by the Federal Reserve Bank of New York of US$1 = Rs.48.83.
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, 2002 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 or 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. The excess of
cost of the stock of these investees over the Companys share of their net
assets at the acquisition date is being amortized on a straight-line basis
over 5 years.

Cash, cash equivalents and short-term investments

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

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

---

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;  
|- |  | -----------------------------------------------------------------------------------------------------------------------------
| 
| |  | Consumer Internet access services, which provides dial-up Internet
access and public Internet access through cyber cafés; and
| 
| |  | Online portal services and content offerings.                                                                                

These segments recognize revenues on the following basis:

Corporate network/data services

Revenues from corporate network / data services are recognized over the
period in which the related services are rendered. Revenues from website
hosting are recognized ratably over the period for which the site is hosted.
Revenues from the sale of communication hardware and software that are
required to provide the Companys network based services are recognized,
upon delivery of the related items or upon delivery and installation, if
contract terms so stipulate. The value of installation services is based on
either vendor-specific objective evidence of fair value or residual amounts
using the residual method as defined in SOP 98-9. Revenues are shown
exclusive of sales tax and service tax and net of applicable discounts and
allowances.

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 Sify
owned cyber café and franchisee cyber café outlets. Sify enters into an
arrangement with franchisees that provides for the payment of an initial
franchisee fee in consideration for establishing the franchisee relationship
and providing certain initial services. This initial franchise fee revenue
is recognized at the time of commencement of operations by the franchisee,
in accordance with SFAS 45, Accounting for Franchise Fee Revenue.

Online portal services

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

Inventories

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

Property, plant and equipment

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

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

---

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

Intangible assets

Intangible assets recorded at cost or fair value and are amortized on a
straight-line basis over the economic lives of the respective assets,
generally between three to five 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 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.

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 Statement of Financial Accounting Standards (SFAS) No.
128, basic earnings per share are computed using the weighted average number
of common shares outstanding during the period. Disclosure of diluted
earnings per share is not applicable as the potential equity shares are
anti-dilutive.

Income taxes

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

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

---

Retirement benefits to employees

i) Provident fund

In accordance with Indian law, all employees receive benefits from a
provident fund, which is a defined contribution plan. Both the employee and
employer 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.

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

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

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

Goodwill

Goodwill acquired in a business combination for which the acquisition date
is after June 30, 2001 is not amortized, while all other goodwill is
amortized on a straight line basis over the expected periods to be
benefited, generally five years. The Company assesses the recoverability of
goodwill by reference to the valuation methodology on the acquisition date,
which includes strategic and synergistic factors that are expected to
enhance enterprise value. Accordingly, the Company considers goodwill to be
impaired when, in conjunction with its valuation methodology, its
expectations with respect to the acquisitions it has made deteriorate
coupled with adverse market conditions. To the extent that future operating
cash flows of the acquired businesses are not significant factors in the
valuation model they would not be significant factors in assessing goodwill
for impairment. The Company assesses impairment, to the extent appropriate,
at the enterprise level by comparing its market capitalization to the
carrying value of goodwill.

Investment securities

The Company has evaluated its investment policies consistent with the
provisions of SFAS 115, Accounting for Certain Investments in Debt and
Equity Securities, and determined that all of its investment securities are
to be classified as available-for-sale. Accordingly, such securities are
carried at fair value with unrealized gains and losses, net of taxes,
reported as other comprehensive income, a separate component of
shareholders equity. Realized gains and losses and declines in value
judged to be other-than-temporary are included in other income. The cost of
securities sold is determined using first-in-first-out (FIFO) method.
Interest and dividends on

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

---

securities classified as available-for-sale are
included in other income. Other investments that are not marketable are
carried at cost, subject to tests of permanent impairment.

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.

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

---

Recent Accounting Pronouncements

SFAS 141, 142

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, Business Combinationsand SFAS 142, Goodwill and Other Intangible
Assets. SFAS 141 requires that all business combinations be accounted for
under a single method-the purchase method. Use of the pooling-of-interest
method is no longer permitted and is effective for business combinations
initiated after June 30, 2001. SFAS 142 requires that goodwill no longer be
amortized to earnings, but instead be reviewed for impairment and is
effective for financial years beginning after December 15, 2001 with earlier
application permitted for entities with fiscal years beginning after March
31, 2001.

At March 31, 2002, the Companys goodwill and other intangible assets
amounted to Rs. 27,983 and 175,323 respectively. If either present
accounting principles or the new standards discussed above require that
impairment in value be recognized, the Company would be required to write
down the carrying value of the asset to its estimated fair value with an
offsetting charge to the statement of operations.

SFAS 143

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value
each period, and the capitalized cost is depreciated over the useful life of
the related asset. Upon settlement of the liability, an entity either
settles the obligation for its recorded amount or incurs a gain or loss upon
settlement. The standard is effective for fiscal years beginning after June
15, 2002.

SFAS 144

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived
assets be measured at the lower of carrying amount or fair value less cost
to sell, whether reported in continuing operations or in discontinued
operations. Under SFAS No. 144, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses
that have not yet been incurred. The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001.

However, SFAS 143 is not applicable and SFAS 144 is not expected to have any
significant impact on the Company.

SFAS 145

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This Statement rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt,and an amendment of that Statement,
FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements.This Statement also rescinds FASB Statement No. 44, Accounting
for Intangible Assets of Motor Carriers.This Statement amends FASB
Statement No. 13, Accounting for Leases,to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions.

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

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The Company is currently evaluating the impact of SFAS 145 on its financial statements.

Reclassifications

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

3 Business acquisition

IndiaWorld Communications Private Limited

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

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

IndiaPlaza.Com, Inc.

On July 13, 2000 Sify entered into a merger agreement to acquire all the
outstanding equity of IndiaPlaza.com, Inc. (IndiaPlaza), an internet company
which, through its website operates an on-line internet shopping-mall. The
consideration amounted to 455,192 ADSs (113,798 shares). The acquisition,
which was consummated on December 15, 2000 upon completion of regulatory
formalities, has been accounted for by the purchase method. The allocation
of the purchase price was as follows:

|                     |  |     |          |  
|-------------------- |  | --- | -------- | -
|Estimated fair value |  |     |          |  
|Assets acquired      |  | Rs. | 22,743   |  
|Liabilities assumed  |  |     | (113,324 | )
|Goodwill             |  |     | 444,585  |  
|Purchase price       |  | Rs. | 354,004  |  

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 issuance of shares and
the completion of regulatory formalities. 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 142, the goodwill has
not been amortized post acquisition. The allocation of purchase price

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

---

was
as follows:

|                      |                        |     |        |         |  
|--------------------- | ---------------------- | --- | ------ | ------- | -
|Estimated fair values |                        |     |        |        
|                      | Assets acquired        |     | Rs.    | 196     |  
|                      | Intangible assets      |     |        | 37,500  |  
|                      | Deferred tax liability |     |        | (13,388 | )
|Goodwill              |                        |     | 27,983 |        
|                      |                        |     |        |        
|Total consideration   |                        | Rs. | 52,291 |        
|                      |                        |     |        |        

The intangible assets relate to employment contracts with sports
personalities, which are being amortized 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. The Company will record contingent
payments as compensation for post-combination services to be expensed in the
periods in which the contingency is resolved.

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 pro forma-consolidated results of operations reflect the
amortization of intangibles acquired in this transaction.

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

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

4 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 18% 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. 349,165 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 as it qualifies
as discontinued operations under APB 30. 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 statement of operations.

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

---

The summarized information on the results of discontinued operations for the
years ended March 31, 2000, 2001 and 2002 is set forth below:

|                                                 |  |                       |         |      |  |      |         |  |  |     |          |  
|------------------------------------------------ |  | --------------------- | ------- | ---- |  | ---- | ------- |  |  | --- | -------- | -
|                                                 |  | Years ended March 31,
|                                                 |  |                      
|                                                 |  | 2000                  |         | 2001 |  | 2002
|                                                 |  |                       |         |      |  |     
|Revenues                                         |  | Rs.                   | 48,300  |      |  | Rs.  | 561,595 |  |  | Rs. | 340,718  |  
|Operating expenses net of other income           |  |                       | 65,193  |      |  |      | 389,014 |  |  |     | 466,091  |  
|                                                 |  |                       |         |      |  |      |         |  |  |     |          |  
|Net income / (loss) from discontinued operations |  | Rs.                   | (16,893 | )    |  | Rs.  | 172,581 |  |  | Rs. | (125,373 | )
|                                                 |  |                       |         |      |  |      |         |  |  |     |          |  

5 Cash and cash equivalents

Cash and Cash equivalents include deposits of Rs. 12,233 and Rs. 21,865 as
of March 31, 2001 and March 31, 2002, respectively, placed in
No-charge-no-lien accounts as security towards performance guarantees
issued by the Companys bankers on the Companys behalf. Cash and Cash
equivalents also include a sum of Rs 100,000 under Lien with the companys
bankers against guarantees issued by the bank on behalf of the companys
subsidiary. The Company cannot utilize these amounts until the guarantees
are discharged or revoked. Cash and cash equivalents as of March 31, 2001
and March 31, 2002 also include deposits of Rs. 1,367,735 and Rs. 601,283
placed with banks as short-term deposits.

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

6 Accounts receivable

Accounts receivable as of March 31, 2001 and 2002 are stated net of
allowance for doubtful accounts. The Company maintains an allowance for
doubtful accounts based on present and prospective financial condition of
the customer and aging of the accounts receivable after considering
historical experience of collections and current economic environment.
Accounts receivable are not collateralised.

Accounts receivable consists of:

|                                   |  |                      |         |      |  |     |         | 
|---------------------------------- |  | -------------------- | ------- | ---- |  | --- | ------- | 
|                                   |  | Year ended March 31,
|                                   |  |                     
|                                   |  | 2001                 |         | 2002
|                                   |  |                      |         |     
|Customers                          |  | Rs.                  | 860,504 |      |  | Rs. | 581,492 | 
|Less: allowance for doubtful debts |  |                      | 34,231  |      |  |     | 161,531 | 
|                                   |  |                      |         |      |  |     |         | 
|Balance at the end of the year     |  | Rs.                  | 826,273 |      |  | Rs. | 419,961 | 
|                                   |  |                      |         |      |  |     |         | 

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

---

7 Investment securities

Investment securities consist of:

|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|------------------- |  | -------------------- | ------ | ------------- |  | ---------------- | --- | ---------------- |  | --- | ----- |  |  | --- | ----- | 
|                    |  | As at March 31, 2002
|                    |  |                     
|                    |  |                      |        |               |  | Gross unrealized |     | Gross unrealized |  |     |       | 
|                    |  | Cost                 |        | holding gains |  | holding losses   |     | Fair value      
|                    |  |                      |        |               |  |                  |     |                 
|Available for sale: |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|Equity securities   |  | Rs.                  | 7,860  |               |  | Rs.              | 151 |                  |  | Rs. | 3,161 |  |  | Rs. | 4,850 | 
|Mutual fund units   |  |                      | 5,000  |               |  |                  |    |                  |  |     | 373   |  |  |     | 4,627 | 
|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|                    |  | Rs.                  | 12,860 |               |  | Rs.              | 151 |                  |  | Rs. | 3,534 |  |  | Rs. | 9,477 | 
|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 

|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|------------------- |  | -------------------- | ------ | ------------- |  | ---------------- | --- | ---------------- |  | --- | ----- |  |  | --- | ----- | 
|                    |  | As at March 31, 2001
|                    |  |                     
|                    |  |                      |        |               |  | Gross unrealized |     | Gross unrealized |  |     |       | 
|                    |  | Cost                 |        | holding gains |  | holding losses   |     | Fair value      
|                    |  |                      |        |               |  |                  |     |                 
|Available for sale: |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|Equity securities   |  | Rs.                  | 7,860  |               |  | Rs.              | 224 |                  |  | Rs. | 2,830 |  |  | Rs. | 5,254 | 
|Mutual fund units   |  |                      | 5,000  |               |  |                  |    |                  |  |     | 420   |  |  |     | 4,580 | 
|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 
|                    |  | Rs.                  | 12,860 |               |  | Rs.              | 224 |                  |  | Rs. | 3,250 |  |  | Rs. | 9,834 | 
|                    |  |                      |        |               |  |                  |     |                  |  |     |       |  |  |     |       | 

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

---

8 Inventories

Inventories consist of:

|                       |  |                 |         |      |  |     |        | 
|---------------------- |  | --------------- | ------- | ---- |  | --- | ------ | 
|                       |  | As at March 31,
|                       |  |                
|                       |  | 2001            |         | 2002
|                       |  |                 |         |     
|CDs                    |  | Rs.             | 7,156   |      |  | Rs. | 3,987  | 
|Communication hardware |  |                 | 94,157  |      |  |     | 22,490 | 
|Application software   |  |                 | 5,907   |      |  |     | 4,680  | 
|Others                 |  |                 | 2,872   |      |  |     | 4,269  | 
|                       |  |                 |         |      |  |     |        | 
|                       |  | Rs.             | 110,092 |      |  | Rs. | 35,426 | 
|                       |  |                 |         |      |  |     |        | 

9 Other current assets

Other current assets consist of:

|                           |  |                 |         |      |  |     |        | 
|-------------------------- |  | --------------- | ------- | ---- |  | --- | ------ | 
|                           |  | As at March 31,
|                           |  |                
|                           |  | 2001            |         | 2002
|                           |  |                 |         |     
|Vendor advances & deposits |  | Rs.             | 38,698  |      |  | Rs. | 36,978 | 
|Advances for expenses      |  |                 | 108,699 |      |  |     | 13,544 | 
|Due from parent company    |  |                 | 12,926  |      |  |     | 8,137  | 
|Others                     |  |                 | 1,330   |      |  |     | 26,369 | 
|                           |  |                 |         |      |  |     |        | 
|                           |  | Rs.             | 161,653 |      |  | Rs. | 85,028 | 
|                           |  |                 |         |      |  |     |        | 

10 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, 2001
and 2002 was Rs. 102,807 and Rs. 120,882 respectively. Sifys equity in the
losses of Refco-Sify for the years ended March 31, 2001 and 2002 was Rs.
9,883 and Rs. 27,105 respectively.

During the year ended March 31, 2002 Refco issued additional shares to
existing shareholders in proportion to their holdings. Sify subscribed to
its share of the issue for a consideration of Rs. 45,180.

Placements.com Limited

The Company holds a 27% interest in Placements.com Limited (Placements).
Placements is engaged in establishing and developing a portal on the
internet for jobs and to carry on the business as a manpower recruitment
agency. The Company has accounted for its 27% interest in Placements by the
equity method. The carrying value of the investment in Placements as of
March 31, 2001 and 2002 was Rs. 9,193 and Rs. 628 respectively. Sifys
equity in the losses of Placements for the years ended March 31, 2001 and
2002 was

Rs. 16,307 and Rs. 8,565 respectively.

Cricinfo Limited

On July 29, 2000, Sify acquired 25% of the outstanding stock of Cricinfo
Limited (Cricinfo) a private Company
85Table of ContentsSatyam Infoway Limited
Notes to Consolidated Financial Statements(In thousands, except share data and as stated otherwise)incorporated in England and Wales, for
US $ 37.5 million by issue of 2,204,720 ADSs (represented by 551,180 equity
shares of the Company). Cricinfo operates Cricinfo.com, a website dedicated
to the cricket sport. The company has accounted for its interest in
Cricinfo by the equity method. The difference between the cost of the
investment and the amount of underlying equity in net assets of Cricinfo
resulted in goodwill of Rs 1,657,479, which is being amortized over a period
of five years. In fiscal 2002, the Company recorded an impairment loss of
Rs. 1,089,870 relating to a decline in the value of investment in Cricinfo
deemed to be other than temporary.On October 5, 2001, Sify entered into an agreement to subscribe for
unsecured convertible notes to be issued by Cricinfo Limited in an aggregate
amount of up to GBP 1,000 (Rs. 68,520) to meet Cricinfos short to medium
term working capital requirements. These notes are redeemable on October 5,
2004. The subscription will be in tranches of such amounts and on such
dates as agreed to in writing from time to time by Sify and Cricinfo. The
terms of the note instrument provide for the payment of interest on the
principal amount at the rate of 8% per annum. In addition, Sify shall be
entitled, at any time upon five-business days notice to Cricinfo, to convert
the notes into Cricinfo shares based on a predetermined conversion formula.
Sify will not be obligated to subscribe for notes if it is not satisfied
that Cricinfo has met certain agreed upon performance measures. On March
13, 2002 Sify entered into an arrangement to subscribe to a further issue of
convertible notes in an aggregate amount of up to GBP 500 (Rs. 34,250) by
Cricinfo that would be subject to the same terms as discussed above.As at March 31, 2002, Sify had purchased convertible notes with an aggregate
principal amount of GBP 1,088 (Rs. 74,561). The above agreement does not
give Sify a majority voting interest or a controlling financial interest in
Cricinfo over the period of convertible notes. Further, the management
currently does not intend to convert the notes into equity. Therefore, the
investment of Sify in Cricinfo continues to be accounted for as an equity
investment.The summarized financial information as to assets, liabilities and results
of operations of Cricinfo is presented below:

|                              |  |                 |         |      |  |     |          |  
|----------------------------- |  | --------------- | ------- | ---- |  | --- | -------- | -
|                              |  | As at March 31,
|                              |  |                
|Balance Sheet                 |  | 2001            |         | 2002
|                              |  |                 |         |     
|Current assets                |  | Rs.             | 111,741 |      |  | Rs. | 21,431   |  
|Non-current assets            |  |                 | 6,381   |      |  |     | 1,113    |  
|Current liabilities           |  |                 | (32,322 | )    |  |     | (127,749 | )
|Net current asset/(liability) |  |                 | 85,800  |      |  |     | (105,205 | )
|                              |  |                 |         |      |  |     |          |  
|Stockholders equity          |  | Rs.             | 85,800  |      |  | Rs. | (105,205 | )
|                              |  |                 |         |      |  |     |          |  

|                        |  |                              |          |      |  |     |          |  
|----------------------- |  | ---------------------------- | -------- | ---- |  | --- | -------- | -
|                        |  | For the year ended March 31,
|                        |  |                             
|Statement of Operations |  | 2001                         |          | 2002
|                        |  |                              |          |     
|Revenues                |  | Rs.                          | 44,877   |      |  | Rs. | 70,609   |  
|Gross profit            |  |                              | 37,455   |      |  |     | 65,410   |  
|Net loss                |  | Rs.                          | (550,955 | )    |  | Rs. | (419,495 | )

The carrying value of the investment in Cricinfo as of March 31, 2001 and
2002 was Rs. 1,394,244 and
Rs. 186,695 respectively. Sifys equity in the losses of Cricinfo for the
years ended March 31, 2001 and 2002 was
Rs. 67,018 and Rs. 142,548 respectively.

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

---

11 Property, plant and equipment

Property, plant and equipment consist of:

|                         |  |                 |           |      |  |     |            |  
|------------------------ |  | --------------- | --------- | ---- |  | --- | ---------- | -
|                         |  | As at March 31,
|                         |  |                
|                         |  | 2001            |           | 2002
|                         |  |                 |           |     
|Land                     |  | Rs.             | 167,700   |      |  | Rs. | 187,701    |  
|Building                 |  |                 | 480,252   |      |  |     | 480,272    |  
|Leasehold improvements   |  |                 | 90,178    |      |  |     | 109,139    |  
|Plant and machinery      |  |                 | 1,114,871 |      |  |     | 1,415,733  |  
|Computer equipment       |  |                 | 369,669   |      |  |     | 465,369    |  
|Office equipment         |  |                 | 40,481    |      |  |     | 51,475     |  
|Furniture and fixtures   |  |                 | 87,524    |      |  |     | 95,840     |  
|Vehicles                 |  |                 | 27,466    |      |  |     | 17,254     |  
|System software          |  |                 | 301,798   |      |  |     | 99,991     |  
|Construction-in-progress |  |                 | 362,568   |      |  |     | 138,848    |  
|                         |  |                 |           |      |  |     |            |  
|                         |  | Rs.             | 3,042,507 |      |  | Rs. | 3,061,622  |  
|Accumulated depreciation |  |                 | (606,387  | )    |  |     | (1,129,576 | )
|                         |  |                 |           |      |  |     |            |  
|                         |  | Rs.             | 2,436,120 |      |  | Rs. | 1,932,046  |  
|                         |  |                 |           |      |  |     |            |  

Depreciation expense amounted to Rs. 123,496, Rs. 429,672 and Rs. 574,867
for the years ended March 31, 2000, 2001 and 2002 respectively.

12 Goodwill and other intangible assets, net

Goodwill and other intangible assets consist of:

|                               |                            |     |                 |           |      |     |         |        | 
|------------------------------ | -------------------------- | --- | --------------- | --------- | ---- | --- | ------- | ------ | 
|                               |                            |     | As at March 31,
|                               |                            |     |                
|                               |                            |     | 2001            |           | 2002
|                               |                            |     |                 |           |     
|Goodwill                       |                            |     |                 |           |      |     |         |       
|                               | Acquisition of IndiaWorld  |     | Rs.             | 5,005,107 |      |     | Rs.     |       | 
|                               | Acquisition of India Plaza |     |                 | 444,585   |      |     |         |       | 
|                               | Acquisition of Kheladi     |     |                 |          |      |     |         | 27,983 | 
|                               | Other                      |     |                 | 2,775     |      |     |         |       | 
|Technical know-how             |                            |     | 54,408          |           |      |     | 87,433  |       
|Portals and web content        |                            |     | 47,630          |           |      |     | 97,630  |       
|Employment contracts           |                            |     |                |           |      |     | 37,500  |       
|                               |                            |     |                 |           |      |     |         |       
|Total                          |                            | Rs. | 5,554,505       |           |      | Rs. | 250,546 |       
|Less: Accumulated amortization |                            |     | 1,075,752       |           |      |     | 47,240  |       
|                               |                            |     |                 |           |      |     |         |       
|                               |                            | Rs. | 4,478,753       |           |      | Rs. | 203,306 |       
|                               |                            |     |                 |           |      |     |         |       

Amortization of goodwill and other intangible assets during the years ended
March 31, 2000, 2001 and 2002 was Rs. 118,386, Rs. 957,368 and Rs. 322,301
respectively.

Due to a general decline in market valuation for technology stocks during
fiscal 2002, the Company reassessed, in accordance with its accounting
policy, the goodwill to be carried forward relating to its acquisitions. As
a result,

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

---

the Company recorded a charge Rs. 4,127,680 relating to the
impairment of goodwill arising on acquisition of its subsidiaries during the
year ended March 31, 2002.

|                 |  |                     |  |                      
|---------------- |  | ------------------- |  | ---------------------
|Acquired Company |  | Date of acquisition |  | Impairment recognized
|                 |  |                     |  |                      
|IndiaWorld       |  | November 1999       |  | Rs. 3,714,848        
|India Plaza      |  | December 2000       |  | 397,799              
|Others           |  | December 2000       |  | 15,033               
|                 |  |                     |  |                      
|Total            |  |                     |  | Rs. 4,127,680        
|                 |  |                     |  |                      

13 Other assets

Other assets consist of:

|                                          |  |                 |         |      |  |     |         | 
|----------------------------------------- |  | --------------- | ------- | ---- |  | --- | ------- | 
|                                          |  | As at March 31,
|                                          |  |                
|                                          |  | 2001            |         | 2002
|                                          |  |                 |         |     
|Deposits                                  |  | Rs.             | 119,303 |      |  | Rs. | 109,582 | 
|Staff advances recoverable after one year |  |                 | 82,910  |      |  |     | 29,570  | 
|Withholding taxes                         |  |                 | 41,259  |      |  |     | 49,743  | 
|Other advances                            |  |                 | 64,314  |      |  |     |        | 
|                                          |  |                 |         |      |  |     |         | 
|                                          |  | Rs.             | 307,786 |      |  | Rs. | 188,895 | 
|                                          |  |                 |         |      |  |     |         | 

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

---

14 Leases

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

|                               |  |                 |        |      |  |     |        |  
|------------------------------ |  | --------------- | ------ | ---- |  | --- | ------ | -
|                               |  | As at March 31,
|                               |  |                
|                               |  | 2001            |        | 2002
|                               |  |                 |        |     
|Vehicles                       |  | Rs.             | 20,859 |      |  | Rs. | 14,484 |  
|Less: Accumulated depreciation |  |                 | (4,786 | )    |  |     | (4,659 | )
|                               |  |                 |        |      |  |     |        |  
|                               |  | Rs.             | 16,073 |      |  | Rs. | 9,825  |  
|                               |  |                 |        |      |  |     |        |  

The following is a schedule of future minimum capital lease commitments
as at March 31, 2002:

|                                                                 |  |     |       | 
|---------------------------------------------------------------- |  | --- | ----- | 
|Due for the year ended March 31,                                 |  |     |       | 
|2003                                                             |  | Rs. | 3,972 | 
|2004                                                             |  |     | 2,853 | 
|2005                                                             |  |     | 1,263 | 
|2006                                                             |  |     | 148   | 
|                                                                 |  |     |       | 
|Total minimum lease payments                                     |  | Rs. | 8,236 | 
|Less: Interest portion                                           |  |     | 1,096 | 
|                                                                 |  |     |       | 
|Present value of net minimum capital leases payments             |  | Rs. | 7,140 | 
|Less: Current installments of obligations under capital leases   |  |     | 3,218 | 
|                                                                 |  |     |       | 
|Obligations under capital leases, excluding current installments |  | Rs. | 3,922 | 
|                                                                 |  |     |       | 

15 Accrued Liabilities

Accrued Liabilities consists of:

|                                      |  |                 |         |      |  |     |         | 
|------------------------------------- |  | --------------- | ------- | ---- |  | --- | ------- | 
|                                      |  | As at March 31,
|                                      |  |                
|                                      |  | 2001            |         | 2002
|                                      |  |                 |         |     
|Creditors for capital purchase        |  | Rs.             | 136,350 |      |  | Rs. | 79,646  | 
|Creditors and provisions for expenses |  |                 | 367,731 |      |  |     | 411,898 | 
|Others                                |  |                 | 1,788   |      |  |     | 7,846   | 
|                                      |  |                 |         |      |  |     |         | 
|                                      |  | Rs.             | 505,869 |      |  | Rs. | 499,390 | 
|                                      |  |                 |         |      |  |     |         | 

16 Other liabilities





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

---

Other liabilities consists of:

|                             |  |                 |        |      |  |     |        | 
|---------------------------- |  | --------------- | ------ | ---- |  | --- | ------ | 
|                             |  | As at March 31,
|                             |  |                
|                             |  | 2001            |        | 2002
|                             |  |                 |        |     
|Deposits from sales partners |  | Rs.             | 23,787 |      |  | Rs. | 38,667 | 
|Others                       |  |                 | 2,377  |      |  |     | 1,210  | 
|                             |  |                 |        |      |  |     |        | 
|                             |  | Rs.             | 26,164 |      |  | Rs. | 39,877 | 
|                             |  |                 |        |      |  |     |        | 

17 Income tax

The provision for income taxes consists of:

|         |  |                      |        |      |  |      |        |   |  |     |   | 
|-------- |  | -------------------- | ------ | ---- |  | ---- | ------ | - |  | --- | - | 
|         |  | Year ended March 31,
|         |  |                     
|         |  | 2000                 |        | 2001 |  | 2002
|         |  |                      |        |      |  |     
|Current  |  | Rs.                  | 3,171  |      |  | Rs.  | (1,827 | ) |  | Rs. |  | 
|Deferred |  |                      | (1,693 | )    |  |      | 120    |   |  |     |  | 
|         |  |                      |        |      |  |      |        |   |  |     |   | 
|         |  | Rs.                  | 1,478  |      |  | Rs.  | (1,707 | ) |  | Rs. |  | 
|         |  |                      |        |      |  |      |        |   |  |     |   | 

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

---

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

|                                                 |  |                      |          |      |  |      |            |   |  |     |            |  
|------------------------------------------------ |  | -------------------- | -------- | ---- |  | ---- | ---------- | - |  | --- | ---------- | -
|                                                 |  | Year ended March 31,
|                                                 |  |                     
|                                                 |  | 2000                 |          | 2001 |  | 2002
|                                                 |  |                      |          |      |  |     
|Net loss from continuing operations before taxes |  | Rs.                  | (368,481 | )    |  | Rs.  | (2,691,041 | ) |  | Rs. | (7,158,265 | )
|Enacted tax rates in India                       |  |                      | 38.5     | %    |  |      | 39.55      | % |  |     | 35.7       | %
|                                                 |  |                      |          |      |  |      |            |   |  |     |            |  
|Computed expected tax expense                    |  | Rs.                  | (141,788 | )    |  | Rs.  | (1,064,307 | ) |  | Rs. | (2,555,501 | )
|Expenses not benefited                           |  |                      | 52,598   |      |  |      | 402,921    |   |  |     | 1,609,811  |  
|Change in valuation allowance                    |  |                      | 97,843   |      |  |      | 665,523    |   |  |     | 860,921    |  
|Other                                            |  |                      | 11       |      |  |      | 3,039      |   |  |     | 6,599      |  
|Effect of tax rate change                        |  |                      | (10,142  | )    |  |      | (5,469     | ) |  |     | 78,170     |  
|                                                 |  |                      |          |      |  |      |            |   |  |     |            |  
|Total income tax (benefit)/expense               |  | Rs.                  | (1,478   | )    |  | Rs.  | 1,707      |   |  | Rs. |           |  
|                                                 |  |                      |          |      |  |      |            |   |  |     |            |  

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,
|                                                        |  |                     
|                                                        |  | 2000                 |         | 2001 |  | 2002
|                                                        |  |                      |         |      |  |     
|Net gain/loss from discontinued
operations before taxes |  | Rs.                  | (16,893 | )    |  | Rs.  | 172,581 |   |  | Rs. | (44,252 | )
|Enacted tax rates in India                              |  |                      | 38.5    | %    |  |      | 39.55   | % |  |     | 35.7    | %
|                                                        |  |                      |         |      |  |      |         |   |  |     |         |  
|Computed expected tax expense                           |  | Rs.                  | (6,504  | )    |  | Rs.  | 68,256  |   |  | Rs. | (15,798 | )
|Valuation allowance                                     |  |                      | 6,504   |      |  |      | (68,256 | ) |  |     | 15,798  |  
|                                                        |  |                      |         |      |  |      |         |   |  |     |         |  
|Total income tax (benefit)/expense                      |  | Rs.                  |        |      |  | Rs.  |        |   |  | Rs. |        |  
|                                                        |  |                      |         |      |  |      |         |   |  |     |         |  

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.

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

---

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

|                                                            |  |                 |          |      |  |     |            |  
|----------------------------------------------------------- |  | --------------- | -------- | ---- |  | --- | ---------- | -
|                                                            |  | As at March 31,
|                                                            |  |                
|                                                            |  | 2001            |          | 2002
|                                                            |  |                 |          |     
|Deferred tax assets:                                        |  |                 |          |      |  |     |            |  
|Operating loss carry forwards                               |  | Rs.             | 702,985  |      |  | Rs. | 989,192    |  
|Provision for accounts receivable and advances              |  |                 | 13,376   |      |  |     | 115,665    |  
|Property, plant and equipment and intangibles               |  |                 | 859      |      |  |     | 777        |  
|Accrual and expenses currently not allowed for tax purposes |  |                 | 33,548   |      |  |     | 50,079     |  
|Provision for valuation of stock                            |  |                 |         |      |  |     | 7,457      |  
|Investments in affiliates                                   |  |                 | 116,491  |      |  |     | 528,001    |  
|                                                            |  |                 |          |      |  |     |            |  
|Total gross deferred tax assets                             |  |                 | 867,259  |      |  |     | 1,691,171  |  
|                                                            |  |                 |          |      |  |     |            |  
|Less: valuation allowance                                   |  |                 | (803,011 | )    |  |     | (1,679,730 | )
|                                                            |  |                 |          |      |  |     |            |  
|Total deferred tax assets                                   |  | Rs.             | 64,248   |      |  | Rs. | 11,441     |  
|                                                            |  |                 |          |      |  |     |            |  

|                               |  |                 |        |      |  |     |        |  
|------------------------------ |  | --------------- | ------ | ---- |  | --- | ------ | -
|                               |  | As at March 31,
|                               |  |                
|                               |  | 2001            |        | 2002
|                               |  |                 |        |     
|Deferred tax liabilities:      |  |                 |        |      |  |     |        |  
|Property, plant and equipment  |  | Rs.             | 60,437 |      |  | Rs. | 13,658 |  
|Investments                    |  |                 | 501    |      |  |     | 736    |  
|Intangibles acquired           |  |                 |       |      |  |     | 13,388 |  
|Other                          |  |                 | 3,310  |      |  |     | (2,953 | )
|                               |  |                 |        |      |  |     |        |  
|Total deferred tax liabilities |  |                 | 64,248 |      |  |     | 24,829 |  
|                               |  |                 |        |      |  |     |        |  
|Net deferred tax liability     |  | Rs.             |       |      |  | Rs. | 13,388 |  
|                               |  |                 |        |      |  |     |        |  

18 Other income, net

Other income consists of:

|                      |  |                              |         |      |  |      |         |   |  |     |        |  
|--------------------- |  | ---------------------------- | ------- | ---- |  | ---- | ------- | - |  | --- | ------ | -
|                      |  | For the year ended March 31,
|                      |  |                             
|                      |  | 2000                         |         | 2001 |  | 2002
|                      |  |                              |         |      |  |     
|Interest expense      |  | Rs.                          | (30,539 | )    |  | Rs.  | (11,766 | ) |  | Rs. | (2,039 | )
|Other finance charges |  |                              | (1,691  | )    |  |      | (4,707  | ) |  |     | (6,495 | )
|Interest income       |  |                              | 106,182 |      |  |      | 246,179 |   |  |     | 38,803 |  
|Others                |  |                              | (2,100  | )    |  |      | 12,662  |   |  |     | 2,442  |  
|                      |  |                              |         |      |  |      |         |   |  |     |        |  
|Other income, net     |  | Rs.                          | 71,852  |      |  | Rs.  | 242,368 |   |  | Rs. | 32,711 |  
|                      |  |                              |         |      |  |      |         |   |  |     |        |  

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

---

19 Executive employment arrangements

Sify has entered into Executive Employment Agreements (the agreements)
with a few executive employees which provide for certain payment in
connection with termination of employment after a change of control or for
good reasons (which are defined in the agreements). The agreements were
entered on February 20, 2002 and expire after three years. The aggregate
terminal benefits payable to the employees under such agreements amounts to
Rs. 16,237.

Further, the senior executives had been provided loans totaling to Rs 40,000
in fiscal 2001 repayable with interest on December 31, 2002. In
consideration of the executives agreeing to continue in the employment of
Sify, Sify agreed to pay the executives additional compensation sufficient
to repay the loan and interest. The additional compensation is reduced by
the value, as on the date of such additional compensation, of specified
market liquid stock options granted to the executives before December
31,2000 and vested until that date. Such additional cash compensation
together with interest is being accrued pro-rata and is amortized over the
remaining service period of approximately 10 months. In addition due to the
modification in the terms of the stock options these options are accounted
in accordance with EITF 00-23 as a variable plan. No compensation charge
with respect to the variable plan is recognized, as the exercise price is
higher than the market price at the balance sheet date.

20 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,
|                                                          |  |                
|                                                          |  | 2001            |       | 2002
|                                                          |  |                 |       |     
|Change in projected benefit obligation                    |  |                 |       |      |  |     |        |  
|Projected benefit obligation at the beginning of the year |  | Rs.             | 1,651 |      |  | Rs. | 5,898  |  
|Service cost                                              |  |                 | 3,844 |      |  |     | 5,545  |  
|Interest cost                                             |  |                 | 182   |      |  |     | 531    |  
|Divestiture                                               |  |                 |      |      |  |     | (2,508 | )
|Actuarial (gain)/loss                                     |  |                 | 221   |      |  |     | (607   | )
|Benefits paid                                             |  |                 |      |      |  |     | (77    | )
|                                                          |  |                 |       |      |  |     |        |  
|Projected benefit obligation at the end of the year       |  | Rs.             | 5,898 |      |  | Rs. | 8,782  |  
|Change in plan assets                                     |  |                 |       |      |  |     |        |  
|Fair value of plan assets at the beginning of the year    |  |                 | 1,093 |      |  |     | 1,729  |  
|Actual return on plan assets                              |  |                 | 140   |      |  |     | 296    |  
|Employer contributions                                    |  |                 | 496   |      |  |     | 1,361  |  
|Benefits paid from plan assets                            |  |                 |      |      |  |     | (77    | )
|                                                          |  |                 |       |      |  |     |        |  
|Fair value of plan assets at the end of the year          |  | Rs.             | 1,729 |      |  | Rs. | 3,309  |  

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

---

|                                           |  |                 |       |      |  |     |       | 
|------------------------------------------ |  | --------------- | ----- | ---- |  | --- | ----- | 
|                                           |  | As of March 31,
|                                           |  |                
|                                           |  | 2001            |       | 2002
|                                           |  |                 |       |     
|Funded status of the plans                 |  | Rs.             | 4,168 |      |  | Rs. | 5,473 | 
|Unrecognized transition obligation (asset) |  |                 |      |      |  |     |      | 
|Unrecognized prior service cost (benefit)  |  |                 |      |      |  |     |      | 
|Unrecognized net actuarial gain/(loss)     |  |                 | (116  | )    |  |     | 560   | 
|                                           |  |                 |       |      |  |     |       | 
|Accrued benefit cost                       |  | Rs.             | 4,052 |      |  | Rs. | 6,033 | 
|                                           |  |                 |       |      |  |     |       | 

|                                                          |  |                              |       |      |  |      |       |   |  |     |       |  
|--------------------------------------------------------- |  | ---------------------------- | ----- | ---- |  | ---- | ----- | - |  | --- | ----- | -
|                                                          |  | For the year ended March 31,
|                                                          |  |                             
|                                                          |  | 2000                         |       | 2001 |  | 2002
|                                                          |  |                              |       |      |  |     
|The components of net gratuity costs are reflected below: |  |                              |       |      |  |      |       |   |  |     |       |  
|Service cost                                              |  | Rs.                          | 1,098 |      |  | Rs.  | 3,844 |   |  | Rs. | 5,545 |  
|Interest cost                                             |  |                              | 58    |      |  |      | 182   |   |  |     | 531   |  
|Expected returns on plan assets                           |  |                              | (73   | )    |  |      | (140  | ) |  |     | (227  | )
|Amortization                                              |  |                              |      |      |  |      |      |   |  |     |      |  
|                                                          |  |                              |       |      |  |      |       |   |  |     |       |  
|Net gratuity costs                                        |  | Rs.                          | 1,083 |      |  | Rs.  | 3,886 |   |  | Rs. | 5,849 |  
|                                                          |  |                              |       |      |  |      |       |   |  |     |       |  
|Principal actuarial assumptions:                          |  |                              |       |      |  |      |       |   |  |     |       |  
|Discount rate                                             |  |                              | 11    | %    |  |      | 11    | % |  |     | 9     | %
|Long-term rate of compensation increase                   |  |                              | 10    | %    |  |      | 10    | % |  |     | 8     | %
|Rate of return on plan assets                             |  |                              | 11    | %    |  |      | 11    | % |  |     | 9     | %

Provident fund

Sify contributed Rs. 5,999, Rs. 11,675 and Rs. 19,797 towards the Provident
fund during the years ended March 31, 2000, 2001 and 2002 respectively.

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\

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

---

21 Related Party Transactions

Satyam Computer Services

An analysis of transactions with Satyam Computer Services (the parent
company), is set out below:

|                                                      |  |                 |         |      |  |      |         |   |  |     |          |  
|----------------------------------------------------- |  | --------------- | ------- | ---- |  | ---- | ------- | - |  | --- | -------- | -
|                                                      |  | As at March 31,
|                                                      |  |                
|                                                      |  | 2000            |         | 2001 |  | 2002
|                                                      |  |                 |         |      |  |     
|Due (to)/from parent company at beginning of the year |  | Rs.             | (3,981  | )    |  | Rs.  | (17,115 | ) |  | Rs. | 12,926   |  
|Advances received towards working capital             |  |                 | (3,295  | )    |  |      |        |   |  |     |         |  
|Advance received against equity                       |  |                 | (78,120 | )    |  |      |        |   |  |     |         |  
|Allocation of facilities costs                        |  |                 | (5,913  | )    |  |      | (17,954 | ) |  |     | (910     | )
|Sale of e-business division                           |  |                 |        |      |  |      |        |   |  |     | 349,165  |  
|Expenses incurred on behalf of the Company            |  |                 | (3,926  | )    |  |      | (47,019 | ) |  |     | (104,616 | )
|Capital expenses incurred on behalf of the Company    |  |                 |        |      |  |      | (27,541 | ) |  |     | (21,702  | )
|Purchases from Satyam Computer Services               |  |                 |        |      |  |      | (2,381  | ) |  |     | (2,106   | )
|Allotment of equity                                   |  |                 | 78,120  |      |  |      |        |   |  |     |         |  
|Sales to Satyam Computer                              |  |                 |        |      |  |      | 83,550  |   |  |     | 178,952  |  
|Collections from Satyam Computer Services             |  |                 |         |      |  |      |         |   |  |     | (403,572 | )
|Payment to Satyam Computer                            |  |                 |        |      |  |      | 41,386  |   |  |     |         |  
|                                                      |  |                 |         |      |  |      |         |   |  |     |          |  
|Due (to)/from parent company                          |  | Rs.             | (17,115 | )    |  | Rs.  | 12,926  |   |  | Rs. | 8,137    |  
|                                                      |  |                 |         |      |  |      |         |   |  |     |          |  

Advance against equity represents interest free advances received from the
Companys parent company, Satyam Computer Services to be adjusted against
subsequent issues of common stock.

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

|                              |  |                      |   |      |  |           |  |           |  |  |  | 
|----------------------------- |  | -------------------- | - | ---- |  | --------- |  | --------- |  |  |  | 
|                              |  | Year ended March 31,
|                              |  |                     
|                              |  | 2000                 |   | 2001 |  | 2002     
|                              |  |                      |   |      |  |          
|Sales to affiliates           |  |                      |  |      |  | Rs.22,405 |  | Rs.52,847
|Interest on convertible notes |  |                      |  |      |  |          |  | Rs. 2,245

The Company has the following amounts due from related parties:

|               |  |                      |        |      |  |     |        | 
|-------------- |  | -------------------- | ------ | ---- |  | --- | ------ | 
|               |  | Year ended March 31,
|               |  |                     
|               |  | 2001                 |        | 2002
|               |  |                      |        |     
|Affiliates     |  | Rs.                  | 25,610 |      |  | Rs. | 5,684  | 
|Employee loans |  |                      | 94,397 |      |  |     | 68,245 | 

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

---

Scheduled repayment of employee loan is set out below:
Repayable in the year ending March 31:

|           |  |     |        | 
|---------- |  | --- | ------ | 
|2003       |  | Rs. | 38,675 | 
|2004       |  |     | 24,344 | 
|2005       |  |     | 915    | 
|2006       |  |     | 687    | 
|2007       |  |     | 669    | 
|Thereafter |  | Rs. | 2,955  | 

The estimated fair value of the employee loans were Rs. 7,674, Rs. 83,164 and Rs. 66,908 as of
March 31, 2000, March 31, 2001 and 2002 respectively.

22 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.

The following table summarizes the stock option plan activity:

|                                     |  |           |         |                  |  |     |       | 
|------------------------------------ |  | --------- | ------- | ---------------- |  | --- | ----- | 
|                                     |  | Number of |         | Weighted average
|                                     |  | shares    |         | exercise price  
|                                     |  |           |         |                 
|For the year ended March 31, 2000    |  |           |         |                  |  |     |       | 
|Balance at the beginning of the year |  |           | 5,000   |                  |  | Rs. | 70    | 
|Granted                              |  |           | 313,160 |                  |  |     | 2,338 | 
|Exercised                            |  |           |        |                  |  |     |      | 
|Forfeited                            |  |           | 5,700   |                  |  |     | 350   | 
|Balance at the end of the year       |  |           | 312,460 |                  |  | Rs. | 2,338 | 
|Exercisable at the end of the year   |  |           | 833     |                  |  |     | 70    | 

|                                     |  |           |         |                  |  |     |       | 
|------------------------------------ |  | --------- | ------- | ---------------- |  | --- | ----- | 
|                                     |  | Number of |         | Weighted average
|                                     |  | shares    |         | exercise price  
|                                     |  |           |         |                 
|For the year ended March 31, 2001    |  |           |         |                  |  |     |       | 
|Balance at the beginning of the year |  |           | 312,460 |                  |  | Rs. | 2,338 | 
|Granted                              |  |           | 342,800 |                  |  |     | 2,821 | 
|Exercised                            |  |           | 200     |                  |  |     | 350   | 
|Forfeited                            |  |           | 90,040  |                  |  |     | 2,409 | 
|Balance at the end of the year       |  |           | 565,020 |                  |  | Rs. | 2,621 | 
|Exercisable at the end of the year   |  |           | 43,073  |                  |  |     | 2,338 | 

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

---

|                                     |  |           |         |                  |  |  |       | 
|------------------------------------ |  | --------- | ------- | ---------------- |  |  | ----- | 
|                                     |  | Number of |         | Weighted average
|                                     |  | shares    |         | exercise price  
|                                     |  |           |         |                 
|For the year ended March 31, 2002    |  |           |         |                  |  |  |       | 
|Balance at the beginning of the year |  |           | 565,020 |                  |  |  | 2,621 | 
|Granted                              |  |           | 276,360 |                  |  |  | 174   | 
|Exercised                            |  |           |        |                  |  |  |      | 
|Forfeited                            |  |           | 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 | 

| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | The following table summarizes information about fixed price options
outstanding at March 31, 2002:

|                      |  |                |         |          |  |                  |       |                |  |          |      |          |  |  |         |  |  |     |       | 
|--------------------- |  | -------------- | ------- | -------- |  | ---------------- | ----- | -------------- |  | -------- | ---- | -------- |  |  | ------- |  |  | --- | ----- | 
|                      |  |                |         |          |  | Weighted         |       | Weighted       |  | Number   |      | Weighted
|                      |  | Number         |         | average  |  | average          |       | exercisable at |  | average 
|Range of exercise     |  | outstanding at |         | exercise |  | remaining        |       | March 31,      |  | exercise
|price                 |  | March 31, 2002 |         | price    |  | contractual life |       | 2002           |  | price   
|                      |  |                |         |          |  |                  |       |                |  |         
|Rs. 169  Rs. 376     |  |                | 322,380 |          |  | Rs.              | 205   |                |  |          | 2.22 |          |  |  | 31,650  |  |  | Rs. | 338   | 
|Rs. 724  Rs. 973     |  |                | 61,120  |          |  |                  | 916   |                |  |          | 1.09 |          |  |  | 21,620  |  |  |     | 946   | 
|Rs. 1,879  Rs. 3,809 |  |                | 166,820 |          |  |                  | 3,303 |                |  |          | 1.16 |          |  |  | 32,603  |  |  |     | 3,312 | 
|Rs. 5,892  Rs. 8,603 |  |                | 33,520  |          |  |                  | 6,304 |                |  |          | 0.85 |          |  |  | 16,760  |  |  |     | 6,304 | 
|                      |  |                |         |          |  |                  |       |                |  |          |      |          |  |  |         |  |  |     |       | 
|Rs. 169  Rs. 8,603   |  |                | 583,840 |          |  | Rs.              | 1,515 |                |  |          | 1.72 |          |  |  | 102,633 |  |  | Rs. | 2,385 | 
|                      |  |                |         |          |  |                  |       |                |  |          |      |          |  |  |         |  |  |     |       | 

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

|                       |                               |             |          |                      |          |      |            |         |            |     |            |         |            |  
|---------------------- | ----------------------------- | ----------- | -------- | -------------------- | -------- | ---- | ---------- | ------- | ---------- | --- | ---------- | ------- | ---------- | -
|                       |                               |             |          | Year ended March 31,
|                       |                               |             |          |                     
|                       |                               |             |          | 2000                 |          | 2001 |            | 2002   
|                       |                               |             |          |                      |          |      |            |        
|Net Loss  As reported |                               | Rs.         | (381,897 | )                    |          | Rs.  | (2,509,030 | )       |            | Rs. | (7,202,517 | )      
|                       |                               |  Pro forma |          |                      | (407,031 | )    |            |         | (2,765,966 | )   |            |         | (7,494,489 | )
|Loss Per Share:        |                               |             |          |                      |          |      |            |         |            |     |            |        
|                       | Basic & Diluted  As reported |             |          | (20.59               | )        |      |            | (109.79 | )          |     |            | (310.50 | )         
|                       |                               |  Pro forma |          | Rs.                  | (21.95   | )    |            | Rs.     | (121.03    | )   |            | Rs.     | (323.01    | )

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

|                        |  |                      |      |              |  |              |      |   |  |  |       |  
|----------------------- |  | -------------------- | ---- | ------------ |  | ------------ | ---- | - |  |  | ----- | -
|                        |  | Year ended March 31,
|                        |  |                     
|                        |  | 2000                 |      | 2001         |  | 2002        
|                        |  |                      |      |              |  |             
|Dividend yield          |  |                      |     |              |  |              |     |   |  |  |       |  
|Expected volatility     |  |                      | 65   | %            |  |              | 118  | % |  |  | 114   | %
|Risk-free interest rate |  |                      | 9.50 | %            |  |              | 9.50 | % |  |  | 7.5-9 | %
|Expected term           |  | 12-36 months         |      | 12-36 months |  | 12-36 months

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

---

23 Commitments and contingencies

The company has outstanding performance guarantees for various statutory
purposes totaling Rs 35,077 and Rs 29,219 as of March 31, 2001 and 2002,
respectively. These guarantees are generally provided to governmental
agencies.

As of March 31, 2002 the Company had
contractual commitments amounting to Rs 100,134.

24 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,
co-location and software development for businesses 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;                                                           
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Software services (e-business services), which provides business to
business e-commerce and web site development and which has been
discontinued and sold to Satyam Computer Services;
| 
| |  | Consumer Internet access services, which provides dial-up Internet
access and public Internet access through cyber cafés; and                                                         
| 
| |  | Online portal services and content offerings.                                                                                                                                         

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. Prior to fiscal 2001, the CODM reviewed
segment information relating to revenues only.

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

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

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

---

The Companys operating segment information for the years ended March 31,
2002 and 2001 is presented below (in rupees):

|                                                           |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|---------------------------------------------------------- |  | ------------------------- | -------- | -------- |  | -------- | ---------- | -------- |  | ---------- | -------- | ------------ |  |  | -------- | - |  |  | ---------- | - |  |  | -------- | -
|                                                           |  | Year ended March 31, 2002
|                                                           |  |                          
|                                                           |  | Corporate                 |          | Internet |  | Online   |            |          |  |            |          |              |  |  |          |   |  | 
|                                                           |  | Network /                 |          | Access   |  | 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                               |  |                           |          |          |  |          |            |          |  |            | (61,805  | )            |  |  |          |   |  |  | (61,805    | ) |  |  |         |  
|Minority interest                                          |  |                           |          |          |  |          | 16,650     |          |  |            | 411      |              |  |  | 867      |   |  |  | 17,928     |   |  |  |          |  
|                                                           |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Segment operating income / (loss)                          |  |                           | 224,211  |          |  |          | (535,317   | )        |  |            | (134,106 | )            |  |  | (52,672  | ) |  |  | (497,884   | ) |  |  | (43,647  | )
|Corporate expenses                                         |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (533,373   | ) |  |  |         |  
|Foreign exchange gain                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 44,520     |   |  |  |         |  
|Other income / (expense), net                              |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 2,457      |   |  |  | (16      | )
|                                                           |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Loss before interest, taxes, depreciation and amortization |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (984,280   | ) |  |  | (43,663  | )
|Depreciation and amortization                              |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (6,204,239 | ) |  |  | (81,710  | )
|Interest income                                            |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 30,254     |   |  |  |          |  
|Profit on sale of discontinued operations                  |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  | 81,121   |  
|Net (loss)/ profit                                         |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (7,158,265 | ) |  |  | (44,252  | )
|                                                           |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  

|                                                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|--------------------------------------------------------------------- |  | ------------------------- | -------- | -------- |  | -------- | ---------- | -------- |  | ---------- | -------- | ------------ |  |  | -------- | - |  |  | ---------- | - |  |  | -------- | -
|                                                                      |  | Year ended March 31, 2001
|                                                                      |  |                          
|                                                                      |  | Corporate                 |          | Internet |  | Online   |            |          |  |            |          |              |  |  |          |   |  | 
|                                                                      |  | Network / Data            |          | Access   |  | Portal   |            | Other    |  | Continuing |          | Discontinued
|                                                                      |  | 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                                          |  |                           |         |          |  |          |           |          |  |            | (79,494  | )            |  |  |         |   |  |  | (79,494    | ) |  |  |         |  
|Minority interest                                                     |  |                           |         |          |  |          | 8,519      |          |  |            | 2,618    |              |  |  |         |   |  |  | 11,137     |   |  |  |         |  
|                                                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Segment operating income / (loss)                                     |  |                           | 89,946   |          |  |          | (531,569   | )        |  |            | (403,080 | )            |  |  | (155,378 | ) |  |  | (1,000,081 | ) |  |  | 226,807  |  
|Corporate expenses                                                    |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (469,183   | ) |  |  |         |  
|Foreign exchange gain                                                 |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 162,136    |   |  |  |         |  
|Other income / (expense), net                                         |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 7,955      |   |  |  |         |  
|                                                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Profit / (loss) before interest, taxes, depreciation and amortization |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (1,299,173 | ) |  |  | 226,807  |  
|Depreciation and amortization                                         |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (1,615,144 | ) |  |  | (54,226  | )
|Interest income                                                       |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | 234,413    |   |  |  |         |  
|Income taxes                                                          |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (1,707     | ) |  |  |          |  
|                                                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  
|Net loss                                                              |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  | (2,681,611 | ) |  |  | 172,581  |  
|                                                                      |  |                           |          |          |  |          |            |          |  |            |          |              |  |  |          |   |  |  |            |   |  |  |          |  

Depreciation and amortization includes Rs. 215,046 and Rs. 1,206,283 for the
year ended March 31, 2001 and 2002 respectively which represents that portion
of the equity loss in investees pertaining to their depreciation and
amortization expense.

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

---

During fiscal year 2000, the CODM reviewed segments by revenues only in
which Corporate Network / Data services and E-Business services were
combined as a single segment under Corporate Services. Segment information
by revenues on the prior year basis would have been as follows:

|                                  |  |                      |         |      |  |      |           |  |  |     |           | 
|--------------------------------- |  | -------------------- | ------- | ---- |  | ---- | --------- |  |  | --- | --------- | 
|                                  |  | Year ended March 31,
|                                  |  |                     
|                                  |  | 2000                 |         | 2001 |  | 2002
|                                  |  |                      |         |      |  |     
|Internet Access                   |  | Rs.                  | 359,140 |      |  | Rs.  | 469,705   |  |  | Rs. | 515,960   | 
|Corporate Network / Data services |  |                      | 224,529 |      |  |      | 593,310   |  |  |     | 782,749   | 
|E-Business Services               |  |                      | 48,300  |      |  |      | 561,595   |  |  |     | 340,718   | 
|Online Portal Services            |  |                      | 39,056  |      |  |      | 144,417   |  |  |     | 207,105   | 
|Others                            |  |                      |        |      |  |      | 18,049    |  |  |     | 71,674    | 
|                                  |  |                      |         |      |  |      |           |  |  |     |           | 
|Revenues                          |  | Rs.                  | 671,025 |      |  | Rs.  | 1,787,076 |  |  | Rs. | 1,918,206 | 
|                                  |  |                      |         |      |  |      |           |  |  |     |           | 

25. Legal proceedings

On November 5, 2001, a securities class action lawsuit was filed in the
United States District Court for the Southern District of New York on behalf
of all persons who acquired Sifys ADSs between October 20, 1999 and December
6, 2000. Satyam Infoway, certain of the executive officers of Satyam Infoway,
and certain underwriters involved in our initial public offering of ADSs are
named as defendants in the complaint. This complaint alleges that certain of
the underwriters of the initial public offering violated the federal
securities laws by failing to disclose that they had solicited and received
undisclosed commissions from, and entered into undisclosed arrangements with,
certain investors who purchased ADSs in the initial public offering, and had
entered into undisclosed arrangements with certain investors whereby the
underwriters allocated shares in the initial public offering to those
investors in exchange for their agreement to purchase Sifys ADSs in the
after-market at pre-determined prices. The complaint also alleges that the
defendants violated the federal securities laws by issuing a registration
statement in connection with the initial public offering that contained
material misstatements and/or omissions because it did not disclose that
these allegedly undisclosed arrangements had occurred. The complaint seeks
damages on behalf of all those who purchased or otherwise acquired Sifys
ADSs during the period covered by the complaint. The deadline for defendants
to respond to the complaint has not yet expired. Sify believes it has
meritorious defenses and intend 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, our business could be harmed.

Sifys subsidiary IndiaWorld Communications is involved in a pending
litigation relating to the IndiaWorld trademark in Federal Court in San
Diego, California with a third party located in the United States.
IndiaWorld Communications commenced the lawsuit alleging, among other things,
that the third party fraudulently registered and used the IndiaWorld
trademark, and committed copyright infringement and misappropriation of
content of IndiaWorld Communications website. The third party filed a
counterclaim against Sify and IndiaWorld Communications alleging, among other
things, that the activities of IndiaWorld Communications infringe a United
States trademark for the term Indiaworld and associated logos and trade
marks purportedly owned by this third party, and that the third party has an
ownership interest in the underlying assets of IndiaWorld Communications. On
August 9, 2001, the Court granted Sifys motion to dismiss Sify from this
case because the Court found that it did not have personal jurisdiction over
Sify. IndiaWorld Communications is still involved in the case. Sify has
been advised by the prior owners of IndiaWorld Communications that no
infringement or misappropriation has taken place. Sifys contract with the
prior owners of IndiaWorld Communications includes an indemnity for past
infringement or misappropriation. Sify and IndiaWorld Communications have
also been contacted by a party that alleges, among other things, that he is
entitled to an equity ownership in IndiaWorld Communications. Sify believes
that this claim is also covered by the contractual indemnity provided by the
prior owners of IndiaWorld Communications. Nonetheless, any dispute such as
those described above creates uncertainty as to the possible

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

---

outcome,
including whether or not the indemnity will be effective in protecting Sify,
and also could divert management time and attention away from business. An
adverse outcome that is not indemnified could be material.

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 has
remanded the matter back to TRAI for denovoconsideration. The matter is
pending before TRAI. This is a pending matter and no decision has been
announced. Adverse resolution of this dispute could have a material impact
on our business.

Sify is party to additional legal actions arising in the ordinary course of
business. Based on information available to Sify as of March 31, 2002, 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 our company.

Based on opinion received from legal counsel, management believes that an
adverse outcome in respect of the above is not anticipated.

26. Business Plans

Since its founding, Sify has incurred significant losses and negative cash
flows. As of March 31, 2002, Sify had an accumulated deficit of
approximately Rs. 10,408,381 ($ 213,155). Sify has not been profitable and
expects to incur operating losses as it expands its services, invest in
expansion of network/data and technology infrastructure, and advertise and
promote its brand. Sifys business plan assumes that businesses in India
will demand private network and related services. Sifys 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.
However, this business model is not yet proven in India.

Although the Company expects to continue incurring losses in the near
future, in view of Sifys internally available cash and the current status
of its discussions with potential investors, management believes that
sufficient funds are available for the Company to meet its currently known
requirements for the current fiscal year. In order to provide further
financial flexibility, Sify is actively investigating opportunities to raise
additional capital, which could be in the form of debt, equity, or a
combination. Sifys ability to raise funds through the sale of equity is
limited by foreign ownership restrictions imposed on it by Indian law and
the terms of our Internet service provider license.

101



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##### Table of Contents



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

---

As of March 31, 2002, Sify had spent approximately Rs 1,319,300 to develop
and deploy network infrastructure. As of March 31, 2002, Sifys future
contractual obligations and commercial commitments were as follows:

|                              |  |       |       |                  |  |                        |       |           |  |               |       |  |  |     |     |  |  |     |   | 
|----------------------------- |  | ----- | ----- | ---------------- |  | ---------------------- | ----- | --------- |  | ------------- | ----- |  |  | --- | --- |  |  | --- | - | 
|                              |  |       |       |                  |  | Payments Due by Period
|Contractual                   |  |       |       |                  |  |                       
|Obligations                   |  | Total |       | Less than 1 year |  | 1-3 years              |       | 4-5 years |  | After 5 years
|                              |  |       |       |                  |  |                        |       |           |  |              
|Capital Lease
Obligations     |  | Rs.   | 8,236 |                  |  | Rs.                    | 3,972 |           |  | Rs.           | 4,116 |  |  | Rs. | 148 |  |  | Rs. |  | 
|Total Contractual
Obligations |  | Rs.   | 8,236 |                  |  | Rs.                    | 3,972 |           |  | Rs.           | 4,116 |  |  | Rs. | 148 |  |  | Rs. |  | 

|                             |  |           |         |                                            |  |          |         |          |  |              |        |  |  |     |   |  |  |     |   | 
|---------------------------- |  | --------- | ------- | ------------------------------------------ |  | -------- | ------- | -------- |  | ------------ | ------ |  |  | --- | - |  |  | --- | - | 
|                             |  | Total     |         | Amount of Commitment Expiration Per Period
|Other Commercial             |  | Amounts   |         |                                           
|Commitments                  |  | Committed |         | Less than 1 year                           |  | 1-3years |         | 4-5years |  | Over 5 years
|                             |  |           |         |                                            |  |          |         |          |  |             
|Standby Letters of
Credit    |  | Rs.       | 16,919  |                                            |  | Rs.      | 16,919  |          |  | Rs.          |       |  |  | Rs. |  |  |  | Rs. |  | 
|Guarantees                   |  |           | 37,555  |                                            |  |          | 37,555  |          |  |              |       |  |  |     |  |  |  |     |  | 
|Other Commercial
Commitments |  |           | 74,879  |                                            |  |          | 50,464  |          |  |              | 24,415 |  |  |     |  |  |  |     |  | 
|Total Commercial
Commitments |  | Rs.       | 129,353 |                                            |  | Rs.      | 104,938 |          |  | Rs.          | 24,415 |  |  | Rs. |  |  |  | Rs. |  | 

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. However, Sify may not necessarily be able to raise
such additional financing.

102



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##### Table of Contents






Item 19. EXHIBITS

|       |  |                                                                                                                                                                                                                                                                                            
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                            
|1.1    |  | Articles of Association of Satyam Infoway Limited. (1)                                                                                                                                                                                                                                     
|1.2    |  | Amendment to Articles of Association.                                                                                                                                                                                                                                                      
|1.3    |  | Memorandum of Association of Satyam Infoway Limited. (1)                                                                                                                                                                                                                                   
|1.4    |  | Amendment of Memorandum of Association.                                                                                                                                                                                                                                                    
|2.1    |  | Share Subscription and Shareholders Agreement, dated as of February
5, 1999 by and among Satyam Infoway Limited, Satyam Computer
Services Limited, South Asia Regional Fund and Mr. B. Ramalinga
Raju. (1)                                                                                
|2.2    |  | Amendment No. 1 to Share Subscription and Shareholders Agreement,
dated as of September 14, 1999, by and among Satyam Infoway Limited,
Satyam Computer Services limited, South Asia Regional Fund and Mr.
Ramalinga Raju. (1)                                                             
|2.3    |  | Deposit Agreement, dated as of October 18, 1999, among Satyam
Infoway Limited, Citibank, N.A. and holders from time to time of
American Depositary Receipts issued thereunder (including, as an
exhibit, the form of American Depositary Receipt). (5)                                     
|2.4    |  | Amendment No. 1 to Deposit Agreement among Satyam Infoway Limited,
Citibank, N.A. and holders from time to time of American Depositary
Receipts issued thereunder (including, as an exhibit, the form of
American Depository Receipt). (5)                                                 
|2.5    |  | Letter Agreement, dated as of September 4, 1999, by and between
Satyam Infoway Limited and Sterling Commerce, Inc. (1)                                                                                                                                                                     
|2.6    |  | Stockholders Agreement, dated as of September 14, 1999, by and among
Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam Computer
Services Limited. (1)                                                                                                                             
|2.7    |  | Registration Rights Agreement, dated as of September 14, 1999, by
and among Satyam Infoway Limited, Sterling Commerce, Inc. and South
Asia Regional Fund. (1)                                                                                                                              
|4.1    |  | Associate Stock Option Plan (including Deed of Trust). (3)                                                                                                                                                                                                                                 
|4.2    |  | Form of Indemnification Agreement. (3)                                                                                                                                                                                                                                                     
|4.3    |  | License Agreement for Provision of Internet Service, including
Internet Telephony dated as of April 1, 2002 by and between Satyam
Infoway Limited and the Government of India, Ministry of
Communications and Information Technology, Department of
Telecommunications, Telecom Commission.
|4.4    |  | Bank Guarantee, dated as of November 4, 1998. (1)                                                                                                                                                                                                                                          
|4.5+   |  | UUNet Technologies Strategic Alliance Agreement, dated as of April
18, 1997, by and between Satyam Infoway Limited and UUNet
Technologies. (3)                                                                                                                                             
|4.6+   |  | CompuServe Network Services Strategic Alliance Agreement, dated as
of April 18, 1997, by and between Satyam Infoway Limited and
CompuServe Incorporated. (3)                                                                                                                               
|4.7    |  | User Agreement, effective as of April 1, 1999 by and between Satyam
Infoway Limited and Satyam Computer Services Limited. (1)                                                                                                                                                              
|4.8    |  | Share Purchase Agreement, dated November 29, 1999, by and among
Satyam Infoway Limited, Indiaworld Communications Private Limited,
Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature pages
thereto. (4)                      
|4.9    |  | Agreement for Option to Purchase Shares, dated November 29, 1999, by
and among Satyam Infoway Limited, Indiaworld Communications Private
Limited, Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature paged
thereto. (4)       
|4.10   |  | 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, Satyam Infoway Limited and Indiaworld
Communications Private Limited. (7)                                                                 
|4.11   |  | Agreement for the Sale of Shares in CricInfo Limited by and between
Indigo Holdings                                                                                                                                                                                                        

103



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##### Table of Contents



|       |  |                                                                                                                              
|------ |  | -----------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                  
|       |  |                                                                                                                              
|       |  | Limited and Satyam Infoway Limited. (8)                                                                                      
|4.12   |  | Subscription Agreement by and among CricInfo Limited, Satyam Infoway
Limited and the Senior Management. (8)                  
|4.13   |  | Agreed Form of Shareholders Agreement by and among CricInfo Limited,
Satyam Infoway Limited and the Non-SIL Shareholders. (8)
|4.14   |  | Letter Agreement between Satyam Infoway Limited and Indigo Holdings
Limited. (8)                                             
|4.15   |  | Letter Agreement, dated May 17, 2002, between Satyam Infoway Limited and CricInfo Limited.                                   
|4.16   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and R. Ramaraj.                      
|4.17   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and George Zacharias.                
|4.18   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and T.R. Santhanakrishnan.           
|4.19   |  | Business Transfer Agreement, dated March 1, 2002, by and between Satyam
Computer Services Limited and Satyam Infoway Limited.
|4.20   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Ajit Abraham.                    
|4.21   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Rahul Swarup.                    
|4.22   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Rustom Irani.                    
|8.1    |  | List of Subsidiaries.                                                                                                        



---

|+   |  | Registrant has requested confidential treatment pursuant to Rule 406 for
a portion of the referenced exhibit and has separately filed such exhibit with
the Commission.        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(1) |  | Previously filed as an exhibit to Amendment No. 1 to the Registration
Statement on Form F-1 filed with the Commission on October 4, 1999 and
incorporated herein by reference. 
|   
|   
|   
|   
|(2) |  | Previously filed as an exhibit to the Registration Statement on Form
F-6 filed with the Commission on October 6, 1999 and incorporated herein by
reference.                    
|   
|   
|   
|   
|(3) |  | Previously filed as an exhibit to Amendment No. 2 to the Registration
Statement on Form F-2 filed with the Commission on October 13, 1999 and
incorporated herein by reference.
|   
|   
|   
|   
|(4) |  | Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on December 3, 1999 and incorporated herein by reference.                                   
|   
|   
|   
|   
|(5) |  | Previously filed as an exhibit to the Post-Effective Amendment No. 1
to Form F-6 filed with the Commission on January 5, 2000 and incorporated
herein by reference.            
|   
|   
|   
|   
|(6) |  | Previously filed as an exhibit to the Annual Report on Form 20-F filed
with the Commission on June 29, 2000 and incorporated herein by reference.                              
|   
|   
|   
|   
|(7) |  | Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on July 12, 2000 and incorporated herein by reference.                                      
|   
|   
|   
|   
|(8) |  | Previously filed as an exhibit to the Registration Statement on Form
F-2 filed with the Commission on July 26, 2000 and incorporated herein by
reference.                      

104



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##### Table of Contents






SIGNATURES

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

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

Date: June 28, 2002

105



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##### Table of Contents






EXHIBIT INDEX

|       |  |                                                                                                                                                                                                                                                                                            
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                            
|1.1    |  | Articles of Association of Satyam Infoway Limited. (1)                                                                                                                                                                                                                                     
|1.2    |  | Amendment to Articles of Association.                                                                                                                                                                                                                                                      
|1.3    |  | Memorandum of Association of Satyam Infoway Limited. (1)                                                                                                                                                                                                                                   
|1.4    |  | Amendment of Memorandum of Association.                                                                                                                                                                                                                                                    
|2.1    |  | Share Subscription and Shareholders Agreement, dated as of February
5, 1999 by and among Satyam Infoway Limited, Satyam Computer
Services Limited, South Asia Regional Fund and Mr. B. Ramalinga
Raju. (1)                                                                                
|2.2    |  | Amendment No. 1 to Share Subscription and Shareholders Agreement,
dated as of September 14, 1999, by and among Satyam Infoway Limited,
Satyam Computer Services limited, South Asia Regional Fund and Mr.
Ramalinga Raju. (1)                                                             
|2.3    |  | Deposit Agreement, dated as of October 18, 1999, among Satyam
Infoway Limited, Citibank, N.A. and holders from time to time of
American Depositary Receipts issued thereunder (including, as an
exhibit, the form of American Depositary Receipt). (5)                                     
|2.4    |  | Amendment No. 1 to Deposit Agreement among Satyam Infoway Limited,
Citibank, N.A. and holders from time to time of American Depositary
Receipts issued thereunder (including, as an exhibit, the form of
American Depository Receipt). (5)                                                 
|2.5    |  | Letter Agreement, dated as of September 4, 1999, by and between
Satyam Infoway Limited and Sterling Commerce, Inc. (1)                                                                                                                                                                     
|2.6    |  | Stockholders Agreement, dated as of September 14, 1999, by and among
Satyam Infoway Limited, Sterling Commerce, Inc. and Satyam Computer
Services Limited. (1)                                                                                                                             
|2.7    |  | Registration Rights Agreement, dated as of September 14, 1999, by
and among Satyam Infoway Limited, Sterling Commerce, Inc. and South
Asia Regional Fund. (1)                                                                                                                              
|4.1    |  | Associate Stock Option Plan (including Deed of Trust). (3)                                                                                                                                                                                                                                 
|4.2    |  | Form of Indemnification Agreement. (3)                                                                                                                                                                                                                                                     
|4.3    |  | License Agreement for Provision of Internet Service, including
Internet Telephony dated as of April 1, 2002 by and between Satyam
Infoway Limited and the Government of India, Ministry of
Communications and Information Technology, Department of
Telecommunications, Telecom Commission.
|4.4    |  | Bank Guarantee, dated as of November 4, 1998. (1)                                                                                                                                                                                                                                          
|4.5+   |  | UUNet Technologies Strategic Alliance Agreement, dated as of April
18, 1997, by and between Satyam Infoway Limited and UUNet
Technologies. (3)                                                                                                                                             
|4.6+   |  | CompuServe Network Services Strategic Alliance Agreement, dated as
of April 18, 1997, by and between Satyam Infoway Limited and
CompuServe Incorporated. (3)                                                                                                                               
|4.7    |  | User Agreement, effective as of April 1, 1999 by and between Satyam
Infoway Limited and Satyam Computer Services Limited. (1)                                                                                                                                                              
|4.8    |  | Share Purchase Agreement, dated November 29, 1999, by and among
Satyam Infoway Limited, Indiaworld Communications Private Limited,
Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature pages
thereto. (4)                      
|4.9    |  | Agreement for Option to Purchase Shares, dated November 29, 1999, by
and among Satyam Infoway Limited, Indiaworld Communications Private
Limited, Mr. Rajesh Jain and the other shareholders of Indiaworld
Communications Private Limited listed on the signature paged
thereto. (4)       
|4.10   |  | 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, Satyam Infoway Limited and Indiaworld
Communications Private Limited. (7)                                                                 
|4.11   |  | Agreement for the Sale of Shares in CricInfo Limited by and between
Indigo Holdings                                                                                                                                                                                                        

106



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##### Table of Contents



|       |  |                                                                                                                              
|------ |  | -----------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                  
|       |  |                                                                                                                              
|       |  | Limited and Satyam Infoway Limited. (8)                                                                                      
|4.12   |  | Subscription Agreement by and among CricInfo Limited, Satyam Infoway
Limited and the Senior Management. (8)                  
|4.13   |  | Agreed Form of Shareholders Agreement by and among CricInfo Limited,
Satyam Infoway Limited and the Non-SIL Shareholders. (8)
|4.14   |  | Letter Agreement between Satyam Infoway Limited and Indigo Holdings
Limited. (8)                                             
|4.15   |  | Letter Agreement, dated May 17, 2002, between Satyam Infoway Limited and CricInfo Limited.                                   
|4.16   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and R. Ramaraj.                      
|4.17   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and George Zacharias.                
|4.18   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and T.R. Santhanakrishnan.           
|4.19   |  | Business Transfer Agreement, dated March 1, 2002, by and between Satyam
Computer Services Limited and Satyam Infoway Limited.
|4.20   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Ajit Abraham.                    
|4.21   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Rahul Swarup.                    
|4.22   |  | Executive Employment Agreement, dated February 20, 2002, between
Satyam Infoway Limited and Rustom Irani.                    
|8.1    |  | List of Subsidiaries.                                                                                                        



---

|+   |  | Registrant has requested confidential treatment pursuant to Rule 406 for
a portion of the referenced exhibit and has separately filed such exhibit with
the Commission.        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(1) |  | Previously filed as an exhibit to Amendment No. 1 to the Registration
Statement on Form F-1 filed with the Commission on October 4, 1999 and
incorporated herein by reference. 
|   
|   
|   
|   
|(2) |  | Previously filed as an exhibit to the Registration Statement on Form
F-6 filed with the Commission on October 6, 1999 and incorporated herein by
reference.                    
|   
|   
|   
|   
|(3) |  | Previously filed as an exhibit to Amendment No. 2 to the Registration
Statement on Form F-2 filed with the Commission on October 13, 1999 and
incorporated herein by reference.
|   
|   
|   
|   
|(4) |  | Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on December 3, 1999 and incorporated herein by reference.                                   
|   
|   
|   
|   
|(5) |  | Previously filed as an exhibit to the Post-Effective Amendment No. 1
to Form F-6 filed with the Commission on January 5, 2000 and incorporated
herein by reference.            
|   
|   
|   
|   
|(6) |  | Previously filed as an exhibit to the Annual Report on Form 20-F filed
with the Commission on June 29, 2000 and incorporated herein by reference.                              
|   
|   
|   
|   
|(7) |  | Previously filed as an exhibit to the Report on Form 6-K filed with
the Commission on July 12, 2000 and incorporated herein by reference.                                      
|   
|   
|   
|   
|(8) |  | Previously filed as an exhibit to the Registration Statement on Form
F-2 filed with the Commission on July 26, 2000 and incorporated herein by
reference.                      

107