##### 





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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




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FORM 20-F

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

OR

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

OR

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

Commission file number 001-15190

Satyam Computer Services Limited

(Exact Name of Registrant as Specified in Its Charter)


|                                                |  |                                                
|----------------------------------------------- |  | -----------------------------------------------
|N/A                                             |  | Republic of India                              
|(Translation of Registrants Name Into English) |  | (Jurisdiction of Incorporation or Organization)



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Satyam Technology Center
Bahadurpallay Village
Qutbullapur Mandal, R.R. District- 500855
Hyderabad, Andra Pradesh
India
(91) 40-2309-7505
(Address and Telephone Number of Principal Executive Offices)



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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 represented by two Equity Shares, par value
Rs.2 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.

312,331,980 equity shares, including 33,350,000 underlying equity shares for
16,675,000 ADS, were issued and outstanding as of March 31, 2003.

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

Yes
þ No o

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

Item 17
o Item 18
þ



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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 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|                                                                                                                           | Item 8. FINANCIAL INFORMATION                                                        
|                                                                                                                           | Item 9. THE OFFER AND LISTING                                                        
|                                                                                                                           | Item 10. ADDITIONAL INFORMATION                                                      
|                                                                                                                           | Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|                                                                                                                           | Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|PART II                                                                                                                   
|                                                                                                                           | Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|                                                                                                                           | Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|                                                                                                                           | Item 15. CONTROLS AND PROCEDURES                                                     
|                                                                                                                           | Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                           
|                                                                                                                           | Item 16B. CODE OF ETHICS                                                             
|PART III                                                                                                                  
|Item 19. EXHIBITS                                                                                                         
|Report of Price Waterhouse, Independent Accountants                                                                       
|Consolidated Balance Sheets as of March 31, 2002 and 2003                                                                 
|Consolidated Statements of Operations for the years ended March 31, 2001, 2002 and 2003                                   
|Consolidated Statements of Shareholders Equity and Comprehensive Income for the years ended March 31, 2001, 2002 and 2003
|Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2002 and 2003                                   
|Notes to the Consolidated Financial Statements                                                                            
|Ex-8.1 Significant Subsidiaries                                                                                           
|Ex-10.1 Consent of Independent Accountants                                                                                
|EX-99.1 Certification of Chief Executive Officer                                                                          
|Ex-99.2 Certification of Chief Financial Officer                                                                          

TABLE OF CONTENTS

SATYAM COMPUTER SERVICES LIMITED

|         |                                                                                       |  |    |    | 
|-------- | ------------------------------------------------------------------------------------- |  | -- | -- | 
|         | Currency of Presentation and Certain Defined Terms                                    |  |    | 1  | 
|         | Forward-Looking Statements May Prove Inaccurate                                       |  |    | 1  | 
|PART I   |                                                                                       |  | 2  |   
|         | Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  |    | 2  | 
|         | Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  |    | 2  | 
|         | Item 3. KEY INFORMATION                                                               |  |    | 2  | 
|         | Item 4. INFORMATION ON THE COMPANY                                                    |  |    | 13 | 
|         | Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  |    | 23 | 
|         | Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  |    | 52 | 
|         | Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  |    | 60 | 
|         | Item 8. FINANCIAL INFORMATION                                                         |  |    | 61 | 
|         | Item 9. THE OFFER AND LISTING                                                         |  |    | 62 | 
|         | Item 10. ADDITIONAL INFORMATION                                                       |  |    | 63 | 
|         | Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |    | 76 | 
|         | Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |    | 77 | 
|PART II  |                                                                                       |  | 78 |   
|         | Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  |    | 78 | 
|         | Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS |  |    | 78 | 
|         | Item 15. CONTROLS AND PROCEDURES                                                      |  |    | 78 | 
|         | Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            |  |    | 78 | 
|         | Item 16B. CODE OF ETHICS                                                              |  |    | 78 | 
|PART III |                                                                                       |  | 79 |   
|         | Item 17. FINANCIAL STATEMENTS                                                         |  |    | 79 | 
|         | Item 18. FINANCIAL STATEMENTS                                                         |  |    | 79 | 
|         | Item 19. EXHIBITS                                                                     |  |    | 79 | 





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##### 



Currency of Presentation and Certain Defined Terms

Unless the context otherwise requires, references herein to we, us,
the company, SAY or Satyam are to Satyam Computer Services Limited, a
limited liability company organized under the laws of the Republic of India,
and its consolidated subsidiaries. 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 a leading Indian
information technology services company which is traded on the New York Stock
Exchange under the symbol SAY as well as the major Indian stock exchanges.
Satyam is a trademark owned by Satyam Computer Services. Sify.com,
SatyamOnline, Satyam: Net, satyamonline.com and Satyam iway are
trademarks used by our associate company, Sify Limited, or Sify, for which
registration applications are pending in India. All other trademarks or
tradenames used in this Annual Report on Form 20-F, or Annual Report, are the
property of their respective owners.

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

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

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

Forward-Looking Statements May Prove Inaccurate

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

1



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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,
1999, 2000, 2001, 2002 and 2003 and the balance sheet data as of March 31,
1999, 2000, 2001, 2002 and 2003 are derived from our consolidated audited
financial statements including the notes, included elsewhere in this
report,
prepared in accordance with U.S. GAAP for the fiscal years ended March 31,
1999, 2000, 2001, 2002 and 2003. As a result of our decreased ownership interest,
we no longer maintain a controlling interest in Sify and subsequent to December
9, 2002 we have accounted for our interest in Sify using the equity method.
Consequently, financial data for the year ended March 31, 2003 is not
comparable with prior periods.

|                                                                                                                 |                                                  |                |         |                                                                   |        |      |         |         |         |      |          |          |         |  |          |          |         |  |          |          |         | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | -------------- | ------- | ----------------------------------------------------------------- | ------ | ---- | ------- | ------- | ------- | ---- | -------- | -------- | ------- |  | -------- | -------- | ------- |  | -------- | -------- | ------- | 
|                                                                                                                 |                                                  |                |         | Year ended March 31,                                             
|                                                                                                                 |                                                  |                |         |                                                                  
|                                                                                                                 |                                                  |                |         | 1999                                                              |        | 2000 |         | 2001    |         | 2002 |          | 2003    
|                                                                                                                 |                                                  |                |         |                                                                   |        |      |         |         |         |      |          |         
|                                                                                                                 |                                                  |                |         | (in thousands ($), except per share data and as stated otherwise)
|Statement of Operations Data:                                                                                    |                                                  |                |         |                                                                   |        |      |         |         |         |      |          |          |         |  |          |          |         |  |          |         
|Revenues:                                                                                                        |                                                  |                |         |                                                                   |        |      |         |         |         |      |          |          |         |  |          |          |         |  |          |         
|                                                                                                                 | Information technology services                  |                |         | 95,573                                                            |        |      |         | 149,257 |         |      |          | 273,467  |         |  |          | 377,321  |         |  |          | 432,621  |        
|                                                                                                                 | Internet services                                |                |         | 2,222                                                             |        |      |         | 15,198  |         |      |          | 36,840   |         |  |          | 36,585   |         |  |          | 25,715   |        
|                                                                                                                 | Software products                                |                |         |                                                                  |        |      |         |        |         |      |          |         |         |  |          | 585      |         |  |          | 871      |        
|                                                                                                                 |                                                  | Total revenues |         |                                                                   | 97,795 |      |         |         | 164,455 |      |          |          | 310,307 |  |          |          | 414,491 |  |          |          | 459,207 | 
|Cost of revenues (1)                                                                                             |                                                  |                | (49,559 | )                                                                 |        |      | (90,449 | )       |         |      | (208,121 | )        |         |  | (238,996 | )        |         |  | (272,688 | )       
|Gross profit                                                                                                     |                                                  |                | 48,236  |                                                                   |        |      | 74,006  |         |         |      | 102,186  |          |         |  | 175,495  |          |         |  | 186,519  |         
|Operating expenses:                                                                                              |                                                  |                |         |                                                                   |        |      |         |         |         |      |          |          |         |  |          |          |         |  |          |         
|                                                                                                                 | Selling, general and administrative
expenses (2) |                |         | (31,896                                                           | )      |      |         | (69,592 | )       |      |          | (124,100 | )       |  |          | (140,896 | )       |  |          | (119,424 | )      
|                                                                                                                 | Amortization of goodwill                         |                |         | (130                                                              | )      |      |         | (5,043  | )       |      |          | (24,728  | )       |  |          | (16,997  | )       |  |          |         |        
|                                                                                                                 | Impairment of goodwill                           |                |         |                                                                  |        |      |         |        |         |      |          |         |         |  |          | (81,115  | )       |  |          |         |        
|                                                                                                                 | Impairment of other non
marketable Investments   |                |         |                                                                  |        |      |         |        |         |      |          |         |         |  |          |         |         |  |          | (3,299   | )      
|Reversal of Put option charge                                                                                    |                                                  |                |        |                                                                   |        |      |        |         |         |      |         |          |         |  |         |          |         |  | 19,843   |         
|Total Operating Expenses                                                                                         |                                                  |                | (32,028 | )                                                                 |        |      | (74,635 | )       |         |      | (148,828 | )        |         |  | (239,008 | )        |         |  | (102,880 | )       
|Operating Income(Loss)                                                                                           |                                                  |                | 16,208  |                                                                   |        |      | (629    | )       |         |      | (46,642  | )        |         |  | (63,513  | )        |         |  | 83,639   |         
|Interest Income                                                                                                  |                                                  |                | 43      |                                                                   |        |      | 2,625   |         |         |      | 5,732    |          |         |  | 3,806    |          |         |  | 7,158    |         
|Interest Expense                                                                                                 |                                                  |                | (6,905  | )                                                                 |        |      | (11,290 | )       |         |      | (9,632   | )        |         |  | (2,856   | )        |         |  | (800     | )       
|Gain of Sale of shares in Infoway                                                                                |                                                  |                |        |                                                                   |        |      |        |         |         |      |         |          |         |  | 45,594   |          |         |  |         |         
|Gain
on Sale of Shares in Satyam GE                                                                              |                                                  |                |        |                                                                   |        |      |        |         |         |      |         |          |         |  |         |          |         |  | 830      |         
|Gain/(loss)
on foreign exchange transactions                                                                     |                                                  |                | 918     |                                                                   |        |      | 1,072   |         |         |      | 5,816    |          |         |  | 10,813   |          |         |  | (4,757   | )       
|Other
Income/(expenses)                                                                                          |                                                  |                | 44      |                                                                   |        |      | (19     | )       |         |      | 646      |          |         |  | 1,277    |          |         |  | (1,746   | )       
|Income (loss) before income taxes,
minority interest and equity in earnings
(losses) of associated companies net |                                                  |                | 10,308  |                                                                   |        |      | (8,241  | )       |         |      | (44,080  | )        |         |  | (4,879   | )        |         |  | 84,324   |         
|Income taxes                                                                                                     |                                                  |                | (1,105  | )                                                                 |        |      | (1,619  | )       |         |      | (4,137   | )        |         |  | (17,234  | )        |         |  | (12,295  | )       

2



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|                                                                                    |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |          |   | 
|----------------------------------------------------------------------------------- | -------------------- |  | ----- | ----------------------------------------------------------------- | - | ---- | ------ | ------- | - | ---- | ------- | -------- | - |  | ------- | ------- | - |  | ------ | -------- | - | 
|                                                                                    |                      |  |       | Year ended March 31,                                             
|                                                                                    |                      |  |       |                                                                  
|                                                                                    |                      |  |       | 1999                                                              |   | 2000 |        | 2001    |   | 2002 |         | 2003    
|                                                                                    |                      |  |       |                                                                   |   |      |        |         |   |      |         |         
|                                                                                    |                      |  |       | (in thousands ($), except per share data and as stated otherwise)
|Minority interest                                                                   |                      |  | (171  | )                                                                 |   |      | 2,785  |         |   |      | 25,772  |          |   |  | 73,406  |         |   |  | 11,082 |         
|Equity in earnings (losses) of
associated companies, net of taxes                   |                      |  | (18   | )                                                                 |   |      | 135    |         |   |      | (5,467  | )        |   |  | (25,401 | )       |   |  | (3,339 | )       
|Net Income (loss)                                                                   |                      |  | 9,014 |                                                                   |   |      | (6,940 | )       |   |      | (27,912 | )        |   |  | 25,892  |         |   |  | 79,772 |         
|Earning Per Share:                                                                  |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |         
|                                                                                    | Basic                |  |       | 0.03                                                              |   |      |        | (0.03   | ) |      |         | (0.10    | ) |  |         | 0.08    |   |  |        | 0.26     |  
|                                                                                    | Diluted              |  |       | 0.03                                                              |   |      |        | (0.03   | ) |      |         | (0.10    | ) |  |         | 0.08    |   |  |        | 0.25     |  
|Earning (loss) per ADS
Basic                                                        |                      |  | 0.07  |                                                                   |   |      | (0.03  | )       |   |      | (0.21   | )        |   |  | 0.17    |         |   |  | 0.51   |         
|                                                                                    | Diluted              |  |       | 0.07                                                              |   |      |        | (0.03   | ) |      |         | (0.21    | ) |  |         | 0.17    |   |  |        | 0.50     |  
|Weighted average equity shares used in
computing earnings per share (in thousands): |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |         
|                                                                                    | Basic                |  |       | 260,190                                                           |   |      |        | 264,720 |   |      |         | 269,943  |   |  |         | 305,751 |   |  |        | 311,797  |  
|                                                                                    | Diluted              |  |       | 260,260                                                           |   |      |        | 264,720 |   |      |         | 269,943  |   |  |         | 307,113 |   |  |        | 318,658  |  
|Weighted average ADS used in computing
earnings per ADS:                            |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |         
|                                                                                    | Basic                |  |       | 130,095                                                           |   |      |        | 132,360 |   |      |         | 134,972  |   |  |         | 152,875 |   |  |        | 155,899  |  
|                                                                                    | Diluted              |  |       | 130,130                                                           |   |      |        | 132,360 |   |      |         | 134,972  |   |  |         | 153,556 |   |  |        | 159,329  |  
|Cash dividend per equity share                                                      |                      |  | 0.01  |                                                                   |   |      | 0.01   |         |   |      | 0.02    |          |   |  | 0.02    |         |   |  | 0.03   |         
|Cash dividend per ADS                                                               |                      |  | 0.03  |                                                                   |   |      | 0.03   |         |   |      | 0.03    |          |   |  | 0.04    |         |   |  | 0.06   |         
|Other Data:                                                                         |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |         
|Net
cash provided by (used in):                                                     |                      |  |       |                                                                   |   |      |        |         |   |      |         |          |   |  |         |         |   |  |        |         
|                                                                                    | Operating activities |  | $     | 14,245                                                            |   |      | $      | 14,115  |   |      | $       | 5,935    |   |  | $       | 116,371 |   |  | $      | 98,540   |  
|                                                                                    | Investing Activities |  |       | (36,089                                                           | ) |      |        | (83,619 | ) |      |         | (137,775 | ) |  |         | (40,360 | ) |  |        | (271,959 | )
|                                                                                    | Financing Activities |  |       | 35,849                                                            |   |      |        | 251,664 |   |      |         | 14,212   |   |  |         | 110,747 |   |  |        | (12,145  | )
|                                                                                    | Capital Expenditure  |  |       | 39,071                                                            |   |      |        | 42,909  |   |      |         | 85,156   |   |  |         | 29,664  |   |  |        | 11,016   |  
|Number of information technology
services technical associates                      |                      |  | 3,513 |                                                                   |   |      | 4,473  |         |   |      | 7,798   |          |   |  | 7,898   |         |   |  | 9,086  |         



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|(1) |  | Inclusive of deferred stock based compensation expense of $13,356
thousand in fiscal 2000, $31,336 thousand in fiscal 2001, $7,212 thousand
in fiscal 2002 and $1,591 thousand in fiscal 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Inclusive of deferred stock based compensation expense of $3,575 thousand
in fiscal 2000, $14,782 thousand in fiscal 2001, $3,582 thousand in
fiscal 2002 and $2,930 thousand in fiscal 2003. 

|                                                 |  |                  |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|------------------------------------------------ |  | ---------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------- | 
|                                                 |  | As at March 31, 
|                                                 |  |                 
|                                                 |  | 1999             |         | 2000 |  | 2001 |         | 2002 |  | 2003
|                                                 |  |                  |         |      |  |      |         |      |  |     
|                                                 |  | In thousands ($)
|Balance Sheet Data:                              |  |                  |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         | 
|Cash and Cash Equivalents                        |  |                  | 13,215  |      |  |      | 192,304 |      |  |      | 66,068  |  |  |  | 243,454 |  |  |  | 62,202  | 
|Total Assets                                     |  |                  | 116,319 |      |  |      | 412,559 |      |  |      | 481,099 |  |  |  | 515,502 |  |  |  | 568,843 | 
|Total Long-term debt (excluding
current portion) |  |                  | 47,967  |      |  |      | 50,050  |      |  |      | 9,625   |  |  |  | 2,712   |  |  |  | 1,738   | 
|Total share holders Equity                      |  |                  | 35,892  |      |  |      | 168,474 |      |  |      | 194,695 |  |  |  | 369,842 |  |  |  | 460,668 | 
|Capital stock                                    |  |                  |        |      |  |      | 205,234 |      |  |      | 269,135 |  |  |  | 422,674 |  |  |  | 423,850 | 

3



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##### 



RISK FACTORS

Any investment in our ADSs involves a high degree of risk. You should
consider carefully the following information about these risks, together with
the other information contained in this Annual Report, before you decide to buy
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 Our Overall Operations

Any inability to manage our rapid growth could disrupt our business and
reduce our profitability

We have experienced significant growth in recent periods. Our total
revenues increased 10.8% in fiscal 2003 as compared to fiscal 2002. As of
March 31, 2003, we had 9,838 employees, whom we refer to as associates,
worldwide as compared to 9,532 associates as of March 31, 2002. We expect our
growth to place significant demands on our management and other resources and
will require us to continue to develop and improve our operational, financial
and other internal controls, both in India and elsewhere. In particular,
continued growth increases the challenges involved in:



| |  |  | recruiting and retaining sufficiently skilled technical, marketing and management personnel;
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | providing adequate training and supervision to maintain our high quality standards; and     
|
| |  |  | preserving our culture and values and our entrepreneurial environment.                      

Our subsidiaries and associated companies may continue to experience losses
and negative cash flows.

As of May 31, 2003, we owned 36.0% of the equity shares of Sify and all
of the outstanding stock of VCI. Since their inception in December 1995 and
January 1999, respectively, Sify and VCI have incurred significant operating
losses and negative cash flows. As of March 31, 2003, the cumulative net losses
incurred by Sify were $247 million and by VCI were $27.3 million. We cannot
assure you that the operating losses or negative cash flows of Sify and VCI
will not continue or increase in the future or that Sify and VCI will become
profitable.

The value of our interest in Sify may decline.

Sifys ADSs are listed for trading on the Nasdaq National Market under the
symbol SIFY, however we do not know whether Sify will be able to retain this
listing in the future. The market price of Sifys ADSs has been highly
volatile, ranging from a high of $425 per ADS to a low of $0.88 per ADSs from
its initial public offering in October 1999 through May 31, 2003, and may
continue to fluctuate widely. Any decline in the market price of Sifys ADSs is
likely to cause the value of the equity shares of Sify which we hold to
decline. We hold our interest in Sify in the form of equity shares for which
there is no market and our ability to convert these equity shares into ADSs is
restricted. Under a shareholders agreement to which we are a party, mergers,
acquisitions and sales of substantially all the assets of Sify require the
approval of two other Sify shareholders, Softbank Asia Infrastructure Fund, or
SAIF, and VentureTech Solutions Private Ltd., or VentureTech. Sify has not been
profitable since its founding and may continue to incur significant losses and
negative cash flows in the future.

Deferred stock compensation expenses may significantly reduce our net income
under U.S. GAAP.

Our reported income under U.S. GAAP has been and will continue to be
affected by the grant of warrants or options under our various employee benefit
plans. Under the terms of our existing plans, employees were typically granted
warrants or options to purchase equity shares at a substantial discount to the
current market value. These grants require us to record non-cash compensation
expenses under currently applicable U.S. GAAP, amortized over the vesting
period of the warrants or options. We expect to recognize amortization of
deferred stock based compensation expense in respect of our three Associate
Stock Option Plans, ASOP, ASOP-B and ASOP ADS, in the approximate amounts of
$2.5 million in fiscal 2004 and $0.3 million in fiscal 2005 based on the price
of our equity shares on March 31, 2003 and in connection with both granted and
ungranted warrants and options on that date. Depending on the market value of
our equity shares on the dates future grants are made, amortization of deferred
stock based compensation expense with respect to ungranted warrants may cause
the expected amounts to change. The size

4



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of our stock compensation expenses has
contributed, and may continue to contribute to negative operating income and
negative net income for purposes of U.S. GAAP. We recognized deferred stock
based compensation of $1.7 million under our ASOP, ASOP B and ASOP ADS Plans
in fiscal 2003 and $3.3 million was amortized and charged to earnings.

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

As at March 31, 2003, we have a significant, non-controlling
interests in Sify, Satyam Venture Engineering Services Private Limited and CA
Satyam ASP Private Limited that are 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 associates 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 but have the ability to exercise
significant influence over their operating and financial policies. Thus, our reported results of operations can be
significantly increased or decreased depending on the results of Sify,
Satyam Venture Engineering Services Private Limited and CA Satyam ASP Private
Limited or other companies in which we may make similar investments even
though we may have only a limited ability to influence their activities. We
may also be required to record additional impairment charges in their carrying
value if we deem the investment to be impaired due to adverse events, many of
which are outside of our control, on their business, results of operations and
financial condition in future periods.

Impairment of goodwill on account of our investments may impact our net
income under U.S. GAAP.

We make estimates in the preparation of financial statements including the
utility of goodwill. Changes in such estimates resulting from events many of
which are outside of our control, may result in the impairment of goodwill
which would negatively impact our net income under U.S. GAAP. Such impact on
net income may result in a reduction of the market value of our shares.

Our revenues are highly dependent upon a small number of customers.

We derive a significant portion of our revenues from a limited number of
corporate customers. In fiscal 2003, our largest customer, General Electric
Company and its affiliates, accounted for 17.1% of our information technology,
or IT services revenues (excluding inter-segment revenues) and 16.1% of our
total revenues. In fiscal 2003, our second largest customer, accounted for
9.2% of our IT services revenues (excluding inter-segment revenues) and 8.7% of
our total revenues. During fiscal 2003 and fiscal 2002, our five largest
customers accounted for 40.8% and 42.2%, respectively, of our IT services
revenues (excluding inter-segment revenues) and 38.4% and 38.4%, respectively,
of our total revenues. The volume of work performed for specific customers is
likely to vary from year to year, particularly since we are usually not the
exclusive outside service provider for our customers. As a result, if we were
to lose one of our major customers or have it significantly reduce its volume
of business with us, our profitability could be reduced.

We dedicate significant resources to develop international operations which
may be more difficult to manage and operate.

In addition to our offshore IT centers in India, we have established IT
centers in the United States, United Kingdom, Japan, Dubai,
Australia, Singapore and other countries. Further we plan to open additional international facilities. Our lack of
experience with facilities outside of India subjects us to risk with regard to
foreign regulation and overseas facilities management. Increasing the number of
IT centers and the scope of operations outside of India subjects us to a number
of risks, including administrative difficulties, currency exchange rate
fluctuations, restrictions against the repatriation of earnings, overlapping
taxes and cost overruns and delays.

System failure could disrupt the lines of communication our business depends
on.

To deliver our services to our customers, we must maintain active voice
and data communications 24 hours a day between our main offices in Hyderabad,
our other IT centers and the offices of our customers worldwide. Any
significant loss of our ability to transmit voice and data through satellite
and telephone communications could result in lost customers and curtailed
operations which would reduce our profitability.

We may be unable to attract skilled professionals in the competitive labor
market.

Our ability to execute projects and to obtain new customers depends, in
large part, on our ability to attract, train, motivate and retain highly
skilled technical associates, particularly project managers, project leaders
and other senior

5



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technical personnel. We believe that there is significant
competition for technical associates who possess the skills needed to perform
the services we offer. An inability to hire and retain additional qualified
personnel will impair our ability to bid for or obtain new projects and to
continue to expand our business. Also, we cannot assure you that we will be
able to assimilate and manage new technical associates effectively. In fiscal
2002 and fiscal 2003, we experienced associate attrition at a rate of 13.2% and
15.6%, respectively. Any increase in our attrition rates, particularly the rate
of attrition of experienced software engineers and project managers and
leaders, would harm our growth strategy. We cannot assure you that we will be
successful in recruiting and retaining a sufficient number of replacement
technical associates with the requisite skills to replace those technical
associates who leave. Further, we cannot assure you that we will be able to
redeploy and re-train our technical associates to keep pace with continuing
changes in IT, evolving technologies and changing customer preferences.
Historically, wage costs in the Indian IT services industry have been
significantly lower than wage costs in the United States for comparably skilled
technical associates. However, in recent years, wage costs in the Indian IT
services industry have been increasing at a faster rate than those in the
United States, driven in part by demand for Indian technical associates
overseas. In the long-term, wage increases may make us less competitive unless
we are able to continue increasing the efficiency and productivity of our
professionals and the prices of our services.

U.S. immigration restrictions could limit our ability to expand our U.S.
operations.

Our professionals working onsite at a customers premises in the United
States are typically required to obtain visas. Although there is no limit to
new L-1 petitions, there is a limit to the number of new H-1B petitions that
are approved in any government fiscal year and in some years recently this
limit has been reached well before the end of the fiscal year. In years in
which this limit is reached, we may be unable to obtain H-1B visas necessary to
bring critical Indian technical associates to the United States on an extended
basis. Changes in existing U.S. immigration laws that make it more difficult
for us to obtain visas could impair our ability to compete for and provide
services to customers.

Our fixed-price contracts expose us to additional risks, many of which are
beyond our control, which may reduce the profitability of these contracts.

As a core element of our business strategy, we continue to offer a portion
of our services on a fixed-price basis, rather than on a time-and-materials
basis. During fiscal 2003 and fiscal 2002, we derived 29% and 22%,
respectively, of our total IT services revenues from fixed-price contracts.
Although we use our software engineering processes and past project experience
to reduce the risks associated with estimating, planning and performing
fixed-price projects, we bear the risk of cost overruns, completion delays and
wage inflation in connection with these projects. Many of these risks may be
beyond our control. Our failure to estimate accurately the resources and time
required for a project, future rates of wage inflation and currency exchange
rates or our failure to complete our contractual obligations within the time
frame committed could reduce the profitability of our fixed-price contracts.

We may be liable to our customers for damages resulting from a system
failure.

Many of our contracts involve projects that are critical to the operations
of our customers businesses and provide benefits that may be difficult to
quantify. Any failure in a customers system could result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. Although we attempt to limit our contractual liability for damages
arising from negligent acts, errors, mistakes or omissions in rendering our
services, we cannot assure you that the limitations of liability set forth in
our service contracts will be enforceable in all instances or will otherwise
protect us from liability for damages. We do not maintain liability insurance
to cover losses from such claims for damages. Assertions of one or more large
claims against us could result in lost customers, and could increase our costs
and reduce our profitability.

We face intense competition in the IT services market which could reduce our
revenues and prevent us from maintaining our customers.

The market for IT services is rapidly evolving and highly competitive. We
expect that competition will continue to intensify. We face competition in
India and elsewhere from a number of companies, including:



| |  |  | Indian IT services companies, such as Infosys Technologies Limited,
Wipro Limited and Tata Consultancy Services;
| | - |  | ----------------------------------------------------------------------------------------------------------------

6



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| |  |  | U.S. IT services companies, such as Computer Sciences Corporation,
Electronic Data Systems, Accenture, IBM, Cambridge Technology Partners
and Keane Inc; and                                                                                                                                                                                                 
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | other international, national, regional and local firms from a
variety of market segments, including major international accounting
firms, systems consulting and implementation firms, applications
software firms, service groups of computer equipment companies, general
management consulting firms, programming companies and temporary
staffing firms.

We expect that future competition will increasingly include firms with
operations in other countries, potentially including countries with lower
personnel costs than those prevailing in India. A significant part of our
competitive advantage has historically been the cost advantage relative to
service providers in the United States and Europe. Since wage costs in this
industry in India are presently increasing at a faster rate than those in the
United States and Europe, our ability to compete effectively will become
increasingly dependent on our reputation, the quality of our services and our
expertise in specific markets. Many of our competitors have significantly
greater financial, technical and marketing resources and generate greater
revenues than us, and we cannot assure you that we will be able to compete
successfully with such competitors and will not lose existing customers to such
competitors. We believe that our ability to compete also depends in part on a
number of factors outside our control, including the ability of our competitors
to attract, train, motivate and retain highly skilled technical associates, the
price at which our competitors offer comparable services and the extent of our
competitors responsiveness to customer needs.

We may be restricted from acquiring non-Indian companies which could
adversely affect our growth strategy.

We have developed a growth strategy based on, among other things,
expanding our presence in existing and new markets and selectively pursuing
attractive joint venture and acquisition opportunities. Under Indian law, an
Indian company is usually required to obtain the approval of the Reserve Bank
of India, or RBI, and/or the government of India to acquire a non-Indian
company. If we are unable to obtain such approvals or are delayed in obtaining
them, we may not be able to fully execute our growth strategy, which could
adversely affect our operations.

Our revenues are difficult to predict and can vary significantly from
quarter to quarter which could cause our share price to decline
significantly.

Our quarterly operating results have historically fluctuated and may
fluctuate significantly in the future. This is primarily because we derive our
revenue from fees for services generated on a project-by-project basis. Our
projects vary in size, scope and duration. For example, we have some projects
that employ only several people for a few weeks and we have other projects that
employ over 100 people for six months or more. A customer that accounts for a
significant portion of our revenue in a particular period may not account for a
similar portion of our revenue in future periods. In addition, customers may
cancel contracts or defer projects at any time for a number of different
reasons. As a result, our revenues and our operating results in a particular
period are difficult to predict, may decline in comparison to corresponding
prior periods regardless of the strength of our business, and may not meet the
expectations of securities analysts or investors. If this were to occur the
share price of our equity shares and our ADSs would likely decline
significantly.

Our customers may terminate projects before completion or choose not to
renew contracts, many of which are terminable at will, which could adversely
affect our profitability.

Any failure to meet a customers expectations could result in a
cancellation or non-renewal of a contract. Our contracts with customers do not
commit our customers to provide us with a specific volume of business and can
typically be terminated by our customers with or without cause, with little or
no advance notice and without penalty, which could significantly reduce our
revenues. Additionally, our contracts with customers typically are limited to a
specific project and not any future work. There are also a number of factors
other than our performance and not within our control that could cause the loss
of a customer. Our customers may demand price reductions, change their
outsourcing strategy by moving more work in-house, or replace their existing
software with packaged software supported by licensors, any of which could
reduce our profitability.

Risks Related to Investments in Indian Companies

We are incorporated in India, and a substantial portion of our assets and
our 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

7



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and economic developments affecting India.

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

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

Political instability could seriously harm 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. Since 1996, the government of India has changed five
times. The current government of India, formed in October 1999, has announced
policies and taken initiatives that supported the continued economic
liberalization policies that have been pursued by the previous governments. We
cannot assure you that these liberalization policies will continue in the
future. Government corruption scandals and protests against privatization could
slow down the pace of liberalization and deregulation. 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 disrupt business and economic conditions in India generally and our
business in particular.

Foreign investment restrictions under Indian law may adversely impact the
value of our ADSs.

Our equity shares are traded on the Stock Exchange, Mumbai (formerly known
as the Stock Exchange, Bombay), the National Stock Exchange of India Limited
and the Hyderabad Stock Exchange Limited and they may trade on these stock
exchanges at a discount or premium to the ADSs traded on the New York Stock
Exchange in part because of restrictions on foreign ownership of the underlying
shares.

Under current Indian regulations and practice, RBI approval 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 RBI 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 RBI
approval for each transaction. We cannot assure you that any required approval
from the RBI or any other government agency can be obtained.

Indian law imposes restrictions that limit your ability to convert equity
shares into ADSs, which may cause our equity shares to trade at a discount or premium to the market price of our
ADSs.

Under prior Indian laws and regulations, our depositary could not accept
deposits of outstanding equity shares and issue ADRs evidencing ADSs
representing such equity shares without prior approval of the Government of
India. The Reserve Bank of India has announced fungibility regulations
permitting, under limited circumstances, the conversion

8



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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 only be able to trade those equity shares on an
Indian stock exchange and, under present law, likely will not be permitted to
reconvert those equity shares to ADSs. Additionally, investors who exchange
ADSs for the underlying equity shares and are not holders of record will be
required to declare to us details of the holder of record, and the holder of
record will be required to disclose the details of the beneficial owner. Any
investor who fails to comply with this requirement may be liable for a fine of
up to Indian Rs.1,000 for each day such failure continues. Such restrictions on
foreign ownership of the underlying equity shares may cause our equity shares
to trade at a discount or premium to the ADSs.

Except for limited circumstances, the Reserve Bank of India must approve
the sale of equity shares underlying ADSs by a non-resident of India to a
resident of India. Since currency exchange controls are in effect in India, the
Reserve Bank of India will approve the price at which equity shares are
transferred based on a specified formula, and a higher price per share may not
be permitted. Additionally, except in certain limited circumstances, if an
investor seeks to convert the rupee proceeds from a sale of equity shares in
India into foreign currency and then repatriate that foreign currency from
India, he or she will have to obtain an additional Reserve Bank of India
approval for each transaction. We cannot assure our ADS holders that any
required approval from the Reserve Bank of India or any other government agency
can be obtained on any terms or at all.

Currency exchange rate fluctuations may affect the value of our ADSs.

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, 2001 through March 31, 2003, the
value of the rupee against the U.S. dollar declined by approximately 9%. In
fiscal 2002 and fiscal 2003, our U.S. dollar-denominated revenues represented
82.7% and 81.2%, respectively, of our total revenues. We expect that a majority
of our revenues will continue to be generated in U.S. dollars for the
foreseeable future and that a significant portion of our expenses, including
personnel costs as well as capital and operating expenditures, will continue to
be denominated in rupees. Consequently, our results of operations will be
adversely affected to the extent that the rupee appreciates against the U.S.
dollar. Depreciation of the rupee will result in foreign currency translation
losses in respect of foreign currency borrowings, if any. In fiscal 2002, our
foreign currency translation losses were approximately $15.1 million while our
foreign currency gains were approximately $16.6 million in fiscal 2003.
Fluctuations in the exchange rate between the rupee and the U.S. dollar will
also affect the U.S. dollar conversion by the depositary of any cash dividends
paid in rupees on the equity shares represented by the ADSs. In addition,
fluctuations in the exchange rate between the Indian rupee and the U.S. dollar
will affect the U.S. dollar equivalent of the Indian rupee price of our equity
shares on the Stock Exchange, Mumbai, the National Stock Exchange and the
Hyderabad Stock Exchange, which we refer to collectively as the Indian stock
exchanges. As a result, these fluctuations are likely to affect the prices of
our ADSs. These fluctuations will also affect the dollar value of the proceeds
a holder would receive upon the sale in India of any equity shares withdrawn
from the depositary under the deposit agreement. We cannot assure you that
holders of ADSs will be able to convert rupee proceeds into U.S. dollars or any
other currency or with respect to the rate at which any such conversion could
occur. In addition, our market valuation could be seriously harmed 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 has recently taken actions to curtail or eliminate
tax benefits that we have historically benefited from.

We have historically benefited from significant tax incentives provided
under Indian tax laws. The principal applicable incentives are:



| |  |  | a tax deduction for all profits derived from exporting computer
software and services; and                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a 10-year tax holiday in respect of income derived from the
operation of software development centers designated as Software
Technology Parks under Indian tax legislation.

As a result, the majority of our income is not subject to Indian tax and,
accordingly, our effective tax rate is far below the Indian statutory income
tax rate of 35.0% plus an applicable surcharge. The Software Technology Park
tax exemption scheme has been modified effective as of April 1, 2001. All
facilities registered in the program before March 31, 2001, which include all
of our existing facilities in India and registrations for 2 new facilities
which have not yet been constructed, will continue to benefit from this program
under present law. Over time, as we construct

9



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additional facilities, however,
the overall benefits of this tax program to our company will decrease with a
resulting increase in our effective tax rate. We cannot assure you as to what
action the present or future governments of India will take regarding tax
incentives for the IT industry.

It may be difficult for you to enforce any judgment obtained in the United
States against us or our affiliates.

We are incorporated under the laws of the Republic of India and many of
our directors and key managerial personnel, and some of the experts named in
this document, reside outside the United States. In addition, virtually all of
our assets and the assets of many of these persons are located outside the
United States. As a result, you may be unable to:



| |  |  | effect service of process upon us outside India or these persons
outside the jurisdiction of their residence; or                                                                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | enforce against us in courts outside of India or these persons
outside the jurisdiction of their residence, judgments obtained in
United States courts, including judgments predicated solely upon the
federal securities laws of the United States.

We have been advised by our Indian counsel, Crawford Bayley & Co., that
the United States and India do not currently have a treaty providing for
reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final judgment for the
payment of money rendered by any federal or state court in the United States on
civil liability, whether or not predicated solely upon the federal securities
laws of the United States, would not be enforceable in India. However, the
party in whose favor such final judgment is rendered may bring a new suit in a
competent court in India based on a final judgment which has been obtained in
the United States. If and to the extent Indian courts were of the opinion that
fairness and good faith so required, it would, under current practice, give
binding effect to the final judgment which had been rendered in the United
States unless such a judgment contravened principles of public policy of India.

Conditions in the Indian securities market may affect the price or liquidity
of our equity shares and our ADSs.

The Indian securities markets are smaller and more volatile than
securities markets in more developed economies. The Indian stock exchanges have
in the past experienced substantial fluctuations in the prices of listed
securities and the price of our equity shares has been especially volatile. The
high and low prices of our shares on the Stock Exchange, Mumbai from 1999 until
the present are set forth in the table below.

|                    |  |      |         |              |  |     |      |              |  |  |        |  |  |  |     | 
|------------------- |  | ---- | ------- | ------------ |  | --- | ---- | ------------ |  |  | ------ |  |  |  | --- | 
|Year                |  | High |         | Low         
|                    |  |      |         |             
|                    |  | Rs.  |         | $ equivalent |  | Rs. |      | $ equivalent
|                    |  |      |         |              |  |     |      |             
|1999                |  |      | 459.80  |              |  |     | 10.6 |              |  |  | 73.10  |  |  |  | 1.7 | 
|2000                |  |      | 1445.99 |              |  |     | 31.0 |              |  |  | 291.50 |  |  |  | 6.2 | 
|2001                |  |      | 429.70  |              |  |     | 9.0  |              |  |  | 111.00 |  |  |  | 2.3 | 
|2002                |  |      | 331.15  |              |  |     | 6.9  |              |  |  | 189.75 |  |  |  | 4.0 | 
|2003 (until May 30) |  |      | 282.85  |              |  |     | 6.0  |              |  |  | 127.30 |  |  |  | 2.7 | 

On May 30, 2003, the closing price of our shares on the Stock Exchange,
Mumbai was Rs. 167.30 ($3.6). For comparison purposes, these prices have been
adjusted to give effect to our September 1, 1999 two-for-one stock split and
our August 25, 2000 five-for-one stock split and an exchange rate of Rs. 47.07
per $1.00 as on May 30, 2003 has been used.

The Indian stock exchanges have also experienced problems that have
affected the market price and liquidity of the securities of Indian companies.
These problems have included temporary exchange closures, the suspension of
stock exchange administration, broker defaults, settlement delays and strikes
by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time restricted
securities from trading, limited price movements and restricted margin
requirements. Further, from time to time, disputes have occurred between listed
companies and stock exchanges and other regulatory bodies, which in some cases
may have had a negative effect on market sentiment. Similar problems could
occur in the future and, if they do, they could harm the market price and
liquidity of our equity shares and our ADSs.



| |                                                                               
| | ------------------------------------------------------------------------------
| | The laws of India may not adequately protect our intellectual property
rights.

10



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The laws of India do not protect intellectual property rights to the same
extent as the laws in the United States. For example, Indian law does not
protect service marks. Further, the global nature of our business makes it is
difficult for us to control the ultimate destination of our products and
services. The misappropriation or duplication of our intellectual property
could curtail our operations or reduce our profitability.

We rely upon a combination of non-disclosure and other contractual
arrangements and copyright, trade secret and trademark laws to protect our
intellectual property rights. Ownership of software and associated deliverables
created for customers is generally retained by or assigned to our customers,
and we do not retain an interest in such software and deliverables.

We have applied for the registration of Satyam, VisionCompass and
other related marks as trademarks in India, the United States and in other
jurisdictions where we carry on business. We currently require our technical
employees to enter into non-disclosure and assignment of rights agreements to
limit use of, access to and distribution of confidential and proprietary
information. We cannot assure you that the steps taken by us in this regard
will be adequate to prevent misappropriation of confidential and proprietary
information or that we will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights.

Although we believe that our services and products do not infringe upon
the intellectual property rights of others, we cannot assure you that such a
claim will not be asserted against us in the future. Assertion of such claims
against us could result in litigation, and we cannot assure you that we would
prevail in such litigation or be able to obtain a license for the use of any
infringed intellectual property from a third party on commercially reasonable
terms. We expect that the risk of infringement claims against us will increase
if more of our competitors are able to obtain patents for software products and
processes. Any such claims, regardless of their outcome, could result in
substantial cost to us and divert managements attention from our operations.
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 infringement claim or litigation against us could therefore result
in substantial costs and diversion of resources.



| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | You may be subject to Indian taxes arising out of capital gains on the sale
of the underlying equity shares.

Generally, capital gains, whether short-term or long-term, arising on the
sale of the underlying equity shares in India are subject to Indian capital
gains tax. For the purpose of computing the amount of capital gains subject to
tax, Indian law specifies that the cost of acquisition of the equity shares
will be deemed to be the share price prevailing on the Stock Exchange, Mumbai
or the National Stock Exchange on the date the Depositary advises the custodian
to redeem receipts in exchange for underlying equity shares. The period of
holding of such equity shares, for determining whether the gain is long-term or
short-term, commences on the date of the giving of such notice by the
Depositary to the custodian. Investors are advised to consult their own tax
advisers and to consider carefully the potential tax consequences of an
investment in our ADSs.



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | There may be less company information available in Indian securities markets
than securities markets in developed countries.

There is a difference between the level of regulation and monitoring of
the Indian securities markets and the activities of investors, brokers and
other participants and that of markets in the United States and other developed
economies. The Securities and Exchange Board of India, or SEBI, is responsible
for improving disclosure and other regulatory standards for the Indian
securities markets. SEBI has issued regulations and guidelines on disclosure
requirements, insider trading and other matters. There may, however, be less
publicly available information about Indian companies than is regularly made
available by public companies in developed economies.

Risk Related to our ADSs and our Trading Market



| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | You may be restricted in your ability to exercise preemptive rights under
Indian law and thereby may suffer future dilution of your ownership
position.

Under the Companies Act, 1956 of India, or the 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 before 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 shares which are voted on the resolution. As
U.S. holders of ADSs represent 10.67% of our outstanding equity shares, you
may be unable to exercise preemptive
rights for equity shares underlying ADSs unless a registration statement
under the Securities Act of 1933, as amended,

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



| |                                                                              
| | -----------------------------------------------------------------------------
| | Holders of ADSs may be restricted in their ability to exercise voting
rights.

At our request, the depositary bank will mail to you any notice of
shareholders 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 you, it will endeavor to vote the securities represented by your ADSs in
accordance with such voting instructions. However, the ability of the
depositary bank to carry out voting instructions may be limited by practical
and legal limitations and the terms of the securities on deposit. We cannot
assure you that you will receive voting materials in time to enable you to
return voting instructions to the depositary bank in a timely manner.
Securities for which no voting instructions have been received will not be
voted.

Under Indian law, subject to the presence in person at a stockholder
meeting of persons holding equity shares representing a quorum, all resolutions
proposed to be approved at that meeting are voted on by a show of hands unless
a stockholder present in person and holding at least 10% of the total voting
power or on which an aggregate sum of not less than Rs.50,000 has been paid-up,
at the meeting demands that a poll be taken. Equity shares not represented in
person at the meeting, including equity shares underlying ADSs for which a
holder has provided voting instructions to the depositary bank, are not counted
in a vote by show of hands. As a result, only in the event that a stockholder
present at the meeting demands that a poll be taken will the votes of ADS
holders be counted. Securities for which no voting instructions have been
received will not be voted on a poll.

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

An active or liquid trading market for our ADSs is not assured.

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. The lack of an active, liquid trading market could result in the
loss of market makers, media attention and analyst coverage. If there is no
longer a market for our equity shares, or if we fail to continue to meet
eligibility requirements, we may be required to delist from the New York Stock
Exchange and this may cause our stock prices to decrease significantly. In
addition, if there is a prolonged decline in the price of our equity shares, we
may not be able to issue equity securities to fund our growth, which would
cause us to limit our growth or to incur higher cost funding, such as
short-term or long-term debt. Further, if our ADS trading price falls below
$5.00 per ADS, our ADSs will be considered a penny stock and trading in our
ADSs will be subject to a set of rules adopted by the Securities and Exchange
Commission that regulate broker-dealer practices in connection with
transactions in penny stocks. The penny stock rules require broker-dealers who
recommend penny stocks to persons other than their established customers and
accredited investors to make a special written suitability determination for
the purchaser, provide them with a standardized risk disclosure document that
provides information about penny stocks and the nature and level of risks in
the penny stock market, and receive the purchasers written agreement to the
transaction before the sale. These requirements limit the ability of
broker-dealers to sell penny stocks. Also, because of the extra requirements,
many broker-dealers are unwilling to sell penny stocks at all. As a result, if
our ADSs were subject to the penny stock rules, the market liquidity for our
ADSs could be adversely affected.

Liquidity of a securities market is often a function of the volume of the
underlying shares that are publicly held by
unrelated parties. Although you 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 the United States.

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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | The future sales of securities by our company or existing shareholders may
harm the price of our ADSs or our equity shares.

The market price of our ADSs or our equity shares could decline as a
result of sales of a large number of ADSs or equity shares or the perception
that such sales could occur. Such sales also might make it more difficult for
us to sell ADSs or equity securities in the future at a time and at a price
that we deem appropriate. As of May 31, 2003, we have an aggregate of
312,386,210 equity shares outstanding, which includes underlying equity shares
of 33,350,000 for 16,675,000 ADSs. All ADSs are freely tradable, other than
ADSs purchased by our affiliates. The remaining equity shares outstanding may
be sold in the United States only pursuant to a registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act, including Regulation S.



| |                                                                                
| | -------------------------------------------------------------------------------
| | Forward-looking statements contained in this Annual Report may not be
realized.

We have included statements in this document which contain words or
phrases such as may, will, will likely result, believe, expect, will
continue, anticipate, estimate, intend, plan, contemplate, seek
to, future, objective, goal, project, should and similar expressions
or variations of such expressions, that are forward-looking statements.
Actual results may differ materially from those suggested by the
forward-looking statements due to risks or uncertainties associated with our
expectations with respect to, but not limited to, our ability to implement our
strategy and our growth and expansion.

In addition, other factors that could cause results to differ materially
from those estimated by the forward-looking statements contained in this
document include, but are not limited to, general economic and political
conditions in India, Southeast Asia, and other countries which have an impact
on our business activities, changes in Indian and foreign laws, regulations and
taxes, changes in competition and other factors beyond our control, including
the factors described in this Risk Factors section. We do not intend to
update any of the forward-looking statements after the date of this Annual
Report to conform such statements to actual results.

Item 4. INFORMATION ON THE COMPANY

History and Development

Our IT professionals work onsite, offshore or offsite to provide
customized IT solutions for companies in several industry sectors. Our
development centers in India, United State of America, United Kingdom, Dubai,
Singapore, Malaysia, Japan and Australia serve over 280 global companies, of
which 81 are Fortune 500 corporations. Our marketing network spans 45
countries across five continents.

The full legal name of our company is Satyam Computer Services Limited.
Satyam was organized as a limited liability company under the laws of the
Republic of India pursuant to the provisions of the Indian Companies Act on
June 24, 1987. Our registered office is located at Mayfair Center, SP Road,
Secunderabad 500 003, Andhra Pradesh, India. Our principal place of business is
the Satyam Technology Center located at Bahadurpally Village, Qutbullapur
Mandal, R.R. District 500 855, Hyderabad, Andhra Pradesh, India, telephone
number (91) 40-2309-7505. Our agent for service in the United States is CT
Corporation System, 111 8th Avenue, New York, New York 10011, telephone number
1 (212) 894-8940. Our operations are primarily conducted in India and
majority of our revenues are derived from the United States.

We
effected a two-for-one stock split (in the form of stock dividend) of our equity shares in September
1999 and a five-for-one stock split of our equity shares in August 2000.

In May 2001, we completed an offering of 16,675,000 ADSs (representing
33,350,000 equity shares) in the United States and elsewhere outside of India a
price of $9.71 per ADS. We received approximately $152.7 million, net of
underwriting discounts, commissions and other costs of this offering. On May
15, 2001, our ADSs were listed on the New York Stock Exchange.

Our principal capital expenditures for the fiscal years 2003, 2002 and
2001 were comprised mainly of expansion of infrastructure facilities in India
and abroad. Our capital expenditures amounted to $11.0 million in fiscal 2003,
$30.0 million in fiscal 2002 and $85.2 million in fiscal 2001. In fiscal 2003,
capital expenditures were incurred mainly for the purchase of computers and
other electrical equipment. In fiscal 2002, our capital expenditures were
incurred mainly for expansion of offshore facilities in acquisition/long lease
of land in Bangalore and expansion of facilities in Hyderabad and Chennai. In
fiscal 2001, our capital expenditures were incurred mainly for expansion of
offshore facilities in

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Hyderabad, Chennai. In fiscal 2001,
our capital expenditures were incurred mainly for expansion of
offshore facilities in Hyderabad, Chennai and acquisition of land in Bangalore.

Business Overview

We are a global professional IT services company. We offer a
comprehensive range of services, including software development, system
maintenance, packaged software integration, and engineering design services. We
use our global infrastructure to deliver value-added services to our customers
to address IT needs in specific industries and to facilitate eBusiness
initiatives. We began providing IT services to businesses in 1988 and as of
March 31, 2003 we had 9,086 technical associates servicing over 280 customers
worldwide. In addition to our core business of providing IT services, we have
also selectively invested in related businesses.

We recognized the importance of the Internet to India and, in December
1995, created Sify Limited (formerly Satyam Infoway Limited), which we believe
is 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. Sifys
shares are listed only in the United States and are quoted on the Nasdaq
National Market under the symbol SIFY. In February 2002, we acquired Sifys
software services business for approximately $6.9 million in a transaction
approved by Sifys shareholders and subjected to an independent valuation. The
objective of this acquisition was to permit us to focus on our core business of
software services and Sify to focus on Internet Services. During the year
ended March 31, 2003, due to the sale of new shares by Sify to Softbank Asia
Infrastructure Fund, or SAIF, and VentureTech Solutions Private Ltd. or
VentureTech, our ownership interest in Sify was reduced from 52.51% to 37.15%.
As a result of this reduced ownership interest, we deconsolidated Sify on
December 9, 2002 and now account for our interest in Sify using the equity
method. VentureTech invested
an additional $1.8 million in Sify in April 2003, and our ownership interest was further reduced to 36.0%.

Through our wholly owned subsidiary in the United States, VCI, we have
developed VisionCompass, a software product for use as a management tool to
assess and help improve business performance. In April 2003, we decided to
discontinue the operations of Vision Compass Inc. and focus on our core IT
business.

In June, 2002, we formed Nipuna Services Limited, or Nipuna, a wholly
owned subsidiary to provide various services connected with business process
outsourcing.

Industry Overview

In May 2003, Gartner Dataquest forecasted that the worldwide IT services
market would grow from $536.3 billion in 2002 to $707.4 billion in 2007,
representing an annual compound growth rate 5.7%. We believe the growth of this
industry is driven by the following factors and trends:

Increased importance of IT to businesses. In todays increasingly
competitive business environment, companies have become dependent on technology
not only to conduct day-to-day operations, but also as a strategic tool to
enable them to re-engineer business processes, restructure organizations and
react quickly to competitive, regulatory and technological changes. As systems
continually become more complex, companies increasingly turn to external IT
service providers to develop and implement new technologies and integrate them
with existing applications in which a company may have already made a
considerable investment.

Impact of the Internet and the emergence of eBusiness.Businesses are
increasingly using the Internet to interact with new and existing customers and
create new revenue opportunities. Business conducted electronically over the
Internet, or eBusiness, extends beyond Internet-based applications, such as
eCommerce websites and corporate intranets, to include packaged software tools
such as customer and supply chain management software. eBusiness initiatives
are often large and difficult to manage and must keep pace with constantly
evolving business processes and technological innovations. In addition,
managing and upgrading existing systems has also become more critical given the
importance of these systems to eBusiness initiatives. Internal IT departments
often do not have the appropriate resources or breadth of skills necessary to
execute these initiatives. As a result, companies increasingly turn to outside
service providers to design, integrate, implement and maintain their eBusiness
applications.

Emergence of a high-quality IT services industry in India. India has
emerged as a destination for companies seeking to engage IT service providers
in a variety of areas, including eBusiness and software design, development,
integration and system maintenance. Indias National Association of Software
and Service Companies, or NASSCOM

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estimates that export revenue generated from
the software and service industry in India was approximately $13.5 billion in
fiscal 2002 and is expected to reach $50.0 billion by fiscal 2008. The key
factors contributing to this rapid growth include the availability of a large
pool of highly skilled, English-speaking engineers and professionals, the
ability to produce high quality software applications, low personnel costs
relative to the United States and a time difference which permits work to be
done during non-business hours in the United States and Europe.

We believe that India ranks second only to the United States as the
country with the largest population of English-speaking technical personnel.
According to NASSCOM, engineering colleges and technical institutes in India
produce approximately 130,000 computer software professionals each year. Given
the shortage of technical labor in the United States and other developed
economies, the availability of people could be a competitive advantage for
Indian IT services companies. Also, the English speaking ability of Indian
technical engineers and professionals facilitates interaction with customers in
the United States and Europe and is a significant advantage compared to
non-English speaking countries which also offer IT services.

Indian companies have developed high-quality methodologies.A January
2002 NASSCOM survey of international quality standards of the top 300 Indian
IT services companies showed that 216 had acquired ISO 9000 or SEI or other
certifications and 58 more companies were in the process of acquiring the same.
According to NASSCOM, currently 36 Indian companies have received a level five
assessment under the Software Engineering Institutes Capability Maturity
Model, or SEI-CMM, developed by the Carnegie Mellon University. Level five is
the highest level attainable under the SEI-CMM standards, which assess an
organizations quality management system and systems engineering processes and
methodologies. The level five certification process involves periodically
subjecting our management system and systems engineering processes and
methodologies to stringent third party review and verification. Some of our
customers look to an SEI-CMM certification as a threshold indication of the
quality of our processes and methodologies.

Need for IT service providers who can provide a range of services
worldwide.Many companies today need a wide range of IT services, from high
value-added services such as the integration and implementation of eBusiness
and packaged software applications to lower-end services such as system
maintenance and the re-engineering of older applications. As a result,
companies often seek a service provider that can understand and integrate a
wide spectrum of emerging technologies with existing systems and which offers a
comprehensive range of services from software design and development to system
maintenance. In addition, as companies become global, they increasingly require
IT support on a worldwide basis. In the eBusiness environment, service
providers need to have a close relationship with customers given the complexity
and time sensitive nature of eBusiness.

We believe there is a need for full service IT service providers that have
expertise in both existing systems and new Internet-based technologies, access
to a large pool of highly-skilled technical personnel and the ability to
cost-effectively service customers on a worldwide basis.

Our Business

We believe the following aspects of our business help us to address the
challenges faced by our customers in the current IT environment.

Comprehensive range of services.We provide our customers the ability to
meet all of their IT needs from one service provider. Our understanding of both
existing systems and new Internet technologies allows us to assist our
customers in the management and maintenance of established systems and the
development and integration of new technologies such as Internet-based customer
or supply chain management software applications. We also help them understand
their IT needs and work with them to develop an appropriate strategy to address
these needs.

Global delivery model.We provide our services through our offshore
centers located in India, our offsite centers located in the United States,
United Kingdom, Japan, Singapore, Dubai, Australia and Malaysia and onsite
teams operating on our customers premises. Through this global network, we can
provide a flexible delivery mix that is tailored to meet our customers
specific needs. In addition, our global network of centers allow us to service
our customers on a 24-hour basis and thereby shorten the time required to
complete projects. Our onsite teams and offsite
centers allow us to respond quickly to customer requests, to interact
closely with the customer to develop IT services where the customers
specifications are not clearly defined and to market services tailored to meet
the needs of specific geographic markets.

In-depth industry knowledge.We have developed significant industry
expertise in insurance, financial services,

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manufacturing and
telecommunications. This allows us to better understand and address the IT
needs of customers within a particular industry. Our technical associates
include experienced project managers and software engineers with substantial
experience in providing IT services to a particular industry. We have also
hired business specialists who possess the industry knowledge our company needs
to better understand the requirements of our customers in these sectors and
assist our software engineers in proactively designing IT services. We believe
our customers benefit from our ability to design and develop applications and
services tailored to address industry-specific needs.

Adherence to high quality standards.We have a large pool of highly
trained technical associates that allows us to provide high quality services
tailored to meet our customers needs. As of March 31, 2003, 58% of our
technical associates had bachelors degrees in engineering, and 42% had masters
degrees in engineering, technology or computer applications and bachelors
degrees in science and others. Each new technical associate must participate in
a three to six-month software engineering training program and all technical
associates are expected to undertake between 40 and 80 hours per year of
development training. In addition, we have implemented strict quality control
programs which form an integral part of our project management methodology to
ensure we provide high quality services to our customers. We have a
company-wide quality management system which satisfies the ISO 9001 TickIT and
received a level five assessment under the SEI-CMM standards. Among other
things, our system involves a rigorous review of software development
processes, testing of all work, measurement and analysis of key quality metrics
and regular internal quality audits. Our adherence to this system ensures that
our customers receive timely delivery of consistent and high-quality services.

Strategy

Our main goal is to be a leading worldwide provider of comprehensive IT
services. We intend to accomplish our goal by.

Continuing to focus on eBusiness and high-value added services.To better
service our customers in all key industry segments, we intend to continue to
focus on and expand our eBusiness offerings and our other high-value added
services, such as packaged software integration and engineering design
services. To continue to differentiate our services and achieve recognition as
a leading worldwide provider of comprehensive IT services, we intend to broaden
our range of Internet-based applications as new technologies become available.

Leveraging our existing customer base.Our goal is to build long-term
stable business relationships with our customers to generate consistent
revenues. With our existing customers, we plan to continue to expand the scope
and range of the services we provide by extending our capabilities into new and
emerging technologies and by understanding our customers businesses. For
example, some of our customers who initially engaged us for Year 2000
conversion projects subsequently retained us to provide other IT services. In
fiscal 2003 and fiscal 2002, we generated 93.2% and 82.7%, respectively, of our
IT services revenues (excluding inter-segment revenues) from customers who were
customers in the prior year. To further strengthen our relationships and
broaden the scope and range of the services we provide to existing customers,
our senior corporate executives have specific relationship management
responsibilities for our largest customers. During fiscal 2003, we appointed
approximately 30 relationship managers to further our relations with our major
customers.

Expanding our presence in existing markets and penetrating new geographic
markets.We plan to expand our presence in our existing markets and to
establish a presence in new geographic markets throughout Europe and the
Asia-Pacific region. We intend to accomplish this by leveraging our existing
global customer base to serve them in other geographic locations. During the
fiscal 2003, We opened additional sales and marketing offices in Europe, the
Asia-Pacific region and Canada and offsite centers in Australia, China and
Malaysia to help us gain better access to new customers. We also plan to
continue to hire local employees to staff and manage our offsite centers. We
believe that the use of locally hired technical associates and managers working
from offsite centers will enable us to increase our share of the local market
and compete more effectively with local IT service providers.

Continuing to enhance our specific industry expertise.We aim to have an
in-depth understanding of targeted industries in order to identify customer
needs in those industries and be able to proactively design and offer tailored
IT
services to address those needs. By focusing on targeted industries, we
believe we can develop services that are reusable within an industry and
thereby lower our cost of delivering those services. We intend to enhance our
health care, government and retail IT services capabilities by hiring
additional specialists with expertise in these industries. We have also
organized our company by line of business, with each operating unit serving
customers in a particular industry. We believe that our decentralized structure
enhances our focus on our targeted industries which should further increase our
level of expertise.

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Attracting and retaining quality technical associates and augmenting their
training. To attract, retain and motivate our technical associates, we plan to
continue to provide an environment that rewards entrepreneurial initiative and
performance, including competitive salaries and benefits as well as incentives
in the form of cash bonuses and stock options. We also intend to continue to
devote significant resources to training our technical associates through our
Satyam Learning Center in a variety of software languages and computer
platforms. We have also established the Satyam Technology Entrepreneurship
Program, known as STEP, through which we provide an opportunity for technical
associates with ideas to act as real entrepreneurs by forming joint ventures
with our company to develop and market their ideas, with access to our
resources, people, infrastructure and systems. These joint ventures are run by
the participating associate as virtual companies, and the participating
associate receives a fixed percentage of the equity of the joint venture,
creating a sharing of the wealth between the individual associate and our
company.

Enhancing our capabilities through joint ventures, technology alliances
and acquisitions. We plan to continue to broaden our network of joint ventures
and technology alliances with technology providers, customers, and IT service
providers, particularly in markets in which we are not currently involved. We
enter into these joint ventures and alliances to acquire expertise in high-end
software products and emerging technologies, to add qualified personnel, to
gain access to additional customers to invest in companies which service niche
markets. We will also consider acquiring companies to gain ownership of
specific technologies and to exploit other synergies with our existing
business. While we currently have not identified any specific candidates, we
regularly engage in discussions and negotiations relating to potential
investment, joint ventures, technology alliances and acquisitions in the
ordinary course of our business.

IT Services

We offer a comprehensive range of IT services based on existing and
emerging technologies that are tailored to meet the specific needs of our
customers. Our IT services include:

Software development. We design, develop and install software for a
variety of IT systems. Our applications range from single-platform, single-site
systems to multi-platform, multiple-site systems. A project may involve the
development of new applications or new functions for existing software
applications. Each development project typically involves all aspects of the
software development process, including definition, prototyping, design,
pilots, programming, testing, installation and maintenance.

System maintenance. We provide maintenance services for large software
systems, which may include modifications and enhancements to the system and
product support. We also assist customers in migrating to new technologies
while extending the useful life of existing systems. Projects may involve
re-engineering software to migrate applications from mainframe to client/server
architectures or to migrate from existing operating systems to UNIX or Windows
NT. For companies with extensive proprietary software applications,
implementing such technologies may require rewriting and testing millions of
lines of software code. We perform most of the maintenance work at our offshore
facilities using satellite links to our customers system. In addition, we
maintain a small team on the customers premises to coordinate support
functions.

Packaged software integration. We work with providers of packaged software
in the areas of enterprise resource planning, customer relationship management
and supply chain management to install and integrate these packages with our
customers existing computer systems and with various Internet applications as
required to address the eBusiness needs of our customers. These packaged
software applications help enable companies to strengthen relationships with
their customers and business partners, create new revenue opportunities,
enhance operating efficiencies and improve communications. We also customize
this software to meet the specific needs of our customers and provide ongoing
maintenance and support services. We have established alliances with providers
of enterprise resource planning systems, such as Oracle and SAP. We have also
established alliances with other companies who supply customer relationship or
supply chain management systems and eBusiness applications for building on-line
businesses. In addition, we offer our customers applications in the areas of
business and customer
intelligence, data-mining and data-warehousing to enable them to analyze
trends.

Engineering design services. We provide engineering design services using
computer aided design, modeling and engineering tools. Our engineering design
services include component design, product and process analysis, and
simulations and range from basic drawing changes to complex designs. In
addition, our services may involve customizing the latest computer aided
design, modeling and engineering software to specific user requirements.

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Delivery of IT Services

We offer our customers flexible delivery alternatives through our offshore
centers located in India, through offsite centers which we have established in
our major markets and through onsite teams operating at the customers
premises.

Offshore centers. We typically assign a team of technical associates to
visit a customers premises and determine the scope and requirements of a
particular project. Some members of the initial team remain onsite to
facilitate direct liaison with the customer, while others return to India to
establish and supervise a larger project team of suitably qualified technical
associates to implement the project. Typically 20% of a project team will be on
site depending on the nature and complexity of the project. Projects completed
in our offshore centers in India contributed 44.3% and 47.7% to our IT services
revenues in fiscal 2003 and fiscal 2002, respectively.

We have also entered into arrangements with several customers where an
entire project team is assigned to a single customer. Such teams, called
dedicated offshore centers, work from our facilities in India and are staffed
and managed by us. Once the project priorities are established by the customer,
we, in conjunction with the customers IT department, manage the execution of
the project. When needed, our dedicated offshore centers will have equipment
specific to the customer, or will have a separate work area with its own
security protocols. The customer agrees to a regular periodic billing amount
regardless of the work performed. We have an established dedicated offshore
centers for, among others, General Electric Appliances Products LLP, and Ford
Motor Company.

Offsite centers. We believe that a key success factor in meeting our
customers needs is our physical presence near the customer. Accordingly, we
have expanded and improved the offshore development model by establishing
offsite centers in our major markets. In the United States, we currently
operate offsite centers located in Atlanta, Georgia; Chicago, Illinois;
Parsippany, New Jersey; and Santa Clara, California. Outside of the United
States, we have six offsite centers located in Tokyo, Japan; Basingstoke,
U.K.; Singapore; Sydney, Australia; Dubai and Malaysia. We believe our
offsite centers allow us to respond quickly to customer requests, to interact
closely with the customer to develop IT services where the customers
specifications are not clearly defined and to market services tailored to meet
the needs of specific geographic markets. In addition, we staff our offsite
centers with locally-hired managers, marketers and technical associates which
we believe enable us to compete more effectively with local IT service
providers.

Onsite teams. Some customers require the presence of our project teams at
their premises, particularly for mission critical or high-end projects. The
customers team and our project team collaborate to develop IT services that
meet the customers specifications.

Projects completed at onsite and offsite centers contributed 55.7% of our
IT services revenues in fiscal 2003 and 52.3% in fiscal 2002.

As of March 31, 2003, 2,386 of our technical associates worked in our
customers premises and offsite centers compared to 1,894 as of March 31,
2002.

Quality and project management

We believe that quality is a culture, expressed in the way we interact and
cater to the needs of our clients, and in the products and processes we deliver
to them. So while we have met several external quality parameters, we are even
more stringent about setting and meeting our own exacting standards.

To minimize disruptions and financial loss in the event of a disaster or
disruption to our business operations, we have implemented a business
continuity management system. This integrated enterprise wide process explores
possible failure scenarios, assesses their impact on our business and puts in
place appropriate controls to mitigate and
manage the risks.

Over the last year, we have opened our global Business Continuity Center
in Singapore. This center is designed to ensure that our clients receive
seamless and uninterrupted support in case we are unable to provide our
services from India or elsewhere and equips us with an alternate site for our
critical projects when required. We are the first major Indian software company
to establish such an operation in Singapore. We chose Singapore as the site for
this center based on its excellent connectivity to the rest of the world, low
risk profile and new visa scheme to facilitate disaster recovery and business
continuity operations.

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Our multiple international locations provide us with numerous options for
alternate sites in any eventuality. Our business continuity plans, backed by
redundant network connectivity and replication/back-up facilities, are intended
to ensure a high level of preparedness.

During the fiscal 2003, we launched a new initiative known as ORBIT 5
(Organizational and Business Transformation), aimed at transforming the
efficiency of our processes to deliver a higher standard and service.

The ORBIT 5 initiative aims not only to achieve and maintain our processes
and sub-processes at the highest level but also to help us to create
world-class infrastructure and systems.

To further improve our business processes, we have also adopted the
iSTRIVETM methodology. This methodology involves systematic data gathering and
statistical analysis to enable us pinpoint errors in our processes.

Customers

We market our services primarily to companies in the United States,
Europe, the Middle East and the Asia-Pacific region. Our strategy is to seek
new customers and at the same time secure additional engagements from existing
customers by providing high quality services and by being responsive to
customer needs. The strength of our relationships has resulted in significant
recurring revenue from existing customers. We generated $403.1 million, $312.5
million and $224.1 million in IT services revenues in fiscal 2003, fiscal
2002 and fiscal 2001 respectively, from customers who were customers in the
prior fiscal year. We also derive a significant proportion of our IT services
revenues from a limited number of customers. In fiscal 2003, fiscal 2002 and
fiscal 2001 our largest customer, General Electric Company and its affiliates,
accounted for 17.1%, 20.1% and 18.0%, respectively, of our IT services
revenues (excluding inter-segment revenues) and 16.1%, 18.3% and 15.8%,
respectively, of our total revenues. During the same periods, our second
largest customer, accounted for 9.2%, 7.6% and 9.3% respectively, of our IT
services revenues (excluding inter-segment revenues) and 8.7%, 6.9% and 8.1%
respectively, of our total revenues. In fiscal 2003, fiscal 2002 and 2001 our
five largest customers accounted for 40.8%, 42.2% and 39.1% respectively, of
our IT services revenues (excluding inter-segment revenues) and 38.4%, 38.4%
and 34.2% , respectively, of our total revenues.

Sales and Marketing

We sell and market our services through 22 sales and marketing offices
spread across the globe. We target our efforts towards Fortune 500 & Global
1000 corporations. Our sales efforts are complemented by our marketing team,
which assists in brand building, Alliance management and other corporate level
marketing efforts. Our sales efforts are largely decentralized and conducted
within each of our business segments. As of March 31, 2003, we had 150 sales
(including pre-sale, support) and marketing employees.

Joint Ventures and Alliances

We have in the past entered into, and plan to continue to enter into,
joint ventures and alliances with technology providers, customers, and IT
service providers, particularly in markets in which we are not currently
involved. We enter into these joint ventures and alliances to gain access to
additional customers, to acquire expertise in high-end software products and
emerging technologies, to add qualified personnel and to make investments in
companies engaged in providing services to niche markets. Our two most
significant joint ventures have been with GE and TRW Inc., each of which ended
during the year ended March 31, 2003.

GE Affiliate: In December 1998, we entered into a joint venture with an
affiliate of GE Industrial Systems. The joint venture company provided the GE
affiliate with engineering design services, software development and system
maintenance services. We believe this joint venture was significant
because it has helped us to strengthen our relationship with one of our largest
customers, General Electric Company and its affiliates. During the year ended
March 31, 2003 we sold our interest in this joint venture after an affiliate
of General Electric Company exercised its option to purchase our interest for
US$4 million. The gain on this transaction amounted to $830 thousand and has
been recognized in the statement of operations.

TRW Inc.:In September 2000, we entered into an agreement with TRW Inc. to
form a non-exclusive joint venture to provide TRW and other global companies
with software development, system maintenance and engineering design services.
We held a 76% interest in the joint venture. TRW had targeted to outsource to
the joint venture at least $200

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million in revenue from information systems and
engineering work from the formation of the joint venture until December 31,
2005.

In October 2002, Northrop Grumman Corporation acquired TRW and TRWs name
was changed to Northrop Grumman Space & Mission Systems Corporation. We
acquired Northrops 24% interest in the joint venture for a mutually agreed
consideration of $3.5 million and based on business prospects and
new business synergies between the parties.

The acquisition has been accounted using the purchase method and the
allocation of the purchase price was almost entirely related to goodwill. We
recognized goodwill of $3.4 million on this acquisition equal to the excess of
the consideration paid of $3.5 million over the fair value of that portion of
the net assets acquired as of March 28, 2003. In accordance with the
provisions of SFAS 142, the goodwill has not been amortized post acquisition.

Competition

The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of our company. Our primary India based competitors
include Infosys Technologies Limited, Wipro Limited and Tata Consultancy
Services. Our primary U.S. based competitors include Computer Sciences
Corporation, Electronic Data Systems, Accenture, Cambridge Technology Partners
and Keane Inc. Generally, our competitors include participants from a variety
of market segments, including major international accounting firms, systems
consulting and implementation firms, applications software firms, service
groups of computer equipment companies, general management consulting firms,
programming companies and temporary staffing firms. Many of these competitors
have substantially greater financial, technical and marketing resources and
greater name recognition than us. We believe that the principal competitive
factors in the IT services industry include the range of services offered,
technical expertise, responsiveness to customer needs, speed in delivering IT
services, quality of service and perceived value. We believe that we compete
favorably with respect to these factors. There are relatively few barriers to
entry into our markets such that we may face additional competition from new
entrants into our markets. In addition, there is a risk our customers may elect
to increase their internal IT resources to satisfy their IT services needs.

Communications Infrastructure

A key component of our IT services delivery model is the linking of a
customers onsite system with our offsite and offshore centers through a
privately owned Frame Relay Network consisting of satellite and fiber
communications links. Our data and voice network, SatyamNet, connects our
facilities worldwide through a high speed network with a backbone of satellite,
fiber optic and land lines. Video Conferencing facilities are available at
multiple locations to improve customer interaction. SatyamNet allows projects
to progress and software applications to be installed without the need for
extensive attendance at the customers premises. Similarly, day-to-day
maintenance of a customers system can be carried out largely from one or more
offsite or offshore centers with only a few maintenance professionals required
to be stationed at the customers premises. We lease dedicated
telecommunication lines from VSNL, TATA, BHARATI and Software Technology Park
of India which permit data communication between our facilities in India and
the MCI, SPRINT and AT&T communication networks to connect to our customers
facilities abroad. All of our Indian satellite and fiber links terminate at our
U.S. communication hubs in Vienna, Virginia and Parsippany, New Jersey. From
the Vienna and Parsippany communication hubs, we connect our offshore centers
in India to our offsite centers in the United States through high speed
networks and to customers systems through leased lines, the Internet, the
customers own network or a network operated by third parties. These two
locations act as back-up telecommunications centers for each other to help
ensure that the connectivity to our customer premises is always available.

In December 2001, we completed a major upgrade of SatyamNet to enhance and
optimize network efficiency across all operating locations. This upgrade has
enhanced our aggregate links capacity by more than 100.0% in different
bandwidths, which cater to the networking requirements of approximately 7,000
workstations across various geographic locations. We currently lease two 2Mbps
Fiber Optic links from Hyderabad and Chennai and three 512 Kbps international
links ( one fiber and the other two satellite ) and one 64 kbps international
satellite link. The aggregate bandwidth is 9.5 Mbps and consists of both fiber
and satellite links to take care of media redundancy. In addition, we have
1 Mbps committed information rate high speed links aggregating to 6 Mbps
connecting various cities in India. Our intra-city links are connected by
2048 kbps lines to multiple locations through multiple providers, thus providing
high availability and complete redundancy. We are connected with the United
Kingdom by a 256 K dedicated leased circuit and also connected to Australia and
Singapore by a 128 K link framed leased circuit from our

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U.S. office hubs. We
have also added redundant Internet Mail and Name Resolution servers in our U.S.
offices as a part of our disaster recovery infrastructure.

During business hours, the average loading of SatyamNet is currently
approximately 40% of total capacity, with sudden bursts in usage reaching
approximately 50%. Our network has extra capacity available to service new
customers in the immediate future and to permit sudden bursts of data transfer
and other contingent uses. The network utilization is monitored using a
centralized management software, and the utilization reports are shared with
senior associates on a weekly basis. When the utilization reaches 60%, the
process for enhanced BW is activated.

We have not experienced any significant downtime in our communications
network during the past two years. To help minimize the likelihood of downtime
in our voice and data communications network, we have built redundancy and
alternative pathways into our network. For example, most of our communications
take place over international links. Each office that has its own international
link also has a inter-city link to another nearby office, which provides an
alternative pathway for international communications if the offices own
international link breaks down. We have also provided ISDN links as a back-up
for the intra-city links. We stock spare parts for our network equipment so
that we can quickly repair equipment breakdowns.

The terms of our customer contracts often impose particular
confidentiality and security standards. We have independently established a
system of security measures to protect our computer systems from security
breaches and computer viruses that may attempt to gain access to our
communications network. We maintain a firewall at the entry point of the
network which checks incoming data for viruses and unauthorized access before
they are transmitted on SatyamNet. All traffic received at our facilities in
India is again checked for viruses, with contaminated files quarantined. We
have implemented a two tier virus protection, which includes arrangements with
two virus protection vendors as a preventive countermeasure against computer
viruses. Our backup process which includes daily, weekly and monthly backups.
Backup tapes are stored at different locations to ensure maximum protection
against losses. We have been accredited with BS7799 / ISO 17799 certification
by Ministry of Information Technology, Government of India, for all our
locations in India  in recognition of our high standards of network security
and business continuity practices.

Premises and Equipment

Our corporate headquarters, the Satyam Technology Center, is located in
Hyderabad, India. We own this facility, which provides a modern workspace for
approximately 1,400 software engineers in two buildings covering an aggregate
area of approximately 209,300 square feet, which are linked to our other
facilities through our SatyamNet. The Satyam Technology Center also has
recreational facilities and housing for up to 400 associates and covers an area
of approximately 153,000 square feet. An auditorium/convention center is being
constructed at our Satyam Technology Center to cater to our growing needs to
host meetings with large number of participants, gatherings and for live
interactive sessions.

We have additional software technology centers located in Bangalore,
Bhubaneshwar, Chennai, Hyderabad and Pune, with facilities aggregating
approximately 720,000 square feet. We own the facilities in Bhubaneshwar and
lease our other facilities with terms ranging from six years to nine years.
Each facility is equipped with computers, servers, telecommunications lines and
back-up electricity generation facilities sufficient to ensure an uninterrupted
power supply.

In addition to the offshore centers in India, we operate offsite centers
in major markets to establish a local presence closer to our customers. Our
four offsite centers currently operating in the United States are located in
Atlanta, Georgia; Chicago, Illinois; Parsippany, New Jersey and Santa Clara,
California. Outside the United States, we
operate six offsite centers located in Tokyo, Japan; Basingstoke, U.K.;
Singapore; Sydney, Australia; Dubai and Malaysia.

During
the fiscal 2003, we constructed a new facility covering an area of
75,000 square feet on our own land in Bangalore, India.
This facility is expected to be ready for operations soon.

Research and Development

Our research and development efforts are focused on development services
required by our existing customers or as needed to attract new customers. As
of March 31, 2003, we employed 49 associates dedicated to our research and
development activities. In addition, a number of our management and other
operational personnel are also involved in

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research and development activities.
We expect to continue to invest some of our resources in research and
development. We estimate that we have spent approximately $1.4 million in
fiscal 2003, $2.2 million in fiscal 2002 and $3.1 million in fiscal 2001 on
company-sponsored research and development activities.

Intellectual Property

Ownership of software and associated deliverables created for customers is
generally retained by or assigned to the customer, and we do not usually retain
an interest in such software or deliverables. We also develop software products
and software tools which are licensed to customers and remain our property. We
rely upon a combination of non-disclosure and other contractual arrangements
and copyright, trade secret, patent and trademark laws to protect our
proprietary rights in technology. We currently require our technical associates
to enter into non-disclosure and assignment of rights agreements to limit use
of, access to and distribution of our proprietary information. The source code
for our proprietary software is generally protected as trade secrets and as
unpublished copyright works. We have applied for the registration of Satyam
and VisionCompass as trademarks in India and United States. We have applied
for one patent in the United States related to VisionCompass which we intend to
pursue despite our decision to discontinue VisionCompass operations as this
product remains in use by customers. We generally apply for trademarks and
service marks to identify our various service and product offerings. Although
we believe that our services and products do not infringe the intellectual
property rights of others, we cannot assure you that such a claim will not be
asserted against us in the future.

Seasonality

Our IT services business is not affected by seasonality.

Government Regulation

Regulation of our business by the Indian government affects our business
in several ways. We benefit from certain tax incentives promulgated by the
Government of India, including a ten-year tax holiday from Indian corporate
income taxes for the operation of most of our Indian facilities and a partial
taxable income deduction for profits derived from exported IT services under
Indian tax laws. As a result of these incentives, our operations have been
subject to relatively insignificant Indian tax liabilities. We have also
benefited from the liberalization and deregulation of the Indian economy by the
successive Indian governments since 1991, including the current Indian
government. Further, there are restrictive parts of Indian law that effect our
business, including the fact that we are generally required to obtain approval
from the Reserve Bank of India and/or the Ministry of Finance of the Government
of India to acquire companies organized outside India, and we are generally
required, subject to some exceptions, to obtain approval from relevant
government authorities in India in order to raise capital outside India.
Finally, the conversion of our equity shares into ADSs is governed by
guidelines issued by the Reserve Bank of India.

Please see Item 10. Additional Information, as well as Item 3. Key
Information  Risk Factors for additional information on the effects of
governmental regulation of our business.

Internet Services

Our associated company, Sify Limited (formerly known as Satyam Infoway
Limited), was organized as a limited liability company under the laws of the
Republic of India pursuant to the provisions of the Companies Act on December
12, 1995. Sify was formed as a separate business unit of our company to
develop and offer connectivity-based corporate services allowing businesses in
India to exchange information, communicate and transact business
electronically. Until December 9, 2002, we owned the majority of Sifys shares
and it was a fully consolidated subsidiary. As a result of a private
placement by Sify our ownership interest in Sify was reduced from 52.5% to 37.15%, we have
accounted for our interest in Sify under the equity method of accounting since
December 9, 2002.

In October 1999, Sify completed an initial public offering on the Nasdaq
National Market, where its ADSs continue to trade under the symbol SIFY.

We believe that Sify is the largest integrated Internet, network and
electronic commerce services company in India. Sify offers end-to-end
solutions with a comprehensive range of services delivered over a common
Internet backbone infrastructure. Sifys services enable its business and
consumer customers to communicate, transmit and share information, access
online content and conduct business remotely using Sifys private data network
or the Internet.

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Software Products

Through our wholly owned subsidiary in the United States, VisionCompass
Inc., or VCI, we developed VisionCompass, a software product for use as a
management tool to assess and help improve business performance. VCIs sales
and marketing strategy targeted Fortune 1000 companies in the manufacturing,
professional services and telecommunications markets, utilizing both a direct
sales force and select channel partners.

In April 2001, following the completion of the latest version of
VisionCompass, we decided to restructure VCI by reducing product development
and general and administrative expenses. As part of the restructuring, the
services of approximately forty personnel, including the Chief Executive
Officer, were terminated.

Following
the restructuring, VisionCompass Inc.,
was able to generate modest profits during fiscal 2003. However, keeping in view the present business and economic
conditions, the relative size and managerial time, we decided to discontinue
the operations of VisionCompass so as to focus on our core business of IT
services.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of the financial condition and results of operations
of our company should be read in conjunction with the financial statements and
the related notes included elsewhere in this document. This discussion contains
forward-looking statements that involve risks and uncertainties. For additional
information regarding these risks and uncertainties, please see Item 3.-Risk
Factors.

Overview

We are a worldwide provider of professional IT services and offer a
comprehensive range of services, including software development, system
maintenance, packaged software integration, and engineering design services. We
use our global infrastructure to deliver value-added services to our customers
to address IT needs in specific industries and to facilitate eBusiness
initiatives.

We continue to be the single largest shareholder of Sify, which provides
Internet services in India, even though our ownership interest in Sify was
reduced from 52.51% as at March 31, 2002 to 37.15% as at March 31, 2003 due to
the private placement completed by Sify to Softbank Asia Infrastructure Fund
(SAIF) and VentureTech Solutions Private Ltd. (VentureTech) in December 2002.

Sify received a $13.0 million investment by SAIF and the $3.5 million first
tranche of a $7.0 million investment by VentureTech in December 2002. In connection with the completion of the
financing, we have entered into a shareholders agreement with SAIF and
VentureTech. In accordance with the shareholders agreement, VentureTech invested additional
$1.75 million in Sify on April 30, 2003 and entered into an agreement whereby
it is obligated to invest the remaining $1.75 million amount by July 31, 2003.
Upon completion of the additional investment by VentureTech, the interests of
SAIF, VentureTech and Satyam in Sifys equity shares will be approximately
21.7%, 11.7% and 35.0%, respectively. The shareholders agreement provides for, among other things,
the Sify Board of Directors to be comprised of nine directors to be nominated
as follows: SAIF  two nominees; VentureTech  two nominees;
Satyam  two nominees; South Asia Regional Fund  one nominee; one independent
nominee; and one nominee who shall be the Managing Director of Sify. The
shareholders agreement has also granted SAIF and VentureTech consent rights
with respect to specified corporate transactions. As a result of this
decreased ownership interest, we no longer maintain a controlling interest in
Sify and hence subsequent to December 9, 2002 we have accounted for our
interest in Sify using the equity method. As a result, our consolidated
financial statements for the year ended March 31, 2003 are not comparable with
prior periods.

We own 100% of the outstanding stock of VisionCompass Inc., or VCI, which has
developed and markets our software product, VisionCompass. VCI had revenues of
$1.2 million and a net profit of $0.2 million for fiscal 2003.

Following the restructuring, VisionCompass Inc., was able to generate modest profits during fiscal 2003. However, keeping in view the present business and economic

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conditions, the relative size and managerial time, we decided to discontinue
the operations of VisionCompass so as to focus on our core business of IT
services.

On June 5, 2002 we formed Nipuna Services Limited or Nipuna, a wholly owned
subsidiary in Secunderabad, Andhra Pradesh, India to provide various services
connected with business process outsourcing. As of March 31, 2003, we had
invested $0.2 million in Nipuna.

Consolidation of Subsidiaries

As of March 31, 2003, we had invested $27.7 million in VCI, $5.1 million in
Sify and $20.8 million representing equity and other advances in six of our other subsidiaries. Since its inception in
January 1999 VCI has incurred significant operating losses and negative cash
flows. As of March 31, 2003, the cumulative net losses incurred
were $27.3
million by VCI and $14.6 million by our other subsidiaries. The results of
Sify, VCI and our other subsidiaries are reflected in our consolidated audited
financial statements under U.S. GAAP. Sifys and VCIs combined losses reduced
our consolidated net income under U.S. GAAP by $12.3 million, $83.3 million and
$42.6 million in the year ended March 31, 2003, 2002 and 2001 respectively.

Satyam Manufacturing Technologies, Inc.

On March 28, 2003, we acquired Northrop Grummans 24% interest in Satyam
Manufacturing Technologies Inc., or SMTI and SMTI became our 100% owned
subsidiary. We issued Northrop Grumman a non interest bearing unsecured
promissory note with a principal amount of $3.5 million, which is payable in
four quarterly installments from April 1, 2003 to January 1, 2004 in payment of
the purchase price.

Our Investment in Associated Companies

Our investments in business entities in which we do not have control, but have
the ability to exercise significant influence over operating and financial
policies (generally 20-50 percent ownership), are referred to as associated
companies and are accounted for by the equity method.

The following table gives details regarding our percentage holding, carrying
value and share of earnings / (losses) of our associated companies for the
years ended March 31, 2003 and 2002 (in million, except percentages).

|                   |       |                     |      |                   |      |             |                    |           |   |                     |      |                   |  |  |      |  |                    |   |       |       |   |   |      |      | 
|------------------ | ----- | ------------------- | ---- | ----------------- | ---- | ----------- | ------------------ | --------- | - | ------------------- | ---- | ----------------- |  |  | ---- |  | ------------------ | - | ----- | ----- | - | - | ---- | ---- | 
|                   |       |                     | 2003 |                   | 2002
|                   |       |                     |      |                   |     
|                   |       |                     |      |                   |      |             | Share of earnings/ |           |   |                     |      |                   |  |  |      |  | Share of earnings/ |   |       |       |  
|Name of associated |       | (losses) during the |      | Carrying value as |      |             |                    |           |   | (losses) during the |      | Carrying value as
|company            |       | % holding           |      | year              |      | at year end |                    | % holding |   | year                |      | at year end      
|                   |       |                     |      |                   |      |             |                    |           |   |                     |      |                  
|Sify*              |       |                     | 37.2 |                   |      | $           | (1.3               | )         |   | $                   | 27.1 |                   |  |  |     |  |                    |   |      |       |   |   |     |     
|Satyam Venture     |       |                     | 50.0 |                   |      |             | 0.2                |           |   |                     | 1.2  |                   |  |  | 50.0 |  |                    | $ | 0.3   |       |   | $ | 1.0  |     
|CA Satyam          |       |                     | 50.0 |                   |      |             | (0.1               | )         |   |                     | 1.3  |                   |  |  | 50.0 |  |                    |   | 0.0   |       |   |   | 0.5  |     
|Satyam GE          |       |                     |     |                   |      |             | 0.3                |           |   |                     |     |                   |  |  | 50.0 |  |                    |   | 1.1   |       |   |   | 3.0  |     
|Cricinfo**         |       |                     |     |                   |      |             | (2.0               | )         |   |                     |     |                   |  |  | 25.0 |  |                    |   | (26.0 | )     |   |   | 3.8  |     
|Refco-Sify**       |       |                     |     |                   |      |             | (0.3               | )         |   |                     |     |                   |  |  | 40.0 |  |                    |   | (0.6  | )     |   |   | 2.5  |     
|Placements.com**   |       |                     |     |                   |      |             | (0.1               | )         |   |                     |     |                   |  |  | 27.0 |  |                    |   | (0.2  | )     |   |   | 0.01 |     
|                   |       |                     |      |                   |      |             |                    |           |   |                     |      |                   |  |  |      |  |                    |   |       |       |   |   |      |     
|                   | Total |                     |      |                   |      |             | $                  | (3.3      | ) |                     | $    | 29.6              |  |  |      |  |                    |   | $     | (25.4 | ) |   | $    | 10.8 | 
|                   |       |                     |      |                   |      |             |                    |           |   |                     |      |                   |  |  |      |  |                    |   |       |       |   |   |      |     



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|*  |  | Sify accounted using the equity method from December 10, 2002. Share of
losses for the period from December 10, 2002 to March 31, 2003.               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Associated companies of Sify. Share of losses for the period from April 1,
2002 to December 9, 2002. Subsequently included in share of losses of Sify.

Sify

During the year ended March 31, 2003, our ownership interest in Sify was
reduced from 52.51% to 37.15% as a result of Sifys completion of a private
placement. Subsequent to December 9, 2002, we have accounted for our interest
in Sify under the equity method of accounting, as we no longer hold a
controlling interest in Sify. We are under no future obligation to provide
additional funds to Sify and would be unwilling to do so.

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Satyam Venture

On October 28, 2000, we entered into an agreement with Venture Industries to
form an equally held joint venture company Satyam Venture Engineering Services
Private Limited or Satyam Venture. We hold 50% of Satyam Venture. Satyam
Venture is engaged in providing engineering solutions, software development and
customization services specifically for the automotive industry worldwide.

CA Satyam

On December 29, 2000, we entered into an agreement with Computer Associates
International, Inc. to form an equally held joint venture company, CA Satyam
ASP Private Limited or CA Satyam. We hold 50% of CA Satyam. As per the
agreement, both we and Computer Associates have invested $1.5 million each in
the joint venture.

Satyam GE

In January 2002, we initiated the
process to transfer our 50% shareholding
in Satyam GE Software Services Private Limited or Satyam GE to our
joint venture partner, an affiliate of General Electric, for approximately $4.0 million. The transfer was
subject to a number of terms and conditions including approvals from
appropriate authorities. After the transfer process was initiated, we continued to
have the ability to exercise significant influence over the operating and
financial policies of Satyam GE and accounted for our 50% interest in
Satyam GE using the equity method until June 30, 2002. During the year ended
March 31, 2003 the necessary approvals were received and we recorded a gain of
$830 thousand, the excess of sales consideration received over the carrying
value as of June 30, 2002 in the statement of operations.

Deferred Stock based Compensation

We have 3 associate stock option plans: our Associated Stock Option Plan, or
ASOP, established in May 1998; our Associated Stock Option Plan B, or ASOP B,
established in May 1999; and our Associated Stock Option Plan ADS, or ASOP ADS,
established in 2000.

ASOP

The aspects of the ASOP differ significantly from typical U.S. stock option
plans. We established a controlled associate welfare trust called the Satyam
Associate Trust, to administer the ASOP, and issued warrants to purchase
13,000,000 equity shares of Satyam Computer Services. To give our associates
the benefit of our stock split (in the form of stock dividend) in September 1999, the Trust exercised its
warrants to acquire our shares before the split using the proceeds from bank
loans. The Trust periodically grants eligible associates warrants to purchase
equity shares held by or reserved for issuance by the Trust. The warrants may
vest immediately or may vest over a period ranging from two to three years,
depending on the associates length of service and performance. Upon vesting,
employees have 30 days in which to exercise their warrants. Each warrant
issued by the Trust currently entitles the associate holding the warrant to
purchase 10 equity shares of our company at a price of Rs.450 ($9.5), plus an
interest component associated with the loan the Trust assumed, for the
conversion of the warrants it held. The interest component is computed based on
a fixed vesting period and a fixed interest rate. This exercise price has been
substantially below the market price of our
shares at the time the warrants have been granted by the Trust. Neither we nor
the Trust may increase the exercise price of the warrants.

We account for the ASOP as a fixed plan in accordance with Accounting
Principles Board Opinion No. 25. Under U.S. GAAP, the difference between the
exercise price and the market price on the date the warrants are granted to
associates is required to be treated as a non-cash compensation charge and
amortized over the vesting period of the equity shares underlying the warrants.
Under U.S. GAAP, in fiscal 2003, 2002 and 2001, we recognized deferred stock
based compensation of $1.7 million; $1.2 million and $38.0 million, and $3.4
million, $10.4 million and $44.2 million was amortized and charged to earnings,
respectively. As of March 31, 2003, warrants (net of forfeited and cancelled)
to purchase 11,956,560 equity shares have been granted to associates pursuant
to ASOP, and warrants to purchase 10,789,180 equity shares have been exercised.
As of March 31, 2003, the Trust held warrants to purchase 1,043,440 equity
shares that had not yet been granted to associates pursuant to the ASOP but are
expected to be granted in the future. Under current accounting rules, we
expect to recognize amortization of deferred stock based compensation expense
in respect of our ASOP in the approximate amounts of $2.5 million in fiscal 2004
and $0.3 million in fiscal 2005 based on the price of our equity shares on
March 31, 2003 and in connection with both granted

25



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##### 



and ungranted warrants on
such date. Depending on the market value of our equity shares on the dates
future grants are made, amortization of deferred stock based compensation
expense with respect to ungranted warrants may cause the expected amounts to
change.

ASOP B

The ASOP B is substantially similar to the ASOP and is administered by a
committee of our board of directors. Under U.S. GAAP, in fiscal 2003, fiscal
2002 and fiscal 2001, we recognized deferred stock based compensation of $(11)
thousand, $6 thousand and $58 thousand and $54 thousand, $58 thousand and $68
thousand was amortized and charged to earnings, respectively. As of March 31,
2003, options (net of forfeited and cancelled) to purchase 14,466,948 equity
shares have been granted to associates under this plan. Under current
accounting rules, we expect to recognize amortization of deferred stock based
compensation expense in respect of these granted options in the approximate
amounts of $27 thousand in fiscal 2004 and $1 thousand in fiscal 2005. We
expect that the exercise prices of options granted in the future under the ASOP
B will generally not be less than the fair market value of the underlying
shares and therefore we do not expect to incur compensation expense with
respect to those future grants under current accounting rules. We also account
for the ASOP B as a fixed option plan.

ASOP ADS

Under ASOP ADS, we periodically issue grants to eligible associates to purchase
ADSs. As of March 31, 2003, warrants (net of forfeited and cancelled) for
1,263,275 ADSs representing 2,526,550 equity shares have been granted to
associates under the ASOP ADS. The warrants issued under ASOP-ADS could be at
a price per option which is not less than 90% of the value of one ADS as
reported on NYSE (fair market value) on the date of grant converted into Indian
Rupees at the rate of exchange prevalent on the day of grant. We account for
the ASOP ADS as a fixed option plan. We expect that the exercise prices of
options granted in the future under the plan will not be less than the fair
market value of the underlying ADSs and therefore we do not expect to incur
compensation expense with respect to those future grants under current
accounting rules.

Stock-based compensation plan of Sify

In fiscal 1999, Sify established the Employee Stock Offer Plan, which provides
for the issuance of 825,000 warrants to eligible employees. The warrants were
issued to an employee welfare trust at one Indian Rupee each on September 28,
1999. The Trust holds the warrants and transfers them to eligible employees
over a period of three years. Sify recognized deferred stock based
compensation of $1.5 million and $2.2 million for the years ended March 31,
2002 and 2001. Sify amortized and charged to income 1.3 million ($1.1 million
for the period April 1, 2002 to December 9, 2002), $315 thousand and $1.9
million for the years ended March 31, 2003, 2002 and 2001 respectively.

Revenues

Our revenues are generated from professional services fees / product
development provided through three segments, IT services, Internet services and
Software products.



| |  | IT services.Our principal business is providing IT services and we
provide our customers the ability to meet all of their IT needs from
one service provider. Our understanding of both existing computer
systems and new technologies allows us to assist our customers in the
management and maintenance of existing systems and the development and
integration of new technologies. Our eBusiness services include
designing, developing, integrating and maintaining Internet-based
applications, such as eCommerce websites, and implementing packaged
software applications, such as customer or supply chain management
software applications. We also assist our customers in making their
existing computing systems accessible over the Internet. We offer our
customers flexible delivery alternatives through our offshore centers
located in India, through offsite centers which we have established in
our major markets and through onsite teams operating on the customers
premises.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Internet services.Through Sify, our former subsidiary which is
presently an associated company, we have offered our corporate
network/data services; consumer Internet access services; and online
portal and content offerings. Sifys ADSs trade on the Nasdaq National
Market under the symbol SIFY.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

26



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| |  | Software products.Through VCI, we developed VisionCompass, a software
product for use as a management tool to assess and help improve
business performance. On April 24, 2003, we decided to discontinue
VCIs operations and focus on our core business of providing IT
services.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth the revenues for our three main business
segments for the years ended March 31, 2003, 2002, and 2001 (in millions,
except percentages).

|                  |       |        |       |       |      |        |      |       |   |        |       |       |  |  |      |       |   |   |       |       |  |  |      |       |  
|----------------- | ----- | ------ | ----- | ----- | ---- | ------ | ---- | ----- | - | ------ | ----- | ----- |  |  | ---- | ----- | - | - | ----- | ----- |  |  | ---- | ----- | -
|                 
|                  |       |        | 2003  |       | 2002 |        | 2001
|                  |       |        |       |       |      |        |     
|Segment           |       | Amount |       | %     |      | Amount |      | %     |   | Amount |       | %    
|                  |       |        |       |       |      |        |      |       |   |        |       |      
|IT Services       |       | $      | 432.6 |       |      |        | 94.2 |       |   | $      | 377.3 |       |  |  | 91.0 |       |   | $ | 273.5 |       |  |  | 88.1 |      
|Internet Services |       |        | 25.7* |       |      |        | 5.6* |       |   |        | 36.6  |       |  |  | 8.8  |       |   |   | 36.8  |       |  |  | 11.8 |      
|Software Products |       |        | 0.9   |       |      |        | 0.2  |       |   |        | 0.6   |       |  |  | 0.2  |       |   |   |      |       |  |  | 0.1  |      
|                  |       |        |       |       |      |        |      |       |   |        |       |       |  |  |      |       |   |   |       |       |  |  |      |      
|                  | Total |        | $     | 459.2 |      |        |      | 100.0 | % |        | $     | 414.5 |  |  |      | 100.0 | % |   | $     | 310.3 |  |  |      | 100.0 | %
|                  |       |        |       |       |      |        |      |       |   |        |       |       |  |  |      |       |   |   |       |       |  |  |      |      



---

|* |  | Revenues from Internet services are for the period from April 1, 2002 to
December 9, 2002.
|- |  | ------------------------------------------------------------------------------------------

Our total revenues increased by 10.8% to $459.2 million in fiscal 2003 from
$414.5 in fiscal 2002 and 33.6% to $414.5 million in fiscal 2002 from $310.3
million in fiscal 2001. Our top two customers accounted for 24.9% of total
revenues in 2003 down from 25.2% of total revenues in 2002. Additionally, our
top 10 customers accounted for 49.8% of the revenues in 2003 as compared to
49.0% in 2002. Our worldwide technical headcount increased to 9,086 as of
March 31, 2003 compared to 7,898 as of March 31, 2002, while the number of our
technical associates offshore increased by 696 and technical associates onsite
increased by 492 during this period. We expect our revenue to grow by
approximately 15% in fiscal 2004.

IT services

Our IT services revenues (excluding inter-segment revenues) represented 94.2%,
91.0% and 88.1% of our total revenues in fiscal 2003, 2002 and 2001
respectively. These revenues increased by 14.7% to $432.6 million in fiscal
2003 from $377.3 million in fiscal 2002 and 38.0% to $377.3 in fiscal 2002 from
$273.5 in fiscal 2001. The fall in growth rate can be primarily attributed to
the unfavorable global economic conditions specifically in the United States
and reduced levels of information technology related capital spending compared
with a year ago. The economic slowdown has had a significant impact on the
information technology industry.

Internet services

As a result of our decreased ownership
interest in Sify, we no longer maintain a
controlling interest in Sify and subsequent to December 9, 2002 we have
accounted for our interest in Sify using the equity method. Consequently,
revenues from Internet services for the year ended March 31, 2003 is not
comparable with prior periods.

Revenues from Internet services are generated principally from corporate
network and technology services, web-site design and development, sale of
Internet access and banner advertisements and sponsorship contracts. Our
Internet services revenues (excluding inter-segment revenues) represented 5.6%,
8.8% and 11.8% of our total revenues in fiscal 2003, 2002 and 2001
respectively. Our Internet services revenues (excluding inter-segment
revenues) decreased by 29.8% to $25.7 million in fiscal 2003 from $36.6 million
in fiscal 2002 and decreased by 0.5% to $36.6 million in fiscal 2002 from $36.8
million in fiscal 2001.

Software products

Revenues from software products to date have been immaterial.

Expenses

Cost of revenues.Cost of revenues increased by 14.1% to $272.7 million in
fiscal 2003 from $239.0 million in fiscal 2002. Cost of revenues represented
59.4% of revenues in fiscal 2003 and 57.7% in fiscal 2002. Inter-segments cost
of revenues were $313 thousand in fiscal 2003 as compared to $3.4 million in
fiscal 2002 and have not been allocated to the individual components that make
up cost of revenues.

27



---



##### 



The increase in fiscal 2003 was attributable primarily to increases in
associate compensation and benefits expenses, traveling expenses and
depreciation expense. These increases were partly compensated by a decrease in
deferred stock based compensation and communication expenses.

Gross profit.Our gross profit was $186.5 million for fiscal 2003, representing
an increase of 6.3% over gross profit of $175.5 million for fiscal 2002. As a
percentage of total revenues, gross profit decreased to 40.6% for fiscal 2003
from 42.3% for fiscal 2002. This decrease was attributable to: (i) an increase
in our personnel costs due to increased annual salaries; (ii) an increase in
the compensation paid to our U.S. based Indian employees to comply with new
immigration regulations introduced in the U.S. effective July 2002; (iii)
decrease in the billing rates and (iv) increased personnel costs for new hires.
These increases were partly compensated by a decrease in deferred stock based
compensation and communication expenses

Selling, general and administrative expense.Selling, general and
administrative expenses decreased 15.3% to $119.4 million in fiscal 2003 from
$140.9 million in fiscal 2002. This decrease was a result primarily of
decreases in associate compensation and benefits, professional charges,
depreciation expense and other expenses. Inter-segment selling, general and
administrative expenses were $254 thousand in fiscal 2003 as compared to $310
thousand in fiscal 2002 and have not been allocated to the individual
components that make up selling, general and administrative expenses. Selling,
general and administrative expenses represented 26.0% of revenues in fiscal
2003 as compared to 34.0% of revenues in fiscal 2002.

Operating income (loss).Our operating income was $83.6 million for fiscal
2003, representing an increase of 231.7% over the operating loss of $63.5
million for fiscal 2002. As a percentage of revenues, operating income
increased to 18.2% for fiscal 2003, from an operating loss of 15.3% for fiscal
2002.

Net income.Our net income was $79.8 million for fiscal 2003, representing an
increase of 208.1% over net income of $25.9 million for fiscal 2002. As a
percentage of total revenues, net income increased to 17.4% for fiscal 2003
from 6.2% for fiscal 2002.

Foreign Currency Transactions / Translation

In fiscal 2003 and fiscal 2002, 81.2% and 82.7%, respectively, of our total
revenues were generated in U.S. dollars. A significant amount of our expenses
were incurred in Indian Rupees and the balance was primarily incurred in U.S.
dollars, European currencies and Japanese yen. Our functional currency and the
functional currency for our subsidiaries located in India is the Indian rupee;
however, the Japanese yen, U.S. dollars, Sterling pounds and Singapore dollars
are the functional currencies of our foreign subsidiaries located in Japan, the
U.S., the U.K. and Singapore, respectively. The translation of such foreign
currencies into U.S. dollars (our reporting currency) is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using monthly simple average exchange
rates prevailing during the reporting periods. Adjustments resulting from the
translation of functional currency financial statements to reporting currency
are accumulated and reported as other comprehensive income, a separate
component of shareholders equity.

Risk management policy

Our functional currency is the Indian rupee although we transact a major
portion of our business in US dollars and accordingly face foreign currency
exposure through our sales in the United States. Accordingly, we are exposed to
substantial risk on account of adverse currency movements in global foreign
exchange markets. The exchange rate between the rupee and the dollar has
changed substantially in recent years and may fluctuate substantially in the
future.

We manage risk on account of foreign currency fluctuations through treasury
operations. Our risk management strategy is to identify risks we are exposed
to, evaluate and measure those risks, decide on managing those risks, regular
monitoring and reporting to management. The objective of our risk management
policy is to minimize risk arising from adverse currency movements by managing
the uncertainty and volatility of foreign exchange fluctuations by hedging the
risk to achieve greater predictability and stability. Our risk management
policies are approved by senior management and include implementing hedging
strategies for foreign currency exposures, specification of transaction limits;
specifying authority and responsibility of the personnel involved in executing,
monitoring and controlling such transactions.

28



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We purchase forward foreign exchange contracts to mitigate the risk of changes
in foreign exchange rates on cash flows denominated in certain foreign
currencies. We enter into forward foreign exchange contracts where the counter
party is generally a bank. We consider the risks of non-performance by the
counter party as non-material. These foreign forward exchange contracts mature
between one to three months.These contracts do not qualify for hedge
accounting under SFAS 133, as amended Any derivative that is either not a
designated hedge, or is so designated but is ineffective per SFAS 133, is
marked to market and recognized in earnings .

The following table gives details in respect of Satyams outstanding foreign
exchange forward contracts:

|                                                                            |  |                 |       |      |  |  |   | 
|--------------------------------------------------------------------------- |  | --------------- | ----- | ---- |  |  | - | 
|                                                                            |  | As of March 31,
|                                                                            |  |                
|                                                                            |  | 2003            |       | 2002
|                                                                            |  |                 |       |     
|                                                                            |  | (in thousands) 
|Aggregate Contracted Principal amounts of Forward exchange
contracts (sell) |  | $               | 4,000 |      |  |  |  | 
|Gain(loss) on outstanding foreign exchange forward contracts                |  |                 | 43    |      |  |  |  | 

We expect that a majority of our revenues will continue to be generated in U.S.
dollars for the foreseeable future and that a significant portion of our
expenses, including personnel costs as well as capital and operating
expenditures, will continue to be denominated in Indian rupees. Consequently,
our results of operations will be affected to the extent the rupee appreciates/
depreciates against the U.S. dollar. During fiscal 2003, rupee appreciated to
47.53 against 48.83 in fiscal 2002. As a result loss on foreign exchange
transactions was $4.8 million in fiscal 2003 as compared to a gain of $10.8
million in fiscal 2002.

As of May 31, 2003, we had outstanding foreign exchange contracts worth
$51 million with maturity dates over the next 9 months to cover the risks of
dollar to Rupee fluctuations.

29



---



##### 



Results of Operations

The following tables set forth selected operating data as value and as a
percentage of revenues by segment (including inter-segment revenues) for the
periods indicated:

|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |          |          |  
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | -------- | ------------------------- | -------- | ------------------ | ------- | ----------------- | -------- | ------------- | ----- | ----- | ----- | - | ---- | --- | ---- | - | -------- | -------- | -------- | -
|                                                                                                             |                                                  |                          |          | Year ended March 31, 2003
|                                                                                                             |                                                  |                          |          |                          
|                                                                                                             |                                                  |                          |          | IT services               |          | Internet Services* |         | Software products |          | Consolidation |       | Total
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |      
|                                                                                                             |                                                  |                          |          | (in thousands)           
|Statement of Operations Data:                                                                                |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Revenues  external customers                                                                                |                                                  | $                        | 432,621  |                           |          | $                  | 25,715  |                   |          | $             | 871   |       |       |   |     |     |      | $ | 459,207  |         
|Inter  segment revenue                                                                                      |                                                  |                          | 44       |                           |          |                    | 270     |                   |          |               | 253   |       |       | $ | (567 | )   |      |   |         |         
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|                                                                                                             |                                                  | Total Revenues           |          |                           | 432,665  |                    |         |                   | 25,985   |               |       |       | 1,124 |   |      |     | (567 | ) |          |          | 459,207  |  
|Cost of revenues (1)                                                                                         |                                                  |                          | (254,884 | )                         |          |                    | (18,068 | )                 |          |               | (49   | )     |       |   | 313  |     |      |   | (272,688 | )       
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Gross profit                                                                                                 |                                                  |                          | 177,781  |                           |          |                    | 7,917   |                   |          |               | 1,075 |       |       |   | (254 | )   |      |   | 186,519  |         
|Operating expenses:                                                                                          |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|                                                                                                             | Selling, general and administrative expenses (2) |                          |          | (89,223                   | )        |                    |         | (29,612           | )        |               |       | (843  | )     |   |      | 254 |      |   |          | (119,424 | )       
|                                                                                                             | Impairment of other non marketable investments   |                          |          | (3,299                    | )        |                    |         |                  |          |               |       |      |       |   |      |    |      |   |          | (3,299   | )       
|                                                                                                             | Reversal of put option charge                    |                          |          | 19,843                    |          |                    |         |                  |          |               |       |      |       |   |      |    |      |   |          | 19,843   |         
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|                                                                                                             |                                                  | Total operating expenses |          |                           | (72,679) |                    |         |                   | (29,612) |               |       |       | (843) |   |      |     | 254  |   |          |          | (102,880 | )
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Operating income (loss)                                                                                      |                                                  |                          | 105,102  |                           |          |                    | (21,695 | )                 |          |               | 232   |       |       |   |     |     |      |   | 83,639   |         
|Interest income                                                                                              |                                                  |                          | 6,663    |                           |          |                    | 495     |                   |          |               |      |       |       |   |     |     |      |   | 7,158    |         
|Interest expense                                                                                             |                                                  |                          | (595     | )                         |          |                    | (205    | )                 |          |               |      |       |       |   |     |     |      |   | (800     | )       
|Gain on sales of shares in Satyam GE                                                                         |                                                  |                          | 830      |                           |          |                    |        |                   |          |               |      |       |       |   |     |     |      |   | 830      |         
|Gain/(loss) on foreign exchange transactions                                                                 |                                                  |                          | (5,419   | )                         |          |                    | 662     |                   |          |               |      |       |       |   |     |     |      |   | (4,757   | )       
|Other income / (expense), net                                                                                |                                                  |                          | (1,591   | )                         |          |                    | (155    | )                 |          |               |      |       |       |   |     |     |      |   | (1,746   | )       
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 104,990  |                           |          |                    | (20,898 | )                 |          |               | 232   |       |       |   |     |     |      |   | 84,324   |         
|Income taxes                                                                                                 |                                                  |                          | (12,416  | )                         |          |                    | 121     |                   |          |               |      |       |       |   |     |     |      |   | (12,295  | )       
|Minority interest                                                                                            |                                                  |                          | (23      | )                         |          |                    | 11,105  |                   |          |               |      |       |       |   |     |     |      |   | 11,082   |         
|Equity in earnings (losses) of associated
companies, net of taxes                                            |                                                  |                          | (499     | )                         |          |                    | (2,840  | )                 |          |               |      |       |       |   |     |     |      |   | (3,339   | )       
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Net income (loss)                                                                                            |                                                  | $                        | 92,052   |                           |          | $                  | (12,512 | )                 |          | $             | 232   |       |       |   |     |     |      | $ | 79,772   |         
|                                                                                                             |                                                  |                          |          |                           |          |                    |         |                   |          |               |       |       |       |   |      |     |      |   |          |         
|Depreciation                                                                                                 |                                                  | $                        | 26,202   |                           |          | $                  | 7,299   |                   |          | $             | 75    |       |       |   |     |     |      | $ | 33,576   |         
|Deferred stock based compensation                                                                            |                                                  | $                        | 3,380    |                           |          | $                  | 1,141   |                   |          |               |      |       |       |   |     |     |      | $ | 4,521    |         



---

|* |  | Information for Internet services are for the period from April 1, 2002 to
December 9, 2002.
|- |  | --------------------------------------------------------------------------------------------

30



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|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |          |         | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | -------- | ------------------------- | ------- | ----------------- | -------- | ----------------- | -------- | ------------- | ------ | ------ | ------ | - | ------ | --- | ------ | - | -------- | -------- | ------- | 
|                                                                                                             |                                                  |                          |          | Year ended March 31, 2002
|                                                                                                             |                                                  |                          |          |                          
|                                                                                                             |                                                  |                          |          | IT services               |         | Internet Services |          | Software products |          | Consolidation |        | Total 
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |       
|                                                                                                             |                                                  |                          |          | (in thousands)           
|Statement of Operations Data:                                                                                |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Revenues  external customers                                                                                |                                                  | $                        | 377,321  |                           |         | $                 | 36,585   |                   |          | $             | 585    |        |        |   |       |     |        | $ | 414,491  |         
|Inter  segment revenue                                                                                      |                                                  |                          | 618      |                           |         |                   | 2,806    |                   |          |               | 284    |        |        | $ | (3,708 | )   |        |   |         |         
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|                                                                                                             |                                                  | Total Revenues           |          |                           | 377,939 |                   |          |                   | 39,391   |               |        |        | 869    |   |        |     | (3,708 | ) |          |          | 414,491 | 
|Cost of revenues (1)                                                                                         |                                                  |                          | (213,528 | )                         |         |                   | (28,689  | )                 |          |               | (177   | )      |        |   | 3,398  |     |        |   | (238,996 | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Gross profit                                                                                                 |                                                  |                          | 164,411  |                           |         |                   | 10,702   |                   |          |               | 692    |        |        |   | (310   | )   |        |   | 175,495  |         
|Operating expenses:                                                                                          |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|                                                                                                             | Selling, general and administrative expenses (2) |                          |          | (92,070                   | )       |                   |          | (45,814           | )        |               |        | (3,322 | )      |   |        | 310 |        |   |          | (140,896 | )      
|                                                                                                             | Amortization of goodwill                         |                          |          | (4,311                    | )       |                   |          | (12,686           | )        |               |        |       |        |   |        |    |        |   |          | (16,997  | )      
|                                                                                                             | Impairment of goodwill                           |                          |          |                          |         |                   |          | (81,115           | )        |               |        |       |        |   |        |    |        |   |          | (81,115  | )      
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|                                                                                                             |                                                  | Total operating expenses |          |                           | (96,381 | )                 |          |                   | (139,615 | )             |        |        | (3,322 | ) |        |     | 310    |   |          |          | 239,008 | 
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Operating income (loss)                                                                                      |                                                  |                          | 68,030   |                           |         |                   | (128,913 | )                 |          |               | (2,630 | )      |        |   |       |     |        |   | (63,513  | )       
|Interest income                                                                                              |                                                  |                          | 2,984    |                           |         |                   | 822      |                   |          |               |       |        |        |   |       |     |        |   | 3,806    |         
|Interest expense                                                                                             |                                                  |                          | (2,811   | )                         |         |                   | (45      | )                 |          |               |       |        |        |   |       |     |        |   | (2,856   | )       
|Gain on sale of shares of Sify                                                                               |                                                  |                          | 45,594   |                           |         |                   |         |                   |          |               |       |        |        |   |       |     |        |   | 45,594   |         
|Gain/(loss) on foreign exchange transactions                                                                 |                                                  |                          | 9,890    |                           |         |                   | 923      |                   |          |               |       |        |        |   |       |     |        |   | 10,813   |         
|Other income                                                                                                 |                                                  |                          | 1,292    |                           |         |                   | 63       |                   |          |               |       |        |        |   |       |     |        |   | 1,355    |         
|Other expenses                                                                                               |                                                  |                          | 58       |                           |         |                   | (136     | )                 |          |               |       |        |        |   |       |     |        |   | (78      | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 125,037  |                           |         |                   | (127,286 | )                 |          |               | (2,630 | )      |        |   |       |     |        |   | (4,879   | )       
|Income taxes                                                                                                 |                                                  |                          | (17,234  | )                         |         |                   |         |                   |          |               |       |        |        |   |       |     |        |   | (17,234  | )       
|Minority interest                                                                                            |                                                  |                          | 64       |                           |         |                   | 73,342   |                   |          |               |       |        |        |   |       |     |        |   | 73,406   |         
|Equity in earnings (losses) of associated
companies, net of taxes                                            |                                                  |                          | 1,363    |                           |         |                   | (26,764  | )                 |          |               |       |        |        |   |       |     |        |   | (25,401  | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Net income (loss)                                                                                            |                                                  | $                        | 109,230  |                           |         | $                 | (80,708  | )                 |          | $             | (2,630 | )      |        |   |       |     |        | $ | 25,892   |         
|                                                                                                             |                                                  |                          |          |                           |         |                   |          |                   |          |               |        |        |        |   |        |     |        |   |          |         
|Depreciation                                                                                                 |                                                  | $                        | 25,009   |                           |         | $                 | 12,093   |                   |          | $             | 384    |        |        |   |       |     |        | $ | 37,486   |         
|Deferred stock based compensation                                                                            |                                                  |                          | 10,478   |                           |         |                   | 316      |                   |          |               |       |        |        |   |       |     |        |   | 10,794   |         

31



---



##### 



|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |          |          |  
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | -------- | ------------------------- | ------- | ----------------- | ------- | ----------------- | ------- | ------------- | ------- | ------- | ------- | - | ------ | ----- | ------ | - | -------- | -------- | -------- | -
|                                                                                                             |                                                  |                          |          | Year ended March 31, 2001
|                                                                                                             |                                                  |                          |          |                          
|                                                                                                             |                                                  |                          |          | IT services               |         | Internet Services |         | Software products |         | Consolidation |         | Total  
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |        
|                                                                                                             |                                                  |                          |          | (in thousands)           
|Statement of Operations Data:                                                                                |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Revenues  external customers                                                                                |                                                  | $                        | 273,467  |                           |         | $                 | 36,840  |                   |         |               |        |         |         |   |       |       |        | $ | 310,307  |         
|Inter  segment revenue                                                                                      |                                                  |                          | 3,547    |                           |         |                   | 2,148   |                   |         | $             | 213     |         |         | $ | (5,908 | )     |        |   |         |         
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|                                                                                                             |                                                  | Total Revenues           |          |                           | 277,014 |                   |         |                   | 38,988  |               |         |         | 213     |   |        |       | (5,908 | ) |          |          | 310,307  |  
|Cost of revenues (1)                                                                                         |                                                  |                          | (181,326 | )                         |         |                   | (27,892 | )                 |         |               | (142    | )       |         |   | 1,239  |       |        |   | (208,121 | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Gross profit                                                                                                 |                                                  |                          | 95,688   |                           |         |                   | 11,096  |                   |         |               | 71      |         |         |   | (4,669 | )     |        |   | 102,186  |         
|Operating expenses:                                                                                          |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|                                                                                                             | Selling, general and administrative expenses (2) |                          |          | (66,958                   | )       |                   |         | (47,862           | )       |               |         | (13,949 | )       |   |        | 4,669 |        |   |          | (124,100 | )       
|                                                                                                             | Amortization of goodwill                         |                          |          | (4,500                    | )       |                   |         | (20,228           | )       |               |         |        |         |   |        |      |        |   |          | (24,728  | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|                                                                                                             |                                                  | Total operating expenses |          |                           | (71,458 | )                 |         |                   | (68,090 | )             |         |         | (13,949 | ) |        |       | 4,669  |   |          |          | (148,828 | )
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Operating income (loss)                                                                                      |                                                  |                          | 24,230   |                           |         |                   | (56,994 | )                 |         |               | (13,878 | )       |         |   |       |       |        |   | (46,642  | )       
|Interest income                                                                                              |                                                  |                          | 263      |                           |         |                   | 5,469   |                   |         |               |        |         |         |   |       |       |        |   | 5,732    |         
|Interest expense                                                                                             |                                                  |                          | (9,366   | )                         |         |                   | (266    | )                 |         |               |        |         |         |   |       |       |        |   | (9,632   | )       
|Other income                                                                                                 |                                                  |                          | 3,115    |                           |         |                   | 3,686   |                   |         |               | 5       |         |         |   |       |       |        |   | 6,806    |         
|Other expenses                                                                                               |                                                  |                          | (330     | )                         |         |                   | (14     | )                 |         |               |        |         |         |   |       |       |        |   | (344     | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 17,912   |                           |         |                   | (48,119 | )                 |         |               | (13,873 | )       |         |   |       |       |        |   | (44,080  | )       
|Income taxes                                                                                                 |                                                  |                          | (4,102   | )                         |         |                   | (35     | )                 |         |               |        |         |         |   |       |       |        |   | (4,137   | )       
|Minority interest                                                                                            |                                                  |                          | 65       |                           |         |                   | 25,707  |                   |         |               |        |         |         |   |       |       |        |   | 25,772   |         
|Equity in earnings (losses) of associated
companies, net of taxes                                            |                                                  |                          | 890      |                           |         |                   | (6,357  | )                 |         |               |        |         |         |   |       |       |        |   | (5,467   | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Net income (loss)                                                                                            |                                                  | $                        | 14,765   |                           |         | $                 | (28,804 | )                 |         | $             | (13,873 | )       |         |   |       |       |        | $ | (27,912  | )       
|                                                                                                             |                                                  |                          |          |                           |         |                   |         |                   |         |               |         |         |         |   |        |       |        |   |          |         
|Depreciation                                                                                                 |                                                  | $                        | 19,873   |                           |         | $                 | 9,340   |                   |         | $             | 424     |         |         |   |       |       |        | $ | 29,637   |         
|Deferred stock based compensation                                                                            |                                                  |                          | 44,219   |                           |         |                   | 1,899   |                   |         |               |        |         |         |   |       |       |        |   | 46,118   |         



---

|(1) |  | Inclusive of deferred stock based compensation expenses $30,862 thousand
for IT services and $474 thousand for Internet services, in fiscal 2001 and
$7,140 thousand for IT services and $72 thousand for Internet services, in
fiscal 2002 and $1,283 thousand for IT services and $308 thousand for Internet
services, in fiscal 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Inclusive of deferred stock based compensation expense of $13,357 thousand
for IT services and $1,425 thousand for Internet services in fiscal 2001,
$3,339 thousand for IT services and $243 thousand for Internet services in
fiscal 2002 and $2,097 thousand for IT services and $833 thousand for Internet
services in fiscal 2003. 

32



---



##### 



The following tables set forth selected operating data as value and as a
percentage of revenues by segment (including inter-segment revenues) for the
periods indicated:

|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |      |       | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | ----- | ------------------------- | ----- | ------------------ | ----- | ----------------- | ----- | ----- | ---- | ---- | ----- |  | ----- | ---- | ----- | 
|                                                                                                             |                                                  |                          |       | Year ended March 31, 2003
|                                                                                                             |                                                  |                          |       |                          
|                                                                                                             |                                                  |                          |       | IT services               |       | Internet Services* |       | Software products |       | Total
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |      
|Statement of Operations Data:                                                                                |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Revenues  external customers                                                                                |                                                  |                          | 99.99 | %                         |       |                    | 99.0  | %                 |       |       | 77.5 | %    |       |  | 100.0 | %   
|Inter  segment revenue                                                                                      |                                                  |                          | 0.01  |                           |       |                    | 1.0   |                   |       |       | 22.5 |      |       |  | 0.0   |     
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|                                                                                                             |                                                  | Total Revenues           |       |                           | 100.0 |                    |       |                   | 100.0 |       |      |      | 100.0 |  |       |      | 100.0 | 
|Cost of revenues (1)                                                                                         |                                                  |                          | 58.9  |                           |       |                    | 69.5  |                   |       |       | 4.4  |      |       |  | 59.4  |     
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Gross profit                                                                                                 |                                                  |                          | 41.1  |                           |       |                    | 30.5  |                   |       |       | 95.6 |      |       |  | 40.6  |     
|Operating expenses:                                                                                          |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|                                                                                                             | Selling, general and administrative expenses (2) |                          |       | 20.6                      |       |                    |       | 114.0             |       |       |      | 75.0 |       |  |       | 26.0 |      
|                                                                                                             | Impairment of other non marketable investments   |                          |       | 0.8                       |       |                    |       |                  |       |       |      |     |       |  |       | 0.7  |      
|                                                                                                             | Reversal of put option charge                    |                          |       | (4.6                      | )     |                    |       |                  |       |       |      |     |       |  |       | (4.3 | )    
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|                                                                                                             |                                                  | Total operating expenses |       |                           | 16.8  |                    |       |                   | 114.0 |       |      |      | 75.0  |  |       |      | 22.4  | 
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Operating income (loss)                                                                                      |                                                  |                          | 24.3  |                           |       |                    | (83.5 | )                 |       |       | 20.6 |      |       |  | 18.2  |     
|Interest income                                                                                              |                                                  |                          | 1.5   |                           |       |                    | 1.9   |                   |       |       |     |      |       |  | 1.6   |     
|Interest expense                                                                                             |                                                  |                          | (0.1  | )                         |       |                    | (0.8  | )                 |       |       |     |      |       |  | (0.2  | )   
|Gain on sales of shares in Satyam GE                                                                         |                                                  |                          | 0.2   |                           |       |                    | 0.0   |                   |       |       |     |      |       |  | 0.2   |     
|Gain/(loss) on foreign exchange transactions                                                                 |                                                  |                          | (1.3  | )                         |       |                    | 2.5   |                   |       |       |     |      |       |  | (1.0  | )   
|Other income / (expense), net                                                                                |                                                  |                          | (0.4  | )                         |       |                    | (0.6  | )                 |       |       |     |      |       |  | (0.4  | )   
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 24.3  |                           |       |                    | (80.4 | )                 |       |       | 20.6 |      |       |  | 18.4  |     
|Income taxes                                                                                                 |                                                  |                          | (2.9  | )                         |       |                    | 0.5   |                   |       |       |     |      |       |  | (2.7  | )   
|Minority interest                                                                                            |                                                  |                          | 0.0   |                           |       |                    | 42.7  |                   |       |       |     |      |       |  | 2.4   |     
|Equity in earnings (losses) of associated                                                                    |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|companies, net of taxes                                                                                      |                                                  |                          | (0.1  | )                         |       |                    | (10.9 | )                 |       |       |     |      |       |  | (0.7  | )   
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Net income (loss)                                                                                            |                                                  |                          | 21.3  | %                         |       |                    | (48.2 | )%                |       |       | 20.6 | %    |       |  | 17.4  | %   
|                                                                                                             |                                                  |                          |       |                           |       |                    |       |                   |       |       |      |      |       |  |       |     
|Depreciation                                                                                                 |                                                  |                          | 6.1   | %                         |       |                    | 28.1  | %                 |       |       | 6.7  | %    |       |  | 7.3   | %   
|Deferred stock based compensation                                                                            |                                                  |                          | 0.8   | %                         |       |                    | 4.4   | %                 |       |       | 0.0  | %    |       |  | 1.0   | %   



---

|* |  | Information for Internet services are for the period from April 1, 2002 to
December 9, 2002.
|- |  | --------------------------------------------------------------------------------------------

33



---



##### 



|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |      |       | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | ---- | ------------------------- | ----- | ----------------- | ------ | ----------------- | ----- | ----- | ------ | ----- | ----- |  | ----- | ---- | ----- | 
|                                                                                                             |                                                  |                          |      | Year ended March 31, 2002
|                                                                                                             |                                                  |                          |      |                          
|                                                                                                             |                                                  |                          |      | IT services               |       | Internet Services |        | Software products |       | Total
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |      
|Statement of Operations Data:                                                                                |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Revenues  external customers                                                                                |                                                  |                          | 99.8 | %                         |       |                   | 92.9   | %                 |       |       | 67.3   | %     |       |  | 100.0 | %   
|Inter  segment revenue                                                                                      |                                                  |                          | 0.2  |                           |       |                   | 7.1    |                   |       |       | 32.7   |       |       |  |      |     
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|                                                                                                             |                                                  | Total Revenues           |      |                           | 100.0 |                   |        |                   | 100.0 |       |        |       | 100.0 |  |       |      | 100.0 | 
|Cost of revenues (1)                                                                                         |                                                  |                          | 56.5 |                           |       |                   | 72.8   |                   |       |       | 20.4   |       |       |  | 57.7  |     
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Gross profit                                                                                                 |                                                  |                          | 43.5 |                           |       |                   | 27.2   |                   |       |       | 79.6   |       |       |  | 42.3  |     
|Operating expenses:                                                                                          |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|                                                                                                             | Selling, general and administrative expenses (2) |                          |      | 24.4                      |       |                   |        | 116.3             |       |       |        | 382.3 |       |  |       | 34.0 |      
|                                                                                                             | Amortization of goodwill                         |                          |      | 1.1                       |       |                   |        | 32.2              |       |       |        |      |       |  |       | 4.1  |      
|                                                                                                             | Impairment of goodwill                           |                          |      |                          |       |                   |        | 205.9             |       |       |        |      |       |  |       | 19.6 |      
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|                                                                                                             |                                                  | Total operating expenses |      |                           | 25.5  |                   |        |                   | 354.4 |       |        |       | 382.3 |  |       |      | 57.7  | 
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Operating income (loss)                                                                                      |                                                  |                          | 18.0 |                           |       |                   | (327.3 | )                 |       |       | (302.6 | )     |       |  | (15.3 | )   
|Interest income                                                                                              |                                                  |                          | 0.8  |                           |       |                   | 2.1    |                   |       |       |       |       |       |  | 0.9   |     
|Interest expense                                                                                             |                                                  |                          | (0.7 | )                         |       |                   | (0.1   | )                 |       |       |       |       |       |  | 0.7   |     
|Gain on sale of shares of Sify                                                                               |                                                  |                          | 12.1 |                           |       |                   |       |                   |       |       |       |       |       |  | 11.0  |     
|Gain/(loss) on foreign exchange transactions                                                                 |                                                  |                          | 2.7  |                           |       |                   | 2.3    |                   |       |       |       |       |       |  | 2.6   |     
|Other income                                                                                                 |                                                  |                          | 0.3  |                           |       |                   | 0.2    |                   |       |       |       |       |       |  | 0.3   |     
|Other expenses                                                                                               |                                                  |                          |     |                           |       |                   | (0.3   | )                 |       |       |       |       |       |  |      |     
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 33.1 |                           |       |                   | (323.1 | )                 |       |       | (302.6 | )     |       |  | (1.2  | )   
|Income taxes                                                                                                 |                                                  |                          | (4.6 | )                         |       |                   |       |                   |       |       |       |       |       |  | (4.2  | )   
|Minority interest                                                                                            |                                                  |                          |     |                           |       |                   | 186.2  |                   |       |       |       |       |       |  | 17.7  |     
|Equity in earnings (losses) of associated
companies, net of taxes                                            |                                                  |                          | 0.4  |                           |       |                   | (67.9  | )                 |       |       |       |       |       |  | (6.1  | )   
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Net income (loss)                                                                                            |                                                  |                          | 28.9 | %                         |       |                   | (204.9 | )%                |       |       | (302.6 | )%    |       |  | 6.2   | %   
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |        |       |       |  |       |     
|Depreciation                                                                                                 |                                                  |                          | 6.6  | %                         |       |                   | 30.7   | %                 |       |       | 44.2   | %     |       |  | 9.0   | %   
|Deferred stock based compensation                                                                            |                                                  |                          | 2.8  | %                         |       |                   | 0.8    | %                 |       |       |       |       |       |  | 2.6   | %   

34



---



##### 



|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |      |       | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------ | ---- | ------------------------- | ----- | ----------------- | ------ | ----------------- | ----- | ----- | -------- | ------- | ------- |  | ----- | ---- | ----- | 
|                                                                                                             |                                                  |                          |      | Year ended March 31, 2001
|                                                                                                             |                                                  |                          |      |                          
|                                                                                                             |                                                  |                          |      | IT services               |       | Internet Services |        | Software products |       | Total
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |      
|Statement of Operations Data:                                                                                |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Revenues  external customers                                                                                |                                                  |                          | 98.7 | %                         |       |                   | 94.5   | %                 |       |       |         |         |         |  | 100.0 | %   
|Inter  segment revenue                                                                                      |                                                  |                          | 1.3  |                           |       |                   | 5.5    |                   |       |       | 100.0    | %       |         |  |      |     
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|                                                                                                             |                                                  | Total Revenues           |      |                           | 100.0 |                   |        |                   | 100.0 |       |          |         | 100.0   |  |       |      | 100.0 | 
|Cost of revenues (1)                                                                                         |                                                  |                          | 65.5 |                           |       |                   | 71.5   |                   |       |       | 66.7     |         |         |  | 67.1  |     
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Gross profit                                                                                                 |                                                  |                          | 34.5 |                           |       |                   | 28.5   |                   |       |       | 33.3     |         |         |  | 32.9  |     
|Operating expenses:                                                                                          |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|                                                                                                             | Selling, general and administrative expenses (2) |                          |      | 24.2                      |       |                   |        | 122.8             |       |       |          | 6,548.8 |         |  |       | 40.0 |      
|                                                                                                             | Amortization of goodwill                         |                          |      | 1.6                       |       |                   |        | 51.9              |       |       |          |        |         |  |       | 8.0  |      
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|                                                                                                             |                                                  | Total operating expenses |      |                           | 25.8  |                   |        |                   | 174.6 |       |          |         | 6,548.8 |  |       |      | 48.0  | 
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Operating income (loss)                                                                                      |                                                  |                          | 8.7  |                           |       |                   | (146.2 | )                 |       |       | (6,515.5 | )       |         |  | (15.0 | )   
|Interest income                                                                                              |                                                  |                          | 0.1  |                           |       |                   | 14.0   |                   |       |       |         |         |         |  | 1.8   |     
|Interest expense                                                                                             |                                                  |                          | (3.4 | )                         |       |                   | (0.7   | )                 |       |       |         |         |         |  | (3.1  | )   
|Other income                                                                                                 |                                                  |                          | 1.1  |                           |       |                   | 9.5    |                   |       |       | 2.3      |         |         |  | 2.2   |     
|Other expenses                                                                                               |                                                  |                          | (0.1 | )                         |       |                   |       |                   |       |       |         |         |         |  | (0.1  | )   
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Income (loss) before income taxes, minority interest and equity in earnings (losses) of
associated companies |                                                  |                          | 6.5  |                           |       |                   | (123.4 | )                 |       |       | (6,513.1 | )       |         |  | (14.2 | )   
|Income taxes                                                                                                 |                                                  |                          | (1.5 | )                         |       |                   | (0.1   | )                 |       |       |         |         |         |  | (1.3  | )   
|Minority interest                                                                                            |                                                  |                          |     |                           |       |                   | 65.9   |                   |       |       |         |         |         |  | 8.3   |     
|Equity in earnings (losses) of associated
companies, net of taxes                                            |                                                  |                          | 0.3  |                           |       |                   | (16.3  | )                 |       |       |         |         |         |  | (1.8  | )   
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Net income (loss)                                                                                            |                                                  |                          | 5.3  | %                         |       |                   | (73.9  | )%                |       |       | (6,513.1 | )%      |         |  | (9.0  | )%  
|                                                                                                             |                                                  |                          |      |                           |       |                   |        |                   |       |       |          |         |         |  |       |     
|Depreciation                                                                                                 |                                                  |                          | 7.2  | %                         |       |                   | 24.0   | %                 |       |       | 199.1    | %       |         |  | 9.6   | %   
|Deferred stock based compensation                                                                            |                                                  |                          | 16.0 | %                         |       |                   | 4.9    | %                 |       |       |         |         |         |  | 14.9  | %   



---

|(1) |  | Inclusive of deferred stock based compensation expenses $30,862 thousand
for IT services and $474 thousand for Internet services, in fiscal 2001 and
$7,140 thousand for IT services and $72 thousand for Internet services, in
fiscal 2002 and $1,283 thousand for IT services and $308 thousand for
Internet services, in fiscal 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Inclusive of deferred stock based compensation expense of $13,357
thousand for IT services and $1,425 thousand for Internet services in fiscal
2001,$3,339 thousand for IT services and $243 thousand for Internet services
in fiscal 2002 and $2,097 thousand for IT services and $833 thousand for
Internet services in fiscal 2003   

35



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##### 



Comparison of fiscal 2003 and 2002

The following year on year comparison is based on our reportable segments.

IT Services

Our principal business is providing IT services and we provide our customers
with the ability to meet all of their IT needs from one service provider.

Revenues:

Our IT services revenues (excluding inter-segment revenues) represented
94.2% and 91.0% of our total revenues in fiscal 2003 and 2002
respectively. These revenues increased by 14.7% to $432.6 million in fiscal
2003 from $377.3 million in fiscal 2002. This fall in growth rate can be primarily attributed to
the unfavorable global economic conditions specifically in the United States,
and reduced levels of information technology-related capital spending compared
with a year ago. The economic slowdown has had a significant impact on the
information technology industry.

This growth of $55.3 million or 14.7% in IT services revenue in fiscal 2003 was
primarily the result of an increase in business from existing customers and the
generation of new business from new customers. We added 100 and 102 customers
during the year including 23 and 21 from the Fortune 500 list during the fiscal
ended 2003 and 2002 respectively. The revenue share of Fortune 500 customers
increased from 59% in fiscal 2002 to 66% in fiscal 2003. Our established and
enduring partnership model with such high quality customers signifies
considerable growth potential.

We derived 93.2% of our IT services revenues from existing customers while the
new customers accounted for 6.8% of our revenues in fiscal 2003 as against
92.0% from existing customers and 8.0% from new customers during fiscal 2002.

IT services revenues and gross profits are affected by the rate at which
associates are utilized. We calculate utilization rates on a monthly basis,
based on the ratio of the actual number of hours billed by technical associates
in such month to the total number of billable hours. For purposes of such
calculation, we assume that an associate is 100.0% utilized if he works 157
hours per month. Utilization rates for IT services were 80.4% and 77.5% in
fiscal 2003 and fiscal 2002, respectively. The utilization rate increased on
account of new business and increase in business from existing clients.

Revenues by technology

The following table presents our IT services revenues (excluding
inter-segment revenues) by type of IT service offering (in millions, except
percentages).

|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |      |      |   |  |      |       |  
|--------------------------- | ----------------------------- | ------ | ----- | ----- | ---- | ------ | --------------------- | ---- | - | ------ | ----- | ----- |  |  | ----- | ---- | - | - | ---- | ---- | - |  | ---- | ----- | -
|                            |                               |        | 2003  |       | 2002 |        | Change 2003 over 2002
|                            |                               |        |       |       |      |        |                      
|Type of IT service offering |                               | Amount |       | %     |      | Amount |                       | %    |   | Amount |       | %    
|                            |                               |        |       |       |      |        |                       |      |   |        |       |      
|                            | Software development          |        | $     | 214.1 |      |        |                       | 49.5 | % |        | $     | 195.5 |  |  |       | 51.8 | % |   | $    | 18.6 |   |  |      | 9.5   | %
|                            | System maintenance            |        |       | 108.6 |      |        |                       | 25.1 |   |        |       | 110.2 |  |  |       | 29.2 |   |   |      | (1.6 | ) |  |      | (1.5  | )
|                            | Packaged software integration |        |       | 94.3  |      |        |                       | 21.8 |   |        |       | 53.0  |  |  |       | 14.0 |   |   |      | 41.3 |   |  |      | 77.9  |  
|                            | Engineering design services   |        |       | 15.6  |      |        |                       | 3.6  |   |        |       | 18.6  |  |  |       | 5.0  |   |   |      | (3.0 | ) |  |      | (16.1 | )
|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |      |      |   |  |      |       |  
|Total IT services           |                               | $      | 432.6 |       |      |        | 100.0                 | %    |   | $      | 377.3 |       |  |  | 100.0 | %    |   | $ | 55.3 |      |   |  | 14.7 | %    
|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |      |      |   |  |      |       |  

Revenues by contract type

The
following table gives the composition of IT services revenues
(excluding inter-segment revenues) by type of
contract (in millions, except percentages).

36



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##### 



|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|--------------------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                            |  | 2003   |       | 2002
|                            |  |        |       |     
|Type of IT service offering |  | Amount |       | %    |  | Amount |       | %
|                            |  |        |       |      |  |        |       |  
|Time and material basis     |  | $      | 306.5 |      |  |        | 70.9  | % |  | $ | 294.7 |  |  |  | 78.1  | %
|Fixed price basis           |  |        | 126.1 |      |  |        | 29.1  |   |  |   | 82.6  |  |  |  | 21.9  |  
|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total IT services           |  | $      | 432.6 |      |  |        | 100.0 | % |  | $ | 377.3 |  |  |  | 100.0 | %
|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  

Our revenues are generated principally from IT services provided on either a
time-and-material or a fixed-price basis. Revenues from IT service provided on
a time-and-material basis are recognized in the period that services are
performed. Revenues from IT services provided on a fixed-price basis are
recognized under the percentage of completion method of accounting when the
work executed can be reasonably estimated. The percentage of completion
estimates are subject to periodic revisions and the cumulative impact of any
revision in the estimates of the percentage of completion is reflected in the
period in which the changes become known. Although from time to time we have
revised our project completion estimates, to date such revisions have not
materially affected our reported revenues.

Revenues from IT services (excluding inter-segment revenues) provided on a
time-and-materials basis decreased in fiscal 2003 by 7.2% to 70.9% from 78.1%
in fiscal 2002 and revenues from fixed-price basis increased in fiscal 2003 by
7.2% to 29.1% from 21.9% in fiscal 2002.

The increase in fiscal 2003 for fixed bid contracts is primarily due to shift
in type of contracts from time-and-material to fixed bid since based on current
market trends majority of the customers prefer to enter in to fixed price
contracts. We expect that revenue from fixed bid contract will continue to
increase in fiscal 2004 since current market trend indicate customer preference
towards fixed price contracts.

Revenues based on onsite / off site

The following tables gives the composition of revenues from IT services
(excluding inter-segment revenues) based on the location where services are performed (in millions, except
percentages).

|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|------------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                    |  | 2003   |       | 2002
|                    |  |        |       |      | 
|                    |  | Amount |       | %    |  | Amount |       | %
|                    |  |        |       |      |  |        |       |  
|Off shore           |  | $      | 191.6 | %    |  |        | 44.3  | % |  | $ | 180.0 |  |  |  | 47.7  | %
|On site / off-sites |  |        | 241.0 |      |  |        | 55.7  |   |  |   | 197.3 |  |  |  | 52.3 
|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total IT services   |  | $      | 432.6 |      |  |        | 100.0 | % |  |   | 377.3 |  |  |  | 100.0 | %
|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |      

We provide our IT services through our 15 offshore centers located in
throughout India and through our offsite centers in United States, United
Kingdom, Japan, Singapore, Australia, Malaysia, Germany, Dubai, and
other countries.

Offshore IT services revenues consist of revenues from IT services work
conducted in our offshore centers and onsite work conducted at customers
premises which is related to offshore work. Offshore IT services revenues do
not include revenues from offsite centers or onsite work which is not related
to any offshore work.

We charge higher rates and incur higher compensation expenses for work
performed by our onsite teams on a customers premises or at our offsite
centers as compared to work performed at our offshore centers in India.
Services performed at our onsite teams or at our offsite centers typically
generate higher revenues per capita but at a lower gross margin than the same
amount of services performed at our offshore centers in India.

The onsite percentage increased as a result of new engagements during fiscal
2003, since in the early stages of new engagements we require extensive
interactions with customers to understand the business scenario and create the
right process and the methodology before we move the work offshore at the most
appropriate time.

We have set up a Global Business Continuity Center in Singapore and a
Global Solution Center in Malaysia as an
integral part of our business continuity plan. With development centers
spread across 15 cities across the globe, we have the ability to commence work
at a number of alternate sites in case of an emergency.

37



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##### 



Revenues based on geography

The following table gives the composition of our revenues based on the
location of our customers (in millions, except percentages).

|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|----------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                  |  | 2003   |       | 2002
|                  |  |        |       |     
|                  |  | Amount |       | %    |  | Amount |       | %
|                  |  |        |       |      |  |        |       |  
|North
America     |  | $      | 332.6 |      |  |        | 76.9  | % |  | $ | 288.8 |  |  |  | 76.5  | %
|Europe            |  |        | 53.3  |      |  |        | 12.3  |   |  |   | 39.2  |  |  |  | 10.4  |  
|Japan             |  |        | 10.5  |      |  |        | 2.4   |   |  |   | 9.2   |  |  |  | 2.4   |  
|India             |  |        | 4.7   |      |  |        | 1.1   |   |  |   | 5.9   |  |  |  | 1.6   |  
|Rest of the World |  |        | 31.5  |      |  |        | 7.3   |   |  |   | 34.2  |  |  |  | 9.1   |  
|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total             |  | $      | 432.6 |      |  |        | 100.0 | % |  | $ | 377.3 |  |  |  | 100.0 | %
|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  

Our
increased business in North America and Europe was due to new clients and
additional business from existing customers. There was no material change in
our revenue mix by geography during fiscal 2003 compared to fiscal 2002. We
expect that most of our revenues will be generated in United States, followed
by Europe, in fiscal 2004.

Cost of Revenues:Cost of revenues increased by 19.4% to $254.9 million in
fiscal 2003 from $213.5 million in fiscal 2002. Cost of revenues represented
58.9% of IT services revenues in fiscal 2003 and 56.6% in fiscal 2002. This
increase by $41.4 million was attributable primarily to increases in associate
compensation and benefits expenses, traveling expenses, depreciation expense
and an increase in other expenses. Associate compensation and benefits
expenses increased 26.7% to $180.5 million, or 41.7% of revenues, in fiscal
2003 from $142.5 million, or 37.8% of revenues, in fiscal 2002. The increase in
the associate compensation and benefits is due to: (1) increase in the total
number of technical associates by 1,188 to 9,086 in fiscal
2003 from 7,898 in fiscal 2002; (2) increase in number of onsite technical
associates by 492 to 2,386 in fiscal 2003 from 1,894 in fiscal
2002 for which we pay a higher compensation; (3) incremental
salary during fiscal 2003.
Traveling expenses increased 47.4% to $25.8 million,
or 6.0% of revenues, in fiscal 2003 from $17.5 million, or 4.6% of revenues, in
fiscal 2002. Depreciation expense increased 2.3% to $22.1 million, or 5.1% of
revenues, in fiscal 2003 from $21.6 million, or 5.7% of revenues, in fiscal
2002. Other expenses were primarily comprised of software charges,
communication expense, rent expense and deferred stock based compensation.
Other expenses decreased 16.9% to $26.5 million, or 6.1% of revenues, in fiscal
2003 from $31.9 million, or 8.5% of revenues, in fiscal 2002. This decrease
was primarily on account of reduction in deferred stock based compensation
expense that decreased by 81.7% to $1.3 million in fiscal 2003 from $7.1
million in fiscal 2002 as a majority of options granted had a vesting date
till March 2002. As a result, the charge on these options was increased in
fiscal 2002 as compared to fiscal 2003. Inter-segments cost of revenues were
$313 thousand in fiscal 2003 as compared to $3.4 million in fiscal 2002 and
have not been allocated to the individual components that make up cost of
revenues.

Selling, general and administrative expenses:Selling, general and
administrative expenses decreased 3.3% to $89.2 million in fiscal 2003 from
$92.2 million in fiscal 2002. Selling, general and administrative expenses
represented 20.6% of revenues in fiscal 2003 and 24.4% in fiscal 2002. This
decrease was attributable primarily to decrease in associate compensation and
benefits expenses, charge on TRW warrants, professional charges and deferred
stock based compensation. This decrease was partially offset by increase in
traveling expenses. The increase in traveling expenses by 15.9% to $9.5 million
in fiscal 2003 from $8.2 million in fiscal 2002 is due to an increase in
foreign travel primarily due to meetings with new clients.

Impairment of other non-marketable investments:During the year ended March 31,
2003 we recorded an impairment charge on other non-marketable investments
amounting to $3.3 million based on our assessment of their carrying values. We
assessed the carrying values of these investments by considering current
factors including economic environment, market conditions and the operational
performance and other specific factors relating to the business underlying
these investments and concluded that there is an other than temporary decline
in their carrying value.

Reversal of put option charge:In connection with our previous joint venture
with TRW Inc., TRW had the option to require us to purchase its 24.0% interest
in the joint venture. The buyout price of TRWs interest in the joint venture
depended on the aggregate amount of revenue which TRW would provide to the
joint venture from June 1, 2000 to

38



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##### 



December 31, 2005. We accounted for the put option at fair value at each
balance sheet date, with the initial fair value of the put option included as
part of the consideration for its 76.0% interest in the joint venture. The
difference between the fair values of the put option at each valuation date was
charged to selling, general and administration expenses in the statement of
operations. Based on the terms of the agreement, the value of put option was
$12.5 million as of March 31, 2002.

In October 2002, Northrop Grumman Corporation acquired TRW and subsequently
TRWs name was changed to Northrop Grumman Space & Mission Systems Corporation
(or NGSM). Following the restructuring of TRW, we entered into a share
purchase and joint venture termination agreement with NGSM and BDM
International Inc. (or NGSM Parties) under which we purchased the 24% holding of NGSM Parties in the joint
venture for $3.5 million
and the prospects of future business opportunities with Northop, on March 28, 2003. The acquisition has been accounted using the purchase
method and the allocation of the purchase price was almost entirely related to
goodwill. We recognized goodwill of $3.4 million on this acquisition equal to
the excess of the consideration paid of $3.5 million over the fair value of
that portion of the net assets acquired as of March 28, 2003. In accordance
with the provisions of SFAS 142, the goodwill has not been amortized post
acquisition. As a result of our acquisition of this 24% interest in the joint
venture, the value of the put option as of December 31, 2002 amounting to $19.8
million has been accounted for as operating income in the year ended March 31,
2003.

Goodwill. Effective April 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142 or SFAS 142, Goodwill and Other Intangible Assets. SFAS 142
requires, among other things, the discontinuance of amortization related to
goodwill and indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. We are required to perform
goodwill impairment tests on an annual basis and between annual tests in
certain circumstances. We performed an initial impairment review of goodwill
on the adoption of SFAS 142 and also carried out an annual impairment review in
2003. Based on these tests there is no impairment of goodwill during the year
ended March 31, 2003. Further due to the adoption of SFAS 142, we ceased
amortizing goodwill and as a result, amortization of goodwill expense was nil
in fiscal 2003 as compared to $4.3 million in fiscal 2002.

Operating income (loss).Our operating income was $105.1 million for fiscal
2003, representing an increase of 54.6% over the operating income of $68.0
million for fiscal 2002. As a percentage of revenues, operating income
increased to 22.9% for fiscal 2003, from 16.4% for fiscal 2002.

Interest income.Interest income increased to $6.7 million in fiscal 2003 from
$3.0 million in fiscal 2002 primarily on account of investments in fixed rate
bank deposits amounting to $259.4 million.

Interest expense.Interest expense decreased to $0.6 million in fiscal
2003 from $2.8 million in fiscal 2002 primarily due to the repayment of debts
during the second and third quarter of fiscal 2002 by utilization of ADR
proceeds.

Gain on sale of shares in Satyam GE.During the year ended March 31, 2003
we obtained the necessary approvals and transferred our 50% shareholding in
Satyam GE to GE Pacific for approximately $4 million. We recorded a gain of
$830 thousand for this sale, the excess of sales consideration received over
the carrying value.

Gain/(loss) on foreign exchange transactions. In fiscal 2003 and fiscal
2002, 81.2% and 82.7%, respectively, of our total revenues were generated in
U.S. dollars. During fiscal 2003, the rupee appreciated to 47.53 to $1.00
against 48.83 in fiscal 2002. Our loss on foreign exchange transactions was
$5.4 million in fiscal 2003 as compared to a gain of $9.9 million in fiscal
2002.

Other income/ (expenses), net.Other expenses increased to $1.6 million in
fiscal 2003 as compared to other income of $1.4 million in fiscal 2002.

Income taxes:Income taxes were $12.4 million in fiscal 2003 as compared to
$17.2 million in fiscal 2002.

Minority Interest.Minority interest decreased to $(23.0) thousand in fiscal
2003 from $64.0 thousand in fiscal 2002 .

39



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##### 



Equity in earnings (losses) of associated companies.Equity losses of
associated companies were $499 thousand in fiscal 2003 as compared to a gain
$1.4 million in fiscal 2002. This decrease was primarily due to Sifys losses
of $1.3 million for period from December 10, 2002 to March 31, 2003 and
decreased income amounting to $0.8 million due to the sale of Satyam GE in
fiscal 2003.

Net income.Our net income was $92.1 million for fiscal 2003, representing an
decrease of 15.7% over net income of $109.2 million for fiscal 2002. As a
percentage of total revenues, net income decreased to 21.3% for fiscal 2003
from 28.9% for fiscal 2002.

Internet Services

Our ownership interest in Sify , which provides Internet services in India, was
reduced from 52.51% as at March 31, 2002 to 37.15% as at March 31, 2003 due to
the private placement completed by Sify in December 2002. As a result of this
decreased ownership interest, we no longer maintain a controlling interest in
Sify and subsequent to December 9, 2002 we have accounted for our interest in
Sify using the equity method. Consequently, our results of operations for the
Internet services segment for the year ended March 31, 2003 is not comparable
with prior periods.

Revenues.Revenues from Internet services are generated principally from
corporate network and technology services, web-site design and development,
sale of Internet access and banner advertisements and sponsorship contracts.
Our Internet services revenues (excluding inter-segment revenues) represented
5.6%, 8.8%and 11.9% of our total revenues in fiscal 2003, 2002 and 2001
respectively. Our Internet services revenues (excluding inter-segment
revenues) decreased by 29.7% to $25.7 million in fiscal 2003 from $36.6 million
in fiscal 2002. This reduction was primarily due to the consolidation of
revenues from the Internet segment for fiscal 2003 for the period April 1, 2002
to December 9, 2002 and not for the entire year.

Cost of Revenues.Cost of revenues decreased by 37.0% to $18.1 million in
fiscal 2003 from $28.7 million in fiscal 2002. This decrease in cost of
revenues was attributable primarily to a decrease in communication expense,
cost of direct supplies, associate compensation and benefits, depreciation
expenses and other expenses. Communication expenses decreased 39.2% to $8.6
million, or 33.5% of revenues in fiscal 2003 from $14.1 million, or 38.6% of
revenues, in fiscal 2002. Cost of direct supplies decreased 15.0% to $5.1
million or19.8% of revenues in fiscal 2003 from $6.0 million or 16.4% of
revenues. Associate compensation and benefits decreased 72.4% to $1.4 million
or 5.3% of revenues in fiscal 2003 from $5.5 million or 13.7% of revenues in
fiscal 2002. Cost of revenues represented 70.4% of Internet services revenues
in fiscal 2003 and 78.4% in fiscal 2002.

Selling, general and administrative expenses.Selling, general and
administrative expenses decreased 35.5% to $29.6 million in fiscal 2003 from
$45.9 million in fiscal 2002. Selling, general and administrative expenses
represented 114% of revenues in fiscal 2003 as compared to 116.4% in fiscal
2002. The decrease in selling, a general and administrative expense was
attributable primarily to decrease in compensation and benefit expenses;
marketing expenses; professional charges; traveling expenses and other
expenses. Compensation and benefit expenses decreased 41.2% to $5.7 million, or
21.9% of revenues, in fiscal 2003 from $9.7 million, or 24.5% of revenues, in
fiscal 2002. Marketing expenses decreased 31.3% to $2.2 million, or 8.6% of
revenues, in fiscal 2003 from $3.2 million, or 8.1% of revenues, in fiscal
2002. Depreciation decreased 19.8% to $9.7 million, or 37.3% of revenues, in
fiscal 2003 from $12.1 million, or 30.7% of revenues, in fiscal 2002.

Goodwill. Effective April 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142 or SFAS 142, Goodwill and Other Intangible Assets. SFAS 142
requires, among other things, the discontinuance of amortization related to
goodwill and indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. We are required to perform
goodwill impairment tests on an annual basis and between annual tests in
certain circumstances. We performed an initial impairment review of goodwill
on the adoption of SFAS 142 and also carried out an annual impairment review in
2003. Based on these tests there is no impairment of goodwill during the year
ended March 31, 2003. Due to the adoption of SFAS 142, we ceased amortizing
goodwill and as a result, amortization of goodwill expense was nil in fiscal
2003 as compared to $12.7 million in fiscal 2002.

In the year ended March 31, 2002, we recorded an impairment charge of $81.1
million relating to goodwill acquired in the IndiaWorld, India Plaza and
Eduempire acquisitions by Sify as a result of an ongoing impairment assessment
of goodwill recorded in connection with these acquisitions. The operations of
those entities have been completely

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integrated into the operations of Sify. We
assessed the recoverability of goodwill arising out of the India World and
India Plaza acquisitions at the enterprise level of Sify. The impairment
charge was calculated as the difference between the market value of Sify and
its net assets. The assessment was performed due to significant decline in
Sifys stock price for a sustained period, Sifys market capitalization
relative to its net book value, significant under performance relative to
expected historical or projected future operating results, significant negative
industry and economic trends and the overall decline in market conditions which
indicate that this decline in the market value of stock price is other-than
temporary. The shortfall in the market capitalization has indicated an
impairment of goodwill. Thus the entire carrying value of goodwill as at
September 30 2001, pertaining to India World of $73.1 million, India Plaza of
$8.0 million and Eduempire of $50 thousand had been charged to the statement of
operations for the year ended March 31, 2002.

Operating income (loss).We incurred an operating loss of $21.7 million in
fiscal 2003 as compared to an operating loss of $128.9 million in fiscal 2002.

Interest income. Interest income was $0.5 million in fiscal 2003 and $0.8
million in fiscal 2002.

Interest expense. Interest expense increased to $205 thousand in fiscal 2003
from $45 thousand in fiscal 2002.

Other income/expenses, net.Other expenses increased to $155 thousand in fiscal
2003 from $73 thousand in fiscal 2002.

Minority Interest.Minority interest decreased to $11.1 million in fiscal 2003
from $73.3 million in fiscal 2002. This decrease was primarily due to a
reduction in Sifys losses in fiscal 2003 and our deconsolidation of Sify
subsequent to December 9, 2002.

Equity in earnings (losses) of associated companies.Equity losses of
associated companies were $2.8 million in fiscal 2003 as compared to $26.8
million in fiscal2002. This decrease was primarily due to amortization of
goodwill from Cricinfo amounting to $23.0 million in fiscal 2002.

Net income (loss).Our net loss decreased was $12.5 million in fiscal 2003 as
compared to a net loss of $80.7 million in fiscal 2002.

Software products

In fiscal 2003, VCI generated revenues
of $1.1 million, of which $0.3 million
was from inter-segment revenues. VCI generated a net profit of $0.2 million in
fiscal 2003. Revenues from software products to date have been immaterial. The
net profit of $0.2 million in fiscal 2003 as compared to the net loss of $2.6
million in fiscal 2002 was primarily due to the decrease in selling and general
administrative expenses to $0.84 million in fiscal 2003 as compared to $3.3
million in fiscal 2002. Keeping in view the present business and economic
conditions, the relative size and managerial time, we decided to discontinue
the operations of VisionCompass so as to focus on our core business of IT
services.

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Comparison of fiscal 2002 and 2001

Revenues.Revenues increased by 33.6% to $414.5 million in fiscal 2002 from
$310.3 million in fiscal 2001. Our top two customers accounted for 25.2% of the
total revenues in 2002 up from 23.9% of the total revenues in 2001.
Additionally, our top 10 customers accounted for 49.0% of the revenues in 2002
as compared to 46.3% in 2001.

IT Services.IT services revenues (including inter-segment revenues) increased
36.4% to $377.9 million in fiscal 2002 from $277.0 million in fiscal 2001, of
which $0.6 million and $3.5 million represented inter-segment revenues in
fiscal 2002 and 2001, respectively. All revenues discussed in this
sub-section relate only to IT services revenues generated from external
customers and exclude inter-segment revenues generated from services provided
by Satyam Computer Services to its subsidiaries and vice-versa.

Internet Services.Internet services revenues (including inter-segment
revenues) were $39.4 million in fiscal 2002 and $39.0 million in fiscal 2001,
of which inter-segment revenues were $2.8 million in fiscal 2002 and $2.1
million in fiscal 2001. The number of Internet access subscribers grew from
more than 460,000 as of March 31, 2001 to over 600,000 as of March 31, 2002.

Software Products.Revenues from software products to date have been
immaterial.

Cost of revenues.Cost of revenues increased 14.8% to $239.0 million in fiscal
2002 from $208.1 million in fiscal 2001. This increase was attributable
primarily to increases in associate compensation and benefits expenses,
depreciation expense and an increase in other expenses. Associate compensation
and benefits expenses increased 40.8% to $145.5 million, or 35.1% of revenues,
in fiscal 2002 from $103.3 million, or 33.3% of revenues, in fiscal 2001.
Depreciation expense increased 40.2% to $21.6 million, or 5.2% of revenues, in
fiscal 2002 from $15.4 million, or 5.0% of revenues, in fiscal 2001. Other
expenses were primarily comprised of cost of direct supplies. Other expenses
increased 52.1% to $28.6 million, or 6.9% of revenues, in fiscal 2002 from
$18.8 million, or 6.1% of revenues, in fiscal 2001. These increases were
partly compensated by a decrease in deferred stock based compensation,
communication expenses and travel expenses. Deferred stock based compensation
expense decreased 77.0% to $7.2 million, or 1.7% of revenues, in fiscal 2002
from $31.3 million, or 10.1% of revenues, in fiscal 2001. Communication
expenses decreased 4.1% to $18.5 million, or 4.5% of revenues, in fiscal 2002
from $19.3 million, or 6.2% of revenues, in fiscal 2001. Travel expenses
decreased 12.0% to $17.5 million, or 4.2% of revenues, in fiscal 2002 from
$19.9 million, or 6.4% of revenues, in fiscal 2001. Inter-segments cost of
revenues were $3.4 million in fiscal 2002 as compared to $1.2 million in fiscal
2001 and have not been allocated to the individual components that make up cost
of revenues. Cost of revenues represented 57.7% of revenues in fiscal 2002 and
67.1% in fiscal 2001.

Gross profit..Our gross profit was $175.5 million for fiscal 2002,
representing an increase of 71.7% over gross profit of $102.2 million for
fiscal 2002. As a percentage of total revenues, gross profit increased to 42.3%
for fiscal 2002 from 32.9% for fiscal 2001.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased 13.5% to $140.9 million in fiscal 2002 from
$124.1 million in fiscal 2001. This increase was a result primarily of
increases in associate compensation and benefits, professional charges, travel
expenses, depreciation expense and other expenses. Compensation and benefits
expenses increased 69.1% to $44.4 million, or 10.7% of revenues, in fiscal 2002
from $26.3 million, or 8.5% of revenues, in fiscal 2001. Professional charges
increased 57.2% to $11.9 million, or 2.9% of revenues, in fiscal 2002 from $7.6
million, or 2.5% of revenues, in fiscal 2001. Travel expenses increased 43.2%
to $10.3 million, or 2.5% of revenues, in fiscal 2002 from $7.2 million, or
2.3% of revenues, in fiscal 2001. Depreciation expense increased 11.5% to $15.8
million, or 3.8% of revenues, in fiscal 2002 from $14.2 million, or 4.6% of
revenues, in fiscal 2001. Other expenses increased 18.7% to $27.1 million, or
6.5% of revenues, in fiscal 2002 from $22.8 million, or 7.4% of revenues, in
fiscal 2001. These increase were partly compensated by a decrease in deferred
stock based compensation and marketing expenses. Deferred stock based
compensation expense decreased 75.8% to $3.6 million, or 0.9% of revenues, in
fiscal 2002 from $14.8 million, or 4.8% of revenues, in fiscal 2001. Marketing
expenses decreased 33.9% to $9.9 million, or 2.4% of revenues, in fiscal 2002
from $15.0 million, or 4.8% of revenues, in fiscal 2001. Inter-segment
selling, general and administrative expenses were $0.3 million in fiscal 2002
as compared to $4.7 million in fiscal 2001 and have not been allocated to the
individual components that make up selling, general and administrative
expenses. Selling, general and administrative expenses represented 34.0% of
revenues in fiscal 2002 as compared to 40.0% of revenues in fiscal 2001.

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Operating income (loss).We incurred an operating loss of $63.5 million in
fiscal 2002 as compared to $46.6 million in fiscal 2001.

Net income (loss).Net income was $25.9 million in fiscal 2002 as compared to a
net loss of $27.9 million in fiscal 2001.

IT Services

Revenues.IT services revenues (including inter-segment revenues) increased
36.4% to $377.9 million in fiscal 2002 from $277.0 million in fiscal 2001, of
which $0.6 million and $3.5 million represented inter-segment revenues in
fiscal 2002 and 2001, respectively. All revenues discussed in this
sub-section relate only to IT services revenues generated from external
customers and exclude inter-segment revenues generated from services provided
by Satyam Computer Services to its subsidiaries and vice-versa.

Revenues by technology

The following table presents our IT services revenues (excluding
inter-segment revenues) by technology of IT service offering (in millions,
except percentages).

|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |       |      |   |  |      |       |  
|--------------------------- | ----------------------------- | ------ | ----- | ----- | ---- | ------ | --------------------- | ---- | - | ------ | ----- | ----- |  |  | ----- | ---- | - | - | ----- | ---- | - |  | ---- | ----- | -
|                            |                               |        | 2002  |       | 2001 |        | Change 2002 over 2001
|                            |                               |        |       |       |      |        |                      
|Type of IT service offering |                               | Amount |       | %     |      | Amount |                       | %    |   | Amount |       | %    
|                            |                               |        |       |       |      |        |                       |      |   |        |       |      
|                            | Software development          |        | $     | 195.5 |      |        |                       | 51.8 | % |        | $     | 175.9 |  |  |       | 64.3 | % |   | $     | 19.6 |   |  |      | 11.1  | %
|                            | System maintenance            |        |       | 110.2 |      |        |                       | 29.2 |   |        |       | 55.3  |  |  |       | 20.2 |   |   |       | 54.9 |   |  |      | 99.3  |  
|                            | Packaged software integration |        |       | 53.0  |      |        |                       | 14.1 |   |        |       | 22.5  |  |  |       | 8.2  |   |   |       | 30.5 |   |  |      | 135.6 |  
|                            | Engineering design services   |        |       | 18.6  |      |        |                       | 4.9  |   |        |       | 19.8  |  |  |       | 7.3  |   |   |       | (1.2 | ) |  |      | (6.1  | )
|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |       |      |   |  |      |       |  
|Total IT services           |                               | $      | 377.3 |       |      |        | 100.0                 | %    |   | $      | 273.5 |       |  |  | 100.0 | %    |   | $ | 103.8 |      |   |  | 38.0 | %    
|                            |                               |        |       |       |      |        |                       |      |   |        |       |       |  |  |       |      |   |   |       |      |   |  |      |       |  

Revenues by contract type

The
following table gives the composition of IT services revenues
(excluding inter-segment revenues) by type of
contract (in millions, except percentages).

|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|--------------------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                            |  | 2002   |       | 2001
|                            |  |        |       |     
|Type of IT service offering |  | Amount |       | %    |  | Amount |       | %
|                            |  |        |       |      |  |        |       |  
|Time and material basis     |  | $      | 294.7 |      |  |        | 78.1  | % |  | $ | 212.5 |  |  |  | 77.7  | %
|Fixed price basis           |  |        | 82.6  |      |  |        | 21.9  |   |  |   | 61.0  |  |  |  | 22.3  |  
|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total IT services           |  | $      | 377.3 |      |  |        | 100.0 | % |  | $ | 273.5 |  |  |  | 100.0 | %
|                            |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  

Our revenues are generated principally from IT services provided on either a
time-and-material or a fixed-price basis. Revenues from IT service provided on
a time-and-material basis are recognized in the period that services are
performed. Revenues from IT services provided on a fixed-price basis are
recognized under the percentage of completion method of accounting when the
work executed can be reasonably estimated. The percentage of completion
estimates are subject to periodic revisions and the cumulative impact of any
revision in the estimates of the percentage of completion is reflected in the
period in which the changes become known.

Revenues based on onsite / off site

The following tables gives the composition of
IT services revenues (excluding inter-segment revenues) based on the location where services are

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performed (in millions, except
percentages).

|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|------------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                    |  | 2002   |       | 2001
|                    |  |        |       |     
|                    |  | Amount |       | %    |  | Amount |       | %
|                    |  |        |       |      |  |        |       |  
|Off shore           |  | $      | 180.0 |      |  |        | 47.7  | % |  | $ | 166.0 |  |  |  | 60.7  | %
|On site / off-sites |  |        | 197.3 |      |  |        | 52.3  |   |  |   | 107.5 |  |  |  | 39.3  |  
|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total IT services   |  | $      | 377.3 |      |  |        | 100.0 | % |  | $ | 273.5 |  |  |  | 100.0 | %
|                    |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  

Offshore IT services revenues consist of revenues from IT services work
conducted in our offshore centers and onsite work conducted at customers
premises which is related to offshore work. Offshore IT services revenues do
not include revenues from offsite centers or onsite work which is not related
to any offshore work.

We charge higher rates and incur higher compensation expenses for work
performed by our onsite teams on a customers premises or at our offsite
centers as compared to work performed at our offshore centers in India.
Services performed at our onsite teams or at our offsite centers typically
generate higher revenues per capita but at a lower gross margin than the same
amount of services performed at our offshore centers in India.

Revenues based on geography

Our revenues based on five geographic theaters: the United States, India,
Japan, Europe and Rest of the World for fiscal 2003 and 2002 is summarized in
the following table (in millions, except percentages):

|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|----------------- |  | ------ | ----- | ---- |  | ------ | ----- | - |  | - | ----- |  |  |  | ----- | -
|                  |  | 2002   |       | 2001
|                  |  |        |       |     
|                  |  | Amount |       | %    |  | Amount |       | %
|                  |  |        |       |      |  |        |       |  
|North
America     |  | $      | 288.8 |      |  |        | 76.5  | % |  | $ | 215.0 |  |  |  | 78.6  | %
|Europe            |  |        | 39.2  |      |  |        | 10.4  |   |  |   | 19.1  |  |  |  | 7.0   |  
|Japan             |  |        | 9.2   |      |  |        | 2.4   |   |  |   | 7.4   |  |  |  | 2.7   |  
|India             |  |        | 5.9   |      |  |        | 1.6   |   |  |   | 6.0   |  |  |  | 2.2   |  
|Rest of the World |  |        | 34.2  |      |  |        | 9.1   |   |  |   | 26.0  |  |  |  | 9.5   |  
|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  
|Total             |  | $      | 377.3 |      |  |        | 100.0 | % |  | $ | 273.5 |  |  |  | 100.0 | %
|                  |  |        |       |      |  |        |       |   |  |   |       |  |  |  |       |  

For purposes of the remainder of the discussion of the results of operations
for our business segments, except as specifically indicated, we have included
all inter-segment data for all items under discussion. Please refer to the
Results of Operations table above for an analysis of consolidation of the
business segments.

Cost of revenues.Cost of revenues increased 17.8% to $213.5 million in fiscal
2002 from $181.3 million in fiscal 2001. Cost of revenues represented 56.5% of
revenues in fiscal 2002 as compared to 65.5% in fiscal 2001. The increase in
cost of revenues was attributable primarily to an increase in associate
compensation and benefits; depreciation expenses and other expenses.
Compensation and benefit expenses increased 42.2% to $142.5 million, or 37.7%
of revenues in fiscal 2002 from $100.2 million, or 36.2% of revenues, in fiscal
2001 respectively. Depreciation expense increased 40.2% to $21.6 million, or
5.7% of revenues, in fiscal 2002 from $15.4 million, or 5.6% of revenues, in
fiscal 2001. Other expenses primary comprised cost of direct supplies, rental
expenses and professional charges. Other expenses increased 83.4% to $20.4
million, or 5.4% of revenues, in fiscal 2002 from $11.1 million, or 4.0% of
revenues, in fiscal 2001. These increases were partly offset by a decrease in
deferred stock based compensation expense and travel expenses. Deferred stock
based compensation expense decreased 76.9% to $7.1 million, or 1.9% of
revenues, in fiscal 2002 from $30.9 million, or 11.1% of revenues. Travel
expenses decreased 12.0% to $17.5 million, or 4.6% of revenues, in fiscal 2002
from $19.9 million, or 7.2% of revenues, in fiscal 2001.

Selling, general and administrative expenses.Selling, general and
administrative expenses increased 37.5% to $92.1 million in fiscal 2002 from
$67.0 million in fiscal 2001. Selling, general and administrative expenses
represented 24.4% of revenues in fiscal 2002 as compared to 24.2% in fiscal
2001. The increase in selling, general and administrative expenses was
attributable primarily to an increase in compensation and benefit expenses;
marketing

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expenses; professional charges; traveling expenses and other
expenses. Compensation and benefit expenses increased 186.0% to $33.3 million,
or 8.8% of revenues, in fiscal 2002 from $11.6 million, or 4.2% of revenues, in
fiscal 2001. Marketing expenses increased 31.6% to $6.7 million, or 1.8% of
revenues, in fiscal 2002 from $5.1 million, or 1.8% of revenues, in fiscal
2001. Professional charges increased 63.1% to $9.1 million, or 2.4% of
revenues, in fiscal 2002 from $5.6 million, or 2.0% of revenues, in fiscal
2001. Traveling expenses increased 102.7% to $8.2 million, or 2.2% of revenues,
in fiscal 2002 from $4.0 million, or 1.5% of revenues, in fiscal 2001. Other
expenses increased 34.1% to $18.0 million, or 4.8% of revenues, in fiscal 2002
from $13.4 million, or 4.9% of revenues, in fiscal 2001. These increase were
primarily offset by a decrease in deferred stock based compensation expense and
depreciation expenses. Deferred stock based compensation expense decreased
75.0% to $3.3 million, or 0.9% or revenues, in fiscal 2002 from $13.4 million,
or 4.8% of revenues, in fiscal 2001. Depreciation expenses decreased 24.3% of
to $3.4 million, or 0.9% of revenues, in fiscal 2002 from $4.4 million, or 1.6%
of revenues, in fiscal 2001.

Amortization of goodwill.Amortization of goodwill was $4.3 million in fiscal
2002 as compared to 4.5 million in fiscal 2001. The goodwill expense reflects
the goodwill associated with the acquisition of the minority interest in SES in
September 1999.

Operating income (loss).As a result of the foregoing, operating income was
$68.0 million in fiscal 2002 as compared to $24.2 million in fiscal 2001.

Interest income.Interest income increased to $3.0 million in fiscal 2002 from
$0.3 million in fiscal 2001. The increase in interest income was attributable
primarily to interest earned on deposits kept out of proceeds from our ADS
offering.

Interest expense.Interest expense decreased to $2.8 million in fiscal 2002
from $9.4 million in fiscal 2001 primarily due to the repayment of debts during
the second and third quarter of fiscal 2002 with ADR proceeds.

Gain of sale of shares in Sify.Gain on sale of shares in Sify was $45.6
million which was recognized in fiscal 2002. In June 2000, we completed a sale
of 347,200 equity shares to GSIC at a price of $144 per share, subject to a
put option to sell the shares back to us. If Sify had not completed an initial
public offering on a recognized stock exchange in India by September 2001. The
put option held by GSIC expired unexercised on October 15, 2001.

Other income.Other income increased to $11.2 million in fiscal 2002 from $3.1
million in fiscal 2001 which was primarily on account of foreign currency
translation gains.

Other expense.Other expenses were $58 thousand in fiscal 2002 and $0.3 million
in fiscal 2001.

Income taxes.Income taxes were $17.2 million in fiscal 2002 and $4.1 million
in fiscal 2001. The increase in income taxes is mainly on account of tax paid
on the capital gain on sale of shares of Sify and the provision for foreign
taxes payable overseas by offsite and onsite centers, principally in the United
States.

Equity earnings (losses) of associated companies.Equity losses of associated
companies were $1.4 million in fiscal 2002 as compared to $0.9 million in
fiscal 2001 primarily due to proportionate earnings associated with our
investment in Satyam Venture Engineering Services Limited and Satyam-GE
Software Services (P) Ltd.,

Net income (loss).As a result of the foregoing, net income was $109.2 million
in fiscal 2002 as compared to net income of $14.8 million in fiscal 2001.

Internet Services

Revenues.Internet services revenues (including inter-segment revenues) were
$39.4 million in fiscal 2002 and $39.0 million in fiscal 2001, of which
inter-segment revenues were $2.8 million in fiscal 2002 and $2.1 million in
fiscal 2001. The number of Internet access subscribers grew from more than
460,000 as of March 31, 2001 to over 600,000 as of March 31, 2002.

Cost of revenues.Cost of revenues increased 2.9% to $28.7 million in fiscal
2002 from $27.9 million in fiscal 2001. Cost of revenues represented 72.8% of
Internet services revenues in fiscal 2002 as compared to 71.5% in fiscal 2001.
The higher level of cost of revenues was attributable to compensation and
benefit expenses. Direct personnel costs for web development and customer
technical support increased 30.9% to $5.0 million, or 12.6% of revenues, in
fiscal 2002 from $3.8 million, or 9.7% of revenues, in fiscal 2001. These
increases were partially offset by a decrease in

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leased line costs which
decreased 8.6% to $14.1 million, or 35.9% of revenues, in fiscal 2002 from
$15.5 million, or 39.7% of revenues, in fiscal 2001. Cost of hardware and
software purchased for resale was $6.0 million in fiscal 2002 and $6.0 million
fiscal 2001.

Selling, general and administrative expenses.Selling, general and
administrative expenses were $45.8 million in fiscal 2002 from $47.9 million in
fiscal 2001. Selling, general and administrative expense represented 116.3% of
Internet services revenues in fiscal 2002 as compared to 122.8% in fiscal 2001.
This decrease was primarily attributable to decrease in marketing expenses.
Marketing expenses decreased 66.8% to $3.2 million, or 8.1% of revenues, in
fiscal 2002 from $9.6 million, or 24.5% of revenues, in fiscal 2001. This
decrease was partially offset by an increase in depreciation expense and
Indirect personnel costs. Depreciation expense increased 29.5% to $12.1
million, or 30.7% of revenues, in fiscal 2002 from $9.3 million, or 24.0% of
revenues, in fiscal 2001. Personnel costs increased 0.3% to $9.6 million, or
24.5% of revenues, in fiscal 2002 from $9.6 million, or 24.6% of revenues, in
fiscal 2001.

Amortization of goodwill.Amortization of goodwill expense was $12.7 million in
fiscal 2002 as compared to $24.7 million in fiscal 2001.

Impairment of goodwill.In the year ended March 31, 2002, Satyam recorded an
impairment charge of $81.1 million relating to goodwill acquired in the
IndiaWorld, India Plaza and Eduempire acquisitions by Sify as a result of an
ongoing impairment assessment of goodwill recorded in connection with various
acquisitions. Since the operations of those entities have been completely
integrated into the operations of Sify. Satyam assessed the recoverability of
goodwill arising out of the India World and India Plaza acquisitions at the
enterprise level of Sify. The impairment charge was calculated as the
difference between the market value of Sify and its net assets. The assessment
was performed due to significant decline in Sifys stock price for a sustained
period, Sifys market capitalization relative to its net book value,
significant under performance relative to expected historical or projected
future operating results, significant negative industry and economic trends and
the overall decline in market conditions which indicate that this decline in
the market value of Sifys stock price is other-than temporary. The shortfall
in the market capitalization has indicated an impairment of goodwill. Thus the
entire carrying value of goodwill as at September 30, 2001, pertaining to India
World of $73.1 million, India Plaza of $8.0 million and Eduempire of $50
thousand has been charged to the statement of operations for the year ended
March 31, 2002.

Operating income (loss).As a result of the foregoing, operating loss increased
to $128.9 million in fiscal 2002 from $57.0 million in fiscal 2001.

Interest income.Interest income decreased to $0.8 million in fiscal 2002 as
compared to $5.5 million in fiscal 2001 primarily due to reduction in deposits
with banks..

Interest expense.Interest expense decreased to $45 thousand in fiscal 2002
from $266 thousand in fiscal 2001.

Other Income.Other income was $1.0 million in fiscal 2002 as compared to $3.7
million in fiscal 2001.

Minority Interest.Minority interest increased to $73.3 million in fiscal 2002
from $25.7 million in fiscal 2001.

Equity earnings (losses) of associated companies.Equity losses of associated
companies were $26.8 million in fiscal 2002 as compared to $6.4 million in
fiscal 2001 which was primarily due to impairment of goodwill associated with
our investment in CricInfo Limited. Satyam evaluates the recoverability of
goodwill relating to the investment in associated companies as current events
or circumstances warrant to determine whether adjustments are needed to their
carrying values. In the year ended March 2002, Satyam recorded a impairment
charge of $21.4 million relating to goodwill on the Cricinfo acquisition by
Sify as a result of an ongoing impairment assessment of goodwill recorded in
connection with various acquisitions.

The main factors in the valuation of the Cricinfo acquisition were share in
revenues for Sify, leadership and synergistic benefits accruing to Sify and
enterprise value of Cricinfo. Sify had made a revenue growth assumption for
Cricinfo at
the time of acquisition. Due to the change in market realities, management
believes those revenue growth estimates would require significant downward
revision. The anticipated leadership and synergistic benefits have also
largely not realized. The current fair value of Cricinfo as an independent
entity is negligible due to its mounting cash losses coupled with the adverse
current market conditions. The impairment was based on discounted cash flow
method considering historical results adjusted to reflect managements best
estimate of future market and operating conditions.

Management believes that the carrying value of goodwill, which forms part of
the investment in Cricinfo is impaired.

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It also believes that considering the
current industry scenario and lack of investor confidence, the impairment is
other-than temporary. Hence, out of the carrying value of goodwill as at
September 30, 2001 of $24.5 million, $21.4 million has been charged to the
statement of operations for the year ended March 31, 2002. The management
believes that balance goodwill of $3.1 million is attributable to the future
discounted cash flows from Sifys share in revenue.

Net income (loss).As a result of the foregoing, net loss increased to $80.7
million in fiscal 2002 from $28.8 million in fiscal 2001.

Software products

In fiscal 2002, VCI has generated revenues of $0.9 million of which $0.3
million was from intersegment revenues. VCI incurred a $2.6 million net loss in
fiscal 2002 as compared to a $13.9 million net loss in fiscal 2001. The net
loss of $2.6 million in fiscal 2002 was attributable primarily to selling and
general administrative expenses, research and development expenses which

primarily comprised employee compensation and benefits of $1.7 million and
professional charges of $0.4 million. The net loss of $13.9 million in fiscal
2001 was attributable primarily to research and development, selling and
general administrative expenses, which primarily comprised professional charges
of $3.4 million and employee compensation and benefits of $6.3 million.
Keeping in view the present business and economic conditions, the relative size
and managerial time, we decided to discontinue the operations of VisionCompass
so as to focus on our core business of IT services.

Liquidity and Capital Resources

Net cash provided by (used in) operating activities.Net cash provided by
operating activities was $98.5 million, $116.4 million and $5.9 million in
fiscal 2003, 2002 and 2001, respectively.

In fiscal 2003, non-cash adjustments to reconcile the $79.8 million net income
to net cash used in operating activities consisted primarily of depreciation
and amortization expense of $36.0 million. Net accounts receivable and unbilled
revenues increased by $15.4 million primarily as a result of an increase in our
revenues and increase in the collection period. Increase in other working
capital assets of $7.3 million was primarily on account of directors and
officers liability insurance taken during the year and interest accrued on
deposits placed with banks. Unearned and deferred revenues increased because of
advance billing on clients for services to be rendered in future.

In fiscal 2002, non-cash adjustments to reconcile the $25.9 million net income
to net cash used in operating activities consisted primarily of deferred stock
based compensation expense of $10.8 million and depreciation, amortization and
impairment of goodwill expense of $136.3 million.

In fiscal 2001, non-cash adjustments to reconcile the $27.9 million net loss to
net cash provided by operating activities consisted primarily of deferred stock
based compensation expenses of $46.1 million and depreciation and amortization
of $54.5 million. These adjustments were partially offset by an increase in net
accounts receivable and unbilled revenues of $49.5 million.

Net cash used in investing
activities.Net cash used in investing activities was $271.9
million, $40.4 million and $137.8 million in fiscal 2003, 2002 and
2001, respectively. Net cash used in investing activities in fiscal
2003 increased by 230.5 million to $271.9 million from $40.4 million
in fiscal 2002. This increase was primarily related to investments in
bank deposits of $259.3 million. This increase was partially offset
by decrease in purchase of premises and equipment, acquisitions and
investments in associated companies. Purchase of premises and
equipment in fiscal 2002 consisted primarily of infrastructure,
computers and other equipment associated with the expansion. Net cash
used in investing activities in fiscal 2001 was primarily related to
acquisitions and investments in associated companies of $52
million; and purchases of premises and equipment of $84.8 million
consisted primarily of infrastructure, computers and other equipment
associated with the expansion in headcount as we continued to grow.

Net cash provided/(used) by financing activities.Net cash provided/(used) by
financing activities was $(12.1)
million, $110.7 million and $14.2 million in fiscal 2003, 2002 and 2001,
respectively. We used cash in repayment of loan amounting to $2.4 million and
payment of dividend amounting to 9.7 million in fiscal 2003. In addition to
using cash generated from operations, we financed our continuing expansion
primarily through sale of investments amounting to $48.9 million in fiscal 2001 and through capital
raising activities amounting to $150.6 million in fiscal 2002.

As of March 31, 2003, we had $62.2 million in cash and cash equivalents, $2.7
million in secured rupee denominated loans of Satyam Associate Trust and
$1.4 million of other outstanding loans denominated in rupee. As of March

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31, 2003, we had an unused short term working capital line of credit of $7.4
million from a bank and unused non-funded lines of credit of $8.0 million.

The following table describes our outstanding credit facilities as at March 31,
2003 (in million, except percentages)

|                                      |  |                 |  |                    |      |                      |  |                    |  |         
|------------------------------------- |  | --------------- |  | ------------------ | ---- | -------------------- |  | ------------------ |  | --------
|                                     
|Loan Type                             |  | Lenders         |  | Amount Outstanding |      | Interest (per annum) |  | Computation Method
|                                      |  |                 |  |                    |      |                      |  |                   
|Rupee loan of
Satyam Associates
Trust |  | ICICI bank      |  |                    | $1.3 |                      |  | 13.0%  14.25%     |  | Variable
|Rupee loan of
Satyam Associates
Trust |  | Cholamandalam   |  |                    | 1.4  |                      |  | 10.75%             |  | Fixed   
|Other loans                           |  | Various parties |  |                    | 1.4  |                      |  | 8.0%  13.0%       |  | Fixed   
|                                      |  |                 |  |                    |      |                      |  |                    |  |         
|Total                                 |  |                 |  |                    | $4.1 |                      |  |                    |  |         
|                                      |  |                 |  |                    |      |                      |  |                    |  |         
|                                     

We anticipate capital expenditures of approximately $40.0 million during fiscal
2004, principally to finance construction of new facilities in our offshore
centres; expand facilities in offshore centers in India and establish offsite
centers outside India. We believe that existing cash and cash equivalents and
funds generated from operations will be sufficient to meet these requirements.
However, we may significantly alter our proposed capital expenditures plans and
accordingly, may require additional financing to meet our requirements. After
fiscal 2004, we may require additional financing to fund our working capital
and capital expenditure requirements. In either case, we cannot assure you that
additional financing will be available at all or, if available, that such
financing will be obtained on terms favorable to us or that any additional
financing will not be dilutive to our shareholders.

The following table sets forth our contractual obligations and commitments to
make future payments as of March 31, 2003. The following table excludes our
accounts payable, accrued operating expenses and other current liabilities
which are payable in normal course of operations.

|                                    |                              |   |                                   |       |           |   |           |     |               |   |       |     |  |   |     |   |  |   |        |       | 
|----------------------------------- | ---------------------------- | - | --------------------------------- | ----- | --------- | - | --------- | --- | ------------- | - | ----- | --- |  | - | --- | - |  | - | ------ | ----- | 
|                                   
|                                    |                              |   | Payments Due as of March 31, 2003
|                                    |                              |   |                                  
|                                    |                              |   | Within 1 year                     |       | 1-3 years |   | 3-5 years |     | After 5 years |   | Total
|                                    |                              |   |                                   |       |           |   |           |     |               |   |      
|                                    |                              |   | (in thousands)                   
|Long term debt                      |                              | $ | 2,336                             |       |           |   | 1,738     |     |               |   |      |     |  |   |    |   |  | $ | 4,074  |      
|Operating leases                    |                              |   | 1,914                             |       |           |   | 3,108     |     |               |   | 1,665 |     |  |   | 725 |   |  |   | 7,412  |      
|Unconditional purchase obligations: |                              |   |                                   |       |           |   |           |     |               |   |       |     |  |   |     |   |  |   |        |      
|                                    | Other commercial commitments |   |                                   | 4,441 |           |   |           |    |               |   |       |    |  |   |     |  |  |   |        | 4,441 | 
|                                    | Bank guarantees              |   |                                   | 3,178 |           |   |           | 179 |               |   |       | 146 |  |   |     |  |  |   |        | 3,503 | 
|                                    | Letters of credit            |   |                                   | 180   |           |   |           |    |               |   |       |    |  |   |     |  |  |   |        | 180   | 
|                                    |                              |   |                                   |       |           |   |           |     |               |   |       |     |  |   |     |   |  |   |        |      
|Total contractual cash obligations  |                              | $ | 12,049                            |       |           | $ | 5,025     |     |               | $ | 1,811 |     |  | $ | 725 |   |  | $ | 19,610 |      
|                                    |                              |   |                                   |       |           |   |           |     |               |   |       |     |  |   |     |   |  |   |        |      
|                                   

Based on past performance and current expectations, we believe that our
cash and cash equivalents, short-term investments, and cash generated from
operations will satisfy our working capital needs, capital expenditures,
investment requirements, stock repurchases, commitments and other liquidity
requirements associated with our existing operations through at least the next
12 months. In addition, there are no transactions, arrangements, and other
relationships with unconsolidated entities or other persons that are reasonably
likely to materially affect liquidity or the availability of our requirements
for capital resources.

Off-Balance Sheet Arrangements.

We do not have any other off balance
sheet arrangements other than as disclosed above.

Income Tax Matters

As of March 31, 2003, we had an operating loss carry forward of approximately
$15.3 million for tax purposes including valuation allowance. 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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For fiscal 2003, the statutory corporate income tax rate in India was 35.0%
and is subject to a 5.0% surcharge, resulting in an effective tax rate of
36.8%. The provision for foreign taxes is due to income taxes payable in
overseas tax jurisdictions by its offsite and onsite centers, principally in
the United States. Satyam Computer Services benefits from certain significant
tax incentives provided to software entities under Indian tax laws. These
incentives presently include: (i) a deduction from payment of Indian corporate
taxes to the extent of 90% of the profits derived from export of software from
software development facilities designated as Software Technology Parks or
STP units until 2010; and (ii) a tax deduction of 50% of profits from exporting
computer software progressively reduced to nil by the year 2004-05. The
benefits of these tax incentives have historically resulted in an effective tax
rate for Satyam Computer Services well below statutory rates. In case of Satyam
Computer Services for various registered STP units these exemptions expire
starting from fiscal 2006 through fiscal 2010. However, Satyam Computer
Services earns certain other income and domestic income, which are taxable
irrespective of the tax holiday as stated above. Satyam Computer Services
subsidiaries are subject to income taxes of the countries in which they
operate.

Effects of Inflation

India has experienced relatively high rates of inflation in the past however it
has not had a significant effect on our results of operations and financial
condition to date.

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        |  | Month end |       | Average  |  | High |       | Low
|             |  |           |       |          |  |      |       |    
|             |  |           |       | (Rupees)
|April-02     |  |           | 48.98 |          |  |      | 48.94 |     |  |  | 49.01 |  |  |  | 48.83 | 
|May-02       |  |           | 49.06 |          |  |      | 49.02 |     |  |  | 49.07 |  |  |  | 48.97 | 
|June-02      |  |           | 48.91 |          |  |      | 48.98 |     |  |  | 49.07 |  |  |  | 48.86 | 
|July-02      |  |           | 48.69 |          |  |      | 48.79 |     |  |  | 48.87 |  |  |  | 48.69 | 
|August-02    |  |           | 48.52 |          |  |      | 48.62 |     |  |  | 48.73 |  |  |  | 48.52 | 
|September-02 |  |           | 48.40 |          |  |      | 48.47 |     |  |  | 48.57 |  |  |  | 48.40 | 
|October-02   |  |           | 48.39 |          |  |      | 48.39 |     |  |  | 48.45 |  |  |  | 48.34 | 
|November-02  |  |           | 48.36 |          |  |      | 48.29 |     |  |  | 48.36 |  |  |  | 48.21 | 
|December-02  |  |           | 48.00 |          |  |      | 48.15 |     |  |  | 48.32 |  |  |  | 47.96 | 
|January-03   |  |           | 47.83 |          |  |      | 47.96 |     |  |  | 48.10 |  |  |  | 47.83 | 
|February-03  |  |           | 47.66 |          |  |      | 47.75 |     |  |  | 47.92 |  |  |  | 47.65 | 
|March-03     |  |           | 47.53 |          |  |      | 47.68 |     |  |  | 47.85 |  |  |  | 47.53 | 
|            

CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60, issued by the Securities and Exchange
Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
The following is a brief discussion of the more significant accounting
policies and methods used by us. In addition, Financial Reporting Release No.
61 issued by the SEC requires all companies to include a discussion to
address, among other things, liquidity, off-balance sheet arrangements,
contractual obligations and commercial commitments.

We have identified the policies below as critical to our business operations
and the understanding of our results of operations. The impact and any
associated risks related to these policies on our business operations is
discussed throughout this Item 5  Operating and Financial Review and
Prospects where such policies affect our reported and expected financial
results. For a detailed discussion on the application of these and other
accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in Item 18 of this Annual Report on Form 20-F, beginning on page
F-10.

Note that our preparation of this Annual Report on Form 20-F requires us to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. There can be no assurance that actual
results will not differ from those estimates.

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Management believes the following critical accounting policies, among others,
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

Revenue recognition

Our revenue recognition policy is significant because our revenue is a key
component of our results of operations. We follow very specific and detailed
guidelines in measuring revenue; however, certain judgments affect the
application of our revenue policy. Revenue results are difficult to predict,
and any shortfall in revenue or delay in recognizing revenue could cause our
operating results to vary significantly from quarter to quarter and could
result in future operating losses. We derive our revenue primarily from IT
services, which includes software development, system maintenance, package
software implementation, engineering design services and ebusiness.

Revenues earned from services performed on a time and material basis are
recognized as the services are performed. IT services performed on time bound
fixed-price engagements, require accurate estimation of the costs which include
salaries and related expenses of technical associates, related communication
expenses, travel costs, scope and duration of each engagement. Revenue and the
related costs for these projects are recognized on percentage of completion,
with revisions to estimates reflected in the period in which changes become
known. Provisions for estimated losses on such engagements are made during the
period in which a loss becomes probable and can be reasonably estimated. We
recognize revenue based on the completed-contract method where the work to
complete cannot be reasonably estimated.

We provide our clients with one to three months warranty as post-sale support
for its fixed price engagements. Costs associated with such services are
accrued at the time the related revenues are recorded. Historically, Satyam
has not incurred any expenditure on account of warranties and since the
customer is required to formally sign off on the work performed, any subsequent
work is usually covered by an additional contract.

Impairment of Goodwill

We assess the impairment of identifiable intangibles, long-lived assets and
related goodwill and enterprise level goodwill whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important which could trigger an impairment review include the
following:



| |  | significant underperformance relative to expected historical or projected future operating results;          
|- |  | -------------------------------------------------------------------------------------------------------------
| 
| |  | significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
| 
| |  | significant negative industry or economic trends;                                                            
| 
| |  | significant decline in our stock price for a sustained period; and                                           
| 
| |  | our market capitalization relative to net book value.                                                        

When we determine that the carrying value of intangibles, long-lived assets and
related goodwill and enterprise level goodwill may not be recoverable based
upon the existence of one or more of the above indicators of impairment, we
measure any impairment based on a projected discounted cash flow method using a
discount rate determined by our management to be commensurate with the risk
inherent in our current business model.

Effective April 1, 2002, we adopted Statement of Financial Accounting Standards
No. 142, or SFAS 142, Goodwill and Other Intangible Assets. SFAS 142 requires,
among other things, the discontinuance of amortization related to goodwill and
indefinite lived intangible assets. These assets will then be subject to an
impairment test at least annually. We are required to perform goodwill
impairment tests on an annual basis and between annual tests in certain
circumstances. We performed an initial impairment review of goodwill on the
adoption of SFAS 142 and also carried out an annual impairment review in 2003.
Based on these tests there is no impairment of goodwill during the year ended
March 31, 2003.

Future events could cause us to conclude that impairment indicators exist and
that goodwill associated with our acquired businesses is impaired. Any
resulting impairment loss could have a material adverse impact on our financial
condition and results of operations.

Accounts Receivable

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We estimate the amount of uncollectable receivables each period and establish
an allowance for uncollectable amounts. The amount of the allowance is based on
the age of unpaid amounts, information about the creditworthiness of customers,
and other relevant information. Estimates of uncollectable amounts are revised
each period, and changes are recorded in the period they become known. A
significant change in the level of uncollectable amounts would have a
significant effect on our results of operations.

Accounting for income taxes

As part of the process of preparing our consolidated financial statements we
are required to estimate our income taxes in each of the jurisdictions in which
we operate. This process involves us estimating our actual current tax exposure
together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes. These differences result in
deferred tax assets and liabilities, which are included within our consolidated
balance sheet. We must then assess the likelihood that our deferred tax assets
will be recovered from future taxable income and to the extent we believe that
recovery is not likely, we must establish a valuation allowance. To the extent
we establish a valuation allowance or increase this allowance in a period, we
must include an expense within the tax provision in the statement of
operations.

The provision for foreign taxes is due to income taxes payable in overseas
tax jurisdictions by its offsite and onsite centers, principally in the United
States. Satyam Computer Services benefits from certain significant tax
incentives provided to software entities under Indian tax laws. These
incentives presently include: (i) an exemption from payment of Indian corporate
income taxes for a period of ten consecutive years of operations of software
development facilities designated as Software Technology Parks; and (ii) a
tax deduction for profits from exporting computer software. The benefits of
these tax incentives have historically resulted in an effective tax rate for
Satyam Computer Services well below statutory rates. Further, most of our
operations are from Software Technology Parks, or STP unit, which are
entitled to a tax holiday of ten years from the date of commencement of
operations. STP units registered after March 31, 2001 are not entitled to this
exemption. Four our various registered STP units, these exemptions expire
starting from fiscal 2006 through fiscal 2010. However, we also earn certain
other income and domestic income, which are taxable irrespective of this tax
holiday. Our subsidiaries are subject to income taxes of the countries in
which they operate.

Significant management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. The valuation
allowance is based on our estimates of taxable income by jurisdiction in which
we operate and the period over which our deferred tax assets will be
recoverable. In the event that actual results differ from these estimates or we
adjust these estimates in future periods we may need to establish an additional
valuation allowance which could materially impact our financial position and
results of operations.

Impact of Recently Issued Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Exit or Disposal
Activities or SFAS No. 146, SFAS No. 146 addresses significant issues regarding
the recognition measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring activities that are
currently accounted for under EITF No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). The scope of SFAS No. 146 also
includes costs related to terminating a contract that is not a capital lease
and termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual deferred-compensation contract. We
are required to adopt the provisions of SFAS No. 146 effective for exit or
disposal activities initiated after December 31, 2002. The provisions of EITF
No. 94-3 shall continue to apply for an
exit activity initiated under an exit plan that met the criteria of EITF No.
94-3 prior to the adoption of SFAS No. 146. The effect-on-adoption of SFAS No.
146 will change on a prospective basis the timing of when restructuring charges
are recorded from a commitment date approach to when the liability is incurred.
The adoption of this standard does not have any material impact on our
results of operations or financial position.

In November 2002, the Emerging Issues Task Force reached a consensus on Issue
No. 00-21, Revenue Arrangements with Multiple Deliverables applicable for
fiscal periods beginning after June 2003. This issue addresses when and, if so,
how an arrangement involving multiple deliverables should be divided into
separate units of accounting, where the deliverables (the revenue generating
activities) are sufficiently separable and have standalone value to the
customer. It is also necessary that there exists sufficient evidence of fair
value to separately account for some or all of the deliverables. The adoption
of the consensus does not have a material impact on our revenue recognition
policies.

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

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation-Transition and Disclosure: An amendment of FASB Statement No. 123.
This Statement amends SFAS 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure provisions of
SFAS 148 are applicable for fiscal periods beginning after December 15, 2002.
Satyam continues to account for its fixed plan stock options under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. We have adopted the
disclosure provisions of SFAS 148 as of December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB 51 that applies to
variable interest entities created after January 31, 2003 and to variable
interest entities in which our enterprise obtains an interest after that date.
We are in the process of assessing the impact of the adoption of this
interpretation.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. The Statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
Statement 133. This Statement is effective for contracts entered into or
modified after June 30, 2003, except specific situations and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. We are currently evaluating the impact of this Statement.

In May 2003, the FASB issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. The
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. It is to be implemented by
reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of the Statement and
still existing at the beginning of the interim period of adoption. Restatement
is not permitted. We are currently evaluating the impact of this Statement.

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Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Officers

The following table sets forth the name, age, and position of each of our
directors and key management personnel as of May 31, 2003:

Directors

|                        |  |     |    |               |  |                                                  
|----------------------- |  | --- | -- | ------------- |  | -------------------------------------------------
|Name                    |  | Age |    | Position Held
|                        |  |     |    |              
|B. Ramalinga Raju       |  |     | 47 |               |  | Chairman                                         
|B. Rama Raju            |  |     | 44 |               |  | Managing Director and Chief Executive Officer (3)
|V. P. Rama Rao          |  |     | 69 |               |  | Director (1) (2) (3)                             
|Dr. Mangalam Srinivasan |  |     | 65 |               |  | Director (1) (2)                                 
|Mr. Krishna G. Palepu   |  |     | 49 |               |  | Director                                         
|Mr. Vinod K Dham        |  |     | 53 |               |  | Director                                         

Key Management Personnel(4)

|                |  |     |    |               |  |                                                                                                                                              
|--------------- |  | --- | -- | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Age |    | Position Held
|                |  |     |    |              
|Anil Kekre      |  |     | 52 |               |  | Executive Vice President, Regional Business Unit  Middle
East and India                                                                     
|Jayaraman G     |  |     | 47 |               |  | Vice President (Corp. Affairs) & Company Secretary                                                                                           
|Joseph Abraham  |  |     | 50 |               |  | Director & Senior Vice President, Vertical Business Unit 
Retail                                                                            
|Kalyan Rao K    |  |     | 50 |               |  | President, Vertical Business Unit - Telecom,
Infrastructure, Media & Entertainment and Semiconductor and
Horizontal Competency Unit  Hi tech
|Mohan Eddy F. S |  |     | 53 |               |  | Director, Internal Information Systems and Platinum
Processes Group                                                                          
|Murty A. S      |  |     | 44 |               |  | Director & Senior Vice President, Global Human Resources                                                                                     
|Prabhat G. B    |  |     | 37 |               |  | Director, Horizontal Business UnitEnterprise Business
Solution                                                                              
|Ram Mynampati   |  |     | 46 |               |  | President, Commercial and Healthcare Businesses                                                                                              
|Srinivas V      |  |     | 43 |               |  | Director and Senior Vice President & Chief Financial Officer                                                                                 
|Subramanian D   |  |     | 44 |               |  | Director & Senior Vice President, Global Manufacturing,
SAP, Oil and Gas & Energy and Utilities and Engineering
Business Units               
|Thiagarajan K   |  |     | 50 |               |  | Director & Senior Vice PresidentCorporate Planning and
Strategy                                                                             



---

|(1) |  | Member of the Audit Committee                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Member of the Compensation Committee                                                                                              
|   
|(3) |  | Member of the Investors Grievance Committee                                                                                       
|   
|(4) |  | Directors listed under key management personnel are directors of
business/support units and not members of our board of directors.

B. Ramalinga Rajuhas been on our board of directors since our inception
in 1987. He became Chairman of our board of directors in 1995. Before this, he
was with the Satyam Corporate Group as Vice Chairman. Mr. Ramalinga Raju also
sits on the board of directors of Nipuna Services Limited, VCI and
Telecommunications Consultants India Limited. Mr. Ramalinga Raju holds a master
of business administration degree from Ohio University and has attended the
owner/president management course at Harvard Business School.

B. Rama Rajuhas been on our board of directors since our inception in
1987. He became the Managing Director and Chief Executive Officer of our
company in 1991. Before 1997, he was with Maytas Infra Limited as one of its
Directors. Mr. Rama Raju also sits on the board of directors of Nipuna
Services Limited, Maytas Infra Limited, Satyam Venture Engineering Services
Private Limited and Gautami Power Limited. Mr. Rama Raju holds a master of
economics from Loyola College, Chennai and a master of business administration
from Loredo State University, Texas and has also attended the owner/president
management course at Harvard Business School. Mr. Rama Raju is the younger
brother of Mr. B. Ramalinga Raju, the Chairman of our company.

V. P. Rama Raohas been on our board of directors since July 1991. Before
this, he was with the Indian Administrative Service and was the Chief Secretary
to the government of Andhra Pradesh. He was closely involved with the
industrial development of Andhra Pradesh for over two decades. He also worked
as the Chief of Industrial Infrastructure Corporation. Mr. Rama Rao holds a
post-graduate degree in arts, a bachelor degree in civil laws and a
post-graduate diploma in technical science and industrial administration, from
Manchester University, located in the United Kingdom. Mr. V.P. Rama Rao also
sits on the board of directors of several companies in India.

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Dr. Mangalam Srinivasanhas been on our board of directors since July
1991. She is a management consultant and a visiting professor at several U.S.
universities. Dr. Mangalam Srinivasan holds a Ph.D. in technology from George
Washington University, a master of business administration degree
(international finance and organization) from the University of Hawaii, a
master of arts degree (English) from Presidency College, Madras University and
was an advanced special scholar (astronomy and physics) at the University of
Maryland. Currently, Dr. Mangalam Srinivasan is an advisor to Center for
Kennedy School of Government of Harvard University where she is a distinguished
fellow.

Mr. Krishna G. Palepuwas appointed to our board of directors on January
23, 2003 as an additional director. Mr. Palepu is the Ross Graham Walker
Professor of Business Administration at the Harvard Business School, where he
also holds the title of Senior Associate Dean, Director of Research. Professor
Palepu joined the Harvard Business School faculty in 1983 after receiving a
Masters degree in physics from Andhra University, a MBA from the Indian
Institute of Management, and a Ph.D. from the Massachusetts Institute of
Technology. Professor Palepu serves as consultant to a wide variety of
businesses, and is on the Boards of several companies viz., Dr. Reddys
Laboratories Limited, Exeter Corporation, USA and Harvard Business School
Publishing Co., USA.

Vinod (Vin) K. Dhamwas appointed to our board of directors on January 23,
2003 as an additional director. Mr. Vin is Vice President and General Manager,
Carrier Access Business Unit, of Broadcom Corporation. Mr. Dham comes to
Broadcom from its acquisition of Silicon Spice Inc., where he was Chairman,
President and CEO. Recognized as the Father of the Pentium Processor, he held
the positions of Vice President of Intels Microprocessor Products Group and
General Manager of the Pentium Processor Division. Mr. Vinod K. Dham is also
director on the Boards of NewPath Ventures Management Company LLC and
Hellosoft.

Anil Kekrehas been our Executive Vice President  Regional Business Unit
- Middle East and India since October, 2002. Prior to this he was our
Executive Vice President  Regional Business Unit  Europe since November 2000
and he was our Senior Vice President, Strategic Business Unit 5 from 1997.
Before this, he was with Tata Information Systems Ltd. as General Manager. Mr.
Anil holds a master in technology (electronics and computer science) degree
from Indian Institute of Technology, Kanpur and a master of business
administration degree from the Faculty of Management Studies, New Delhi.

Jayaraman G.has been our Vice President (Corp. Affairs) & Company
Secretary since October, 2000. From March 2000 to September, 2000 he was Asst.
Vice President and Company Secretary. Before this, he was with Samrat
Spinner Limited as Director (Finance) & Company Secretary. Mr. Jayaraman holds
a Bachelor of Science degree and is a fellow member of the Institute of
Chartered Accountants of India and the Institute of Cost and Works Accountants
of India. He is also an associate member of Institute of Company Secretaries of
India.

Joseph Abrahamhas been our Director and Senior Vice President, Vertical
Business Unit  Retail since November 2000. Prior to this, he was our Senior
Vice President, Strategic Business Unit 7 from 1998. Before this, he was with
Tata Consultancy Services as Executive Vice President, Human Resources. Mr.
Abraham holds a master of personnel management and industrial relations degree
from Tata Institute of Social Services and a Differential Test Battery
Certificate from Morrisby Institute, United Kingdom.

Kalyan Rao K.has been our President  Vertical Business Unit  Telecom,
Infrastructure, Media & Entertainment and Semiconductor and Horizontal
Competency Unit  Hi tech since October 2002. Prior to this he was our
Executive Vice President & Chief Technical OfficerVertical Business
UnitTelecom since November 2000. Before this, he served in various positions
since joining our company in 1992. Mr. Kalyan Rao holds a master of
engineering (ECE) degree from Indian Institute of Science, Bangalore.

Mohan Eddy F. S.has been our Director  Internal Information Systems and
Platinum Processes Group. Prior to this he was our Director  Horizontal
Business UnitCollaborative Enterprise Solutions since November 2000. Before
this he was a Director, Strategic Business UnitSatyam Renaissance Consulting
from 1995. He is also a director of Satyam Asia Pte Ltd. Mr. Mohan Eddy holds
a bachelor of engineering degree and a post-graduate diploma in management from
Indian Institute of Management, Calcutta.

Murty A. S.has been our Director & Senior Vice PresidentGlobal Human
Resources since November 2000. Prior to this, he was our Senior Vice President,
Human Resources from 1999. Before this, he was our Senior Vice-President of
Strategic Business Unit 1 since 1994. He is also a director of Satyam (Europe)
Limited. Before joining our company, Mr. Murty worked for Tata Consulting
Services for over 12 years. Mr. Murty holds a master of engineering

54



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degree from
Indian Institute of Science, Bangalore.

Prabhat G. B.has been our DirectorHorizontal Business UnitEnterprise
Business Solution since November 2000. Prior to this, he was a Director,
Strategic Business UnitSatyam Renaissance Consulting from 1995. Mr. Prabhat
holds a master of science (computer sciences) degree from Indian Institute of
Technology, Chennai.

Ram Mynampatihas been our President  Commercial and Healthcare
Businesses since October 2002. Prior to this he was our Executive Vice President &
Chief Operating OfficerVertical Business UnitInsurance, Banking & Financial
Services, Healthcare since November 2000. Before this, he was our Executive
Vice President, Strategic Business Units 1, 2 & 4 from 1999. Mr. Mynampati
holds a master of computer science degree from California State University.

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

Subramanian D.has been our Director and Senior Vice President  Global
Manufacturing, SAP, Oil and Gas& Energy and Utilitiesand EngineeringBusiness
Units since October, 2002. Prior to this he was Senior Vice President Global
Manufacturing, SAP, Oil and Gas& Energy and Utilitiesand EngineeringBusiness
Units since November, 2000. Before this he was Vice President  SAP since
joining our company in 1999. Mr. Subramanian holds a masters in business
administration (MBA) degree and also an Associate Member of Cost and
Management Accountants of India.

Thiagarajan K.has been our Director & Senior Vice PresidentCorporate
Planning and Strategy since April 2001. Prior to this, he was PresidentE
Training of Satyam Infoway Ltd., since January, 2000. Before this, he was with
Sanmar Weighing Systems Ltd., as President. Mr. Thiagarajan holds a Bachelor of
Technology degree from Indian Institute of Technology, Chennai and Post
Graduate Diploma in Business Management from Indian Institute of Management,
Ahmedabad.

Compensation



| |                       
| | ----------------------
| | Executive Compensation

Under the Companies Act, our shareholders must approve the salary, bonus
and benefits of all associate directors at an annual general meeting of
shareholders. At our general meeting held in May 28, 1999, our shareholders
approved the employment terms and conditions for each of our associate
directors including the monthly salary, benefits, medical reimbursement and
pension fund contributions. These terms are made for a five-year period. The
employment terms of Mr. B. Ramalinga Raju, the chairman of our board of
directors, and Mr. Rama Raju, our managing director
and chief executive officer, were renewed for a period of five years with
effect from April 1, 1999.

No remuneration was paid to our non-executive directors. There are no loans to,
or guarantees in favor of, directors or key management personnel other than
interest-bearing housing loans provided to certain key management personnel
which have not been made, modified or renewed after July 30, 2002.

The following table sets forth all compensation awarded to, earned by or
paid to Mr. B. Rama Raju, our managing director and chief executive officer,
during fiscal 2002 for services rendered in all capacities to us. Mr. Raju was
appointed as managing director and chief executive officer of our company in
1991. With the exception of four executive officers who are serving overseas,
none of our other executive officers earned a combined salary and bonus in
excess of $100,000 during any of the last three fiscal years. With respect to
the four key managerial personnel , we have not provided individual
compensation information because their compensation is attributed predominantly
to their overseas assignments, and if they were based in India, their
individual compensation would not exceed $100,000. The total remuneration
received by our executive officers and directors for their services to us for
the fiscal year ended March 31, 2003 was $1.52 million. The total remuneration
and the amounts in the following table are in dollars based

55



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on the noon buying
rate of Rs. 47.53 per dollar on March 31, 2003.

Annual Compensation

|                                                            |  |        |        |       |  |            |   |  |  |   |        | 
|----------------------------------------------------------- |  | ------ | ------ | ----- |  | ---------- | - |  |  | - | ------ | 
|Name and Principal Position                                 |  | Salary |        | Bonus |  | Others (1)
|                                                            |  |        |        |       |  |           
|B. Rama Raju, Managing Director and Chief Executive Officer |  | $      | 87,236 |       |  |            |  |  |  | $ | 12,302 | 



---

|(1) |  | Includes commissions, membership fees and housing allowance.
|--- |  | ------------------------------------------------------------

Option Grants

During the fiscal year ended March 31, 2003, we granted options to our key
managerial personnel to purchase 500,000 shares under our ASOP, 509,540 shares
under our ASOP B plan and 65,000 ADSs under our ASOP ADS plan. The
expiration dates for the options granted under ASOP, ranged from October,
2002 to January, 2004 and for the options granted under ASOP B and
ASOP ADS range from April, 2006 to February, 2012. The exercise
prices for the options granted under ASOP, range from Rs.73.80 to
Rs.82.10. The exercise prices for the options granted under ASOP B,
range from Rs.223.45 to Rs.259.05 and the exercise price for the
options granted under ASOP ADS was $10.26.

Employee Benefit Plans

We have instituted an incentive plan, and intend to institute additional
incentive plans, to reward associates performance through cash payments and,
since September 1999, stock options. Associate performance is measured by
reference to the associates contribution to (1) profits and his or her tenure
of service, (2) organizational development and (3) customer satisfaction. An
associate must score a minimum number of points in each performance criterion
to be eligible for a reward. Since the introduction of stock options, cash
bonuses have decreased and we expect cash bonuses to continue to decrease in
the future as we place more emphasis on the granting of stock options.

Associate Stock Option Plan

The ASOP provides for the grant of warrants to eligible associates,
entitling such associates to apply for and receive 10 equity shares of our
company per warrant. All full-time associates of our company and our subsidiary
companies are eligible associates.

Our ASOP was approved at the annual general meeting of shareholders in May
1998. Associates may exercise warrants issued under the ASOP at the times and
upon the dates determined by a committee of our board of directors. The Trust
acts as the operating agency for administering the ASOP. In accordance with the
resolutions passed at our annual general meeting, we allotted to the Trust
warrants for equity shares in an amount not to exceed 13,000,000 shares. The
Trust holds these warrants on behalf of our associates and those of our
subsidiaries. A committee of directors constituted and authorized by our board
of directors, or advisory board, is in charge of studying and assessing
eligible associates. The advisory board identifies and recommends associates to
the Trust according to guidelines framed and approved by the board of
directors. Factors considered for the assessment of associates are performance,
organizational development and customer satisfaction. The advisory board can
also recommend awards as incentives to new associates joining us, and to
associates who have shown exceptional performance. On the recommendations of
the advisory board, the Trust advises us of offer of warrants to
identified associates.

An associate must pay consideration of one rupee per warrant to the Trust
before the warrant can be transferred to the associate. These warrants are
non-transferable by the associate. However, if the associate ceases to be an
associate of our company by reason of resignation, dismissal or severance, the
warrants will be transferred back to the Trust for the same consideration paid
by the associate. If the associate ceases to be an employee by retirement or
death, the rights and obligations under the warrants accrue to the associate or
his or her legal heirs. The conversion date of warrants is determined by the
advisory board. The conversion price to be paid by the associate upon
conversion has been determined by the board of directors under the SEBI
guidelines to be Rs.450, or approximately $9.47 per share (translated at the
noon buying rate of Rs.47.53 per $1.00 on March 31, 2003). The SEBI guidelines
apply to the pricing of shares issued under employee stock option plans. Under
the guidelines, the minimum exercise price to acquire shares under our ASOP is
the higher of the following:

(i)  the average of the weekly high and low of the closing prices of the
underlying shares quoted on the relevant Indian stock exchange during the six
months period before the date which is 30 days before the date of our
shareholders meeting at which the plan was approved (or April 24, 1998 in the
case of our ASOP); and

(ii)  the average of the weekly high and low of the closing prices of the
underlying shares quoted on the relevant

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Indian stock exchange during the two
weeks period before the date which is 30 days before the date of our
shareholders meeting at which the plan was approved (or April 24, 1998 in the
case of our ASOP).

Shares transferred to the associate after conversion from warrants become
the absolute property of the associate. In the event of a bonus or rights issue
or any other issue of securities to the existing holders, the warrant holders
may be given an opportunity to exercise the conversion warrant, even before the
conversion date to enable the warrant holder to be eligible for the issue of
securities. Such shares allotted upon conversion would be in the custody of the
Trust, to be released to the associate after the conversion date.

Associates Stock Option Plan B

In May 1999, the shareholders at our annual general meeting approved the
ASOP B. ASOP B provides for the grant of options to eligible associates, which
entitles these associates to apply for and receive five equity shares of our
company per option. All full-time associates of our company and our subsidiary
companies are eligible associates. Options granted to eligible associates under
the ASOP B become vested and exercisable within time periods selected by a
committee of our board of directors.

Under our ASOP B, 13,000,000 equity shares were set aside for associate
stock options. Stock options carry a minimum vesting period decided by the
committee of our board of directors.

The ASOP B may be administered by a committee of the board. The committee
has the power to determine the terms of the options granted, including the
exercise price, the number of equity shares subject to each option, the
exercisability thereof and the form of consideration payable upon such exercise
(which may be less than the fair market value of our equity shares on the date
of grant) in accordance with the SEBI guidelines described above. In addition,
the committee has the authority to amend, suspend or terminate our ASOP B.

ASOP ADS

Our ASOP ADS provides for the grant of incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code) and non-statutory options
to acquire ADSs of Satyam Computer Services to our associates, officers and
directors as well as to employees, officers and directors of our parent or
subsidiary entities. The establishment of our ASOP ADS was approved at our
annual general meeting of shareholders in May 1999, subject to a $25.0 million
limit on the aggregate market value of the equity shares initially reserved
pursuant to the ASOP ADS. Accordingly, the total equity shares reserved for
issuance may be reduced by the board of directors from time to time to comply
with the $25.0 million limit. All options under our ASOP ADS will be
exercisable for ADSs represented by ADSs.

Our ASOP ADS may be administered by the board of directors or a committee
of the board. The committee has the power to determine the terms of the options
granted, including the exercise price, the number of ADSs subject to each
option, the exercisability thereof and the form of consideration payable upon
such exercise. In addition, the
committee has the authority to amend, suspend or terminate our ASOP ADS,
provided that no such action may affect any ADS previously issued and sold or
any option previously granted under our ASOP ADS.

Options granted under our ASOP ADS are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under our ASOP ADS must generally be
exercised within three months of the end of the optionees status as an
associate of our company, but in no event later than the expiration of the
options term. In the event of an optionees termination as a result of death
or disability, the vesting and exercisability of the optionees option will
accelerate in full and the option must be exercised within 12 months after such
termination, but in no event later than the expiration of the options term.
The exercise price of incentive stock options granted under our ASOP ADS must
be at least equal to the fair market value of our ADSs on the date of grant.
The exercise price of non-statutory stock options granted under our ASOP ADS
must be at least equal to 90.0% of the fair market value of our ADSs on the
date of grant. With respect to any participant owning stock possessing more
than 10.0% of the voting power of all classes of our outstanding capital stock,
the exercise price of any incentive stock option granted must equal at least
110.0% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other
options granted under our ASOP ADS may not exceed 10 years.

Our ASOP ADS provides that in the event of a merger of our company with or
into another corporation, a sale of substantially all of our assets or a like
transaction involving our company, each option shall be assumed or an

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equivalent option substituted by the successor corporation. If the outstanding
options are not assumed or substituted as described in the preceding sentence,
the vesting and exercisability of each option will accelerate in full.

IASOP.In fiscal 1999, Sify established the IASOP which provides for
the issuance of warrants to purchase Sify shares to eligible associates of
Sify. The IASOP is substantially similar to the ASOP and is administered by
an employee welfare trust, the Sify Trust. Sify issued to the Sify
Trust 825,000 warrants of Rs.1 each to purchase equity shares in Sify. In
turn, the Sify Trust from time to time grants to eligible associates
warrants to purchase equity shares held by or reserved for issuance to the
Sify Trust. An associate must pay consideration of Rs.1 per warrant to the
Sify Trust and each warrant entitles the associate-holder to purchase one
share of Sify at an exercise price decided by the board of directors. The
board of directors has determined that in no event will the exercise price be
less than 90.0% of the market price of the shares on the Nasdaq National Market
as of the grant date. The warrants and the shares received upon the exercise of
warrants are subject to progressive vesting over a three year period from the
date the warrants were issued to the associate. The exercise period for these
warrants is 30 days from the vesting period. The intrinsic value of each
warrant is the market price of the shares underlying the warrants on the date
of the grant. The warrants allotted and the underlying shares are not subject
to any repurchase obligations by Sify. We account for the IASOP as a fixed
warrant plan. We expect that the exercise price of warrants granted in the
future will not be less than 90.0% of the fair market value of the underlying
shares and therefore we do not expect to incur a compensation expense with
respect to those future grants.

VCI
ASOP Plan. In April 2000, VCI established the VCI Stock Option
Plan, or the VCI Plan. A total of 25,000,000 shares of VCI common
stock are currently reserved for issuance upon the exercise of options
under the VCI Plan of which 17,500 options were outstanding as of
March 31, 2003 under the VCI Plan. The exercise prices of the prior
options grants have been at fair value of the underlying shares. As
VCI's operations have been discontinued, we do not expect that any of
the outstanding VCI options will be exercised or that VCI will issue
any further options. As a result, we do not expect to incur any
further compensation expenses with respect to VCI's options.

The SEBI guidelines, effective June 1999, has removed the limits on the
amount of stock options or warrants a company can grant to its employees and
the amount of discount to market price at which a company can grant such
options. The guideline requires companies to account for the difference between
the market price of its shares and the exercise price of its employee stock
options as personnel expenses in its profit and loss accounts.

Board Practices

Board Composition

Our Articles of Association set the minimum number of directors at three
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
retirement; and                                                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in any given year, at least one-third of these directors who are
subject to retirement shall retire and be eligible for re-election at
the annual meeting of our shareholders.

B.     Ramalinga Raju and B. Rama Raju are permanent directors and are not
subject to retirement by rotation. V.P. Rama Rao and Dr. Managalam Srinivasan
are the next directors who are scheduled to retire by rotation. Our Board of
directors appointed Mr. Krishna G. Palepu and Vinod K. Dham as additional
directors on January 23, 2003  they hold
office up to the ensuing Annual General Meeting in which their appointment
will be subject to shareholders approval. During fiscal 2003, C. Srinivasa
Raju, Director resigned from the Board effective, January 23, 2003.

Board Committees

The audit committee of 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 adequacy and
effectiveness of the accounting and financial controls of our company and our
accounting practices. The members of the audit committee are V.P. Rama Rao and
Dr. Mangalam Srinivasan, each of whom is an independent
director. We are in the process of filling up the vacant position on
this Committee.

The compensation committee of the board of directors determines the
salaries and benefits for our executive directors and the stock options for all
associates. The members of the compensation committee are V.P. Rama Rao and Dr.
Mangalam Srinivasan, each of whom is an independent director. We are
in the process of filling up the vacant position on this Committee.

The investors grievance committee of the board of directors formed in
January 2001 focuses on strengthening

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investor relations and addressing
investors concerns. The members of the committee are V.P. Rama Rao, who is an
independent director, and B. Rama Raju, Managing Director and CEO. We
are in the process of filling up the vacant position on this
Committee.



| |                      
| | ---------------------
| | Director Compensation

Our Articles of Association provides that each of our directors shall
receive a sitting fee not exceeding the maximum amount allowed under the
Companies Act. Currently, our directors receive Rs.5,000 for every board and
committee meeting. Currently, Independent directors do not receive any
additional compensation for their 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.



| |                                           
| | ------------------------------------------
| | Employment, Severance And Other Agreements

Our Articles of Association provides that directors are appointed by the
shareholders by resolutions passed at general meetings; however, the board of
directors has the power to appoint additional directors for a period up to the
date of the next annual general meeting. Key managerial personnel are appointed
by the management. There are no severance agreements with our key managerial
personnel.



| |          
| | ---------
| | Employees

Our success depends in large part on our ability to attract, develop,
motivate and retain highly skilled technical associates. We offer competitive
salaries, incentive pay, including, since May 1998, stock options, extensive
training, an entrepreneurial work environment and opportunities to work
overseas. As of March 31, 2003, we had 9,838 employees whom we refer to as
associates, including 9,086 technical associates. We had
9,532 and 9,700
associates as of March 31, 2002 and 2001, respectively. As of date, we had none
of our associates are represented by a union. We believe that our relationship
with our associates is good.

Recruiting. We recruit top graduates from the engineering departments of
Indias universities and engineering and technical colleges. India has over
1,500 such schools and, with the rapid growth of the IT services industry in
India, the number of students pursuing education in software engineering has
increased in recent years. This has allowed us to recruit from a large pool of
qualified applicants who undergo our demanding selection process involving a
series of tests and interviews. In fiscal 2001, we received approximately
25,000 job applications, from both recent graduates and those with previous
experience, tested and/or interviewed approximately 15,000 and extended job
offers to 5,458 of whom 3,660 joined our company. In fiscal 2002, we received
approximately 90,543 job applications, from both recent graduates and those
with previous experience, tested and/or interviewed approximately 4,722,
extended job offers to 1,259 and 1,287 joined our company. In fiscal 2003, we
received approximately 40,200 job applications, from both recent graduates and
those with previous experience, tested and/or interviewed approximately 13,400,
extended job offers to 3,350 and 2,561 joined our company.

Training of associates.We devote significant resources to training our
associates. We established the Satyam Learning Center, which is responsible for
conducting training programs. To assist our technical associates to better
understand and implement new technologies, each new technical associate must
participate in a three to six-month software engineering training program and
all technical associates are expected to undertake between 40 and 80 hours per
year of development training. Through such ongoing training, we build the
competencies in emerging disciplines necessary to meet customers project
needs. At the Satyam Learning Center, our technical associates are trained on
skill sets and encompassing Microsoft, Sun, IBM, Linux and other platforms.
Training is done keeping in view project requirements and proactive competency
development based on forecasted market needs. This expertise allows us the
flexibility to ramp up to meet the demands of particular projects and to
redeploy our personnel among projects. We also recruit managers in non-software
engineering fields for positions as project leaders and project managers and
provide them with extensive training, usually over a six-month period, in
software engineering and project management skills. To focus our associates on
selecting the best technologies to match customer requirements, all of our
associates are also required to undergo a customer orientation program.

Retention. To attract, retain and motivate our associates, we seek to
provide an environment that rewards entrepreneurial initiative and performance.
We also provide competitive salaries and benefits as well as incentives in the
form of cash bonuses and stock options. In fiscal 2001, fiscal 2002 and
fiscal 2003, we experienced associate attrition at a rate of 15.1%, 13.2% and
15.6% respectively. As the pool of software engineers in India becomes larger
and as we increase the opportunities for our associates to work overseas,
either for onsite work at the customers premises or in the offsite centers
which we are establishing as one of our strategic priorities, we believe our
current

59



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rates of turnover will continue.

At any given time, our technical associates are working overseas, either
onsite at customer premises or at our offsite centers, while the balance are
working in the offshore centers in India. On average, approximately 17.6%,
20.0% and 26.4% of our technical associates worked overseas, primarily in the
United States, in fiscal 2001, fiscal 2002 and fiscal 2003, respectively. As
at March 31, 2003, we employed 2,386 technical staff and 161 support in our
onsite and offsite centers in the United States, Japan, the United Kingdom,
Singapore, Middle East and Australia. We have staffed the offsite centers
mainly through local hiring, supplemented by associates from India. Our
professionals who work onsite at customers premises in the United States on
temporary and extended assignments are typically required to obtain visas. H-1B
visas are generally used for sending personnel to the United States for onsite
work, and L-1 visas are typically used only for inter-company transfers of high
level managers. Although there is no limit to new L-1 petitions, there is a
limit to the number of new H-1B petitions that the United States Immigration
and Naturalization Service may approve in any government fiscal year and in
recent years this limit has been reached well before the end of the fiscal
year. We are generally able to obtain H-1B and L-1 visas within two to four
months of applying for such visas, which remain valid for three years and can
be extended for a further three years. We plan for our visa requirements by
forecasting our annual needs for such visas in advance and applying for such
visas as soon as practicable. We do not anticipate any problems obtaining
enough visas for our needs in the current U.S. government fiscal year. In
addition, we utilize L-1 visas whenever available and redeploy existing H-1B
visa holders to minimize the number of new H-1B visas we need.



| |                
| | ---------------
| | Share Ownership

The following table sets forth information with respect to the beneficial
ownership of our equity shares as of May, 31, 2003 by each of our directors
and our chief executive officer and all of our directors and executive officers
as a group. The table gives effect to equity shares issuable within 60 days of
May 31, 2003 upon the exercise of all options and other rights beneficially
owned by the indicated shareholders on that date. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to equity
shares. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all equity shares
beneficially owned.

|                                                             |  |                    |            |         |  |  |     | 
|------------------------------------------------------------ |  | ------------------ | ---------- | ------- |  |  | --- | 
|                                                             |  | Equity Shares     
|                                                             |  | Beneficially Owned
|                                                             |  |                   
|Beneficial Owner                                             |  | Number             |            | Percent
|                                                             |  |                    |            |        
|B. Rama Raju                                                 |  |                    | 15,102,000 | (1)     |  |  | 4.8 | 
|B. Ramalinga Raju                                            |  |                    | 13,746,000 | (2)     |  |  | 4.4 | 
|V.P. Rama Rao                                                |  |                    |           |         |  |  |    | 
|Dr. Mangalam Srinivasan                                      |  |                    |           |         |  |  |    | 
|Krishna G. Palepu                                            |  |                    |           |         |  |  |    | 
|Vinod K Dham                                                 |  |                    |           |         |  |  |    | 
|All directors and executive
officers as a group
(17 persons) |  |                    | 29,866,245 |         |  |  | 9.6 | 



---

|(1) |  | Includes 3,874,000 equity shares held by B. Rama Rajus wife, B. Radha
Raju. B. Rama Raju disclaims beneficial ownership of any equity shares
held by B. Radha Raju.              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes 4,047,000 equity shares held by B. Ramalinga Rajus wife, B.
Nandini Raju. B. Ramalinga Raju disclaims beneficial ownership of any
equity shares held by B. Nandini Raju.

Other than B. Rama Raju and B Ramalinga Raju, none of our directors or
executive officers beneficially owned more than 1% of our equity shares as of
May 31, 2003.

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Share Ownership

The persons or group of affiliated persons who is known to us to
beneficially own 5% or more of our equity shares as of May 31, 2003, are
Templeton Global Advisors Limited A/c Templeton Funds, Inc. (Templeton Foreign
Fund), which holds 5.9% and Warburg Pincus LLC A/C Madison Holding Ltd., which
holds 5.4%. Templeton and Warburg have the same voting rights as our other
shareholders.

60



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As of May 31, 2003, 322,085 of our equity shares, representing 0.1% of
our outstanding shares, were held by a total of 93 holders of record with
addresses in the United States. As of May 31, 2003, we have issued 16,675,000
ADSs (representing 33,350,000 equity shares) and which represent 10.67% of our
outstanding equity shares and which are held by 2,016 beneficial holders and
3 registered holders.

Related Party Transactions

In December 1998, we entered into a joint venture with GE Pacific
(Mauritius) Ltd., an affiliate of GE Industrial Systems. The joint venture
company, called Satyam-GE Software Services Private Limited, provided GE
Industrial Systems with engineering design services, software development and
system maintenance. Under our joint venture agreement, we granted GE Pacific an
option to purchase our interest in the joint venture. Subject to the joint
venture meeting performance targets and other conditions. In January 2002 we
have initiated the process of transfer of our 50% shareholding in Satyam GE
Software Services Private Limited in accordance with the shareholders
agreement. During the year ended March 31, 2003, the transfer of shares was
consummated in favour of GEPL at an agreed price of US$4 million. The gain on
the above transaction amounting to $830 was recognized in the profit and loss
account.

During the years ended March 31, 2003, we provided infrastructure and
other services to Satyam-GE, in the amount of $142 thousand and $9 thousand,
respectively.

In October, 1999, we entered into a joint venture with Venture Global
Engineering LLC, USA. The joint venture company, called Satyam Venture
Engineering Services Private Limited or Satyam Venture, formed in January
2000, provides engineering services and computer services to the automotive
industry. We hold a 50% stake in the joint venture company. For fiscal 2002 and
fiscal 2003, we provided infrastructure and other services to Satyam Venture,
which amounted to $928 thousand and $875 thousand respectively. As of March 31,
2003, we owe $69 thousand to Satyam Venture.

During the fiscal 2003, Sify rendered services to us aggregating to $0.3
million ($0.1 million for the period from December 10, 2002 to March 31, 2003),
on terms which were no less favourable to us than could have been obtained from
independent third parties.

Item 8. FINANCIAL INFORMATION

Financial Statements

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

Legal Proceedings

As of the date of this document, we are not a party to any legal
proceedings that could reasonably be expected to seriously harm our company.

Dividends

Although the amount varies, it is customary for public companies in India
to pay cash dividends. Under Indian law, a corporation pays dividends upon a
recommendation by the board of directors and approval by a majority of the
shareholders, who have the right to decrease but not increase the amount of the
dividend recommended, by the board of directors. However, approval of
shareholders is not required for distribution of Interim dividend. 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. We paid out dividends of Rs.54.0 million ($1.3 million), Rs.91.6
million ($2.2 million), Rs.120.0 million ($2.8 million), Rs.187.8 million ($4.1
million), Rs. 279.0 million ($6.4 million.) and Rs.
469.0 million ($9.7
million) in fiscal 1998, fiscal 1999, fiscal 2000, fiscal 2001, fiscal 2002 and
fiscal 2003, respectively. These dividends include interim dividends for the
current fiscal year and dividends paid with respect to previous fiscal year.
Under Indian law, dividends are declared with respect to the shares outstanding
during the prior fiscal year and are paid in the subsequent fiscal year after
approval by shareholders in the Annual General Meeting. The dividend is paid on
the outstanding shares as at the end of fiscal year and is prorated for shares
issued during the fiscal year to take into account the amount of time such
shares have been issued. For example, our ADSs were issued in May, 2001 and
therefore our ADS holders were not entitled to receive the dividend payment
made on

61



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July 14, 2001 for the fiscal year ended March 31, 2001. However, the
ADS holders will be entitled to receive their share of any dividends for the
fiscal year ending March 31, 2002, prorated from May until March. Although, we
have no current intention to discontinue dividend payments, we cannot assure
you that any future dividends will be declared or paid or that the amount
thereof will not be decreased.

Owners of ADSs will be entitled to receive dividends payable in respect of
the equity shares represented by such ADSs. Cash dividends in respect of the
equity shares represented by the ADSs will be paid to the depositary in rupees
and, will generally be converted by the depositary into U.S. dollars and
distributed, net of depositary fees and expenses, to the holders of such ADSs.

Item 9. THE OFFER AND LISTING

Trading Markets

Our equity shares are traded in India on the Stock Exchange, Mumbai, the
National Stock Exchange and the Hyderabad Stock Exchange. Our ADSs evidenced by
American Depositary Receipts, or ADRs, are traded in the United States on the
New York Stock Exchange. Each ADS represents two equity shares. The ADRs
evidencing ADSs were issued by our depositary, Citibank, N.A., pursuant to a
Deposit Agreement.

The number of our outstanding equity shares (including the underlying
shares for ADSs) as of May, 31, 2003 was 312,386,210. As of May, 31, 2003,
there were 16,675,000 ADSs outstanding (representing 33,350,000 equity shares).

Price History

The information presented in the table below represents, for the periods
indicated: (1) the reported high and low sales prices quoted in Indian rupees
for the equity shares on the BSE; and (2) the imputed high and low sales prices
for the equity shares based on such high and low sales prices, translated into
U.S. dollars based on the noon buying rate on the last date of each period
presented.

|                                  |  |                  |         |                   |  |      |        |     |  |  |       |  |  |  |      | 
|--------------------------------- |  | ---------------- | ------- | ----------------- |  | ---- | ------ | --- |  |  | ----- |  |  |  | ---- | 
|                                  |  | Rupee Price per  |         | U.S. Dollar Price
|Annual high and low market prices |  | Equity Share (1) |         | Per Equity Share 
|                                  |  |                  |         |                  
|                                  |  | High             |         | Low               |  | High |        | Low
|                                  |  |                  |         |                   |  |      |        |    
|Fiscal
Year Ended March 31, (2)   |  |                  |         |                   |  |      |        |     |  |  |       |  |  |  |      | 
|1999                              |  |                  | 169.50  |                   |  |      | 24.70  |     |  |  | 3.99  |  |  |  | 0.58 | 
|2000                              |  |                  | 1445.99 |                   |  |      | 99.20  |     |  |  | 33.13 |  |  |  | 2.27 | 
|2001                              |  |                  | 901.98  |                   |  |      | 179.00 |     |  |  | 20.18 |  |  |  | 3.84 | 
|2002                              |  |                  | 331.15  |                   |  |      | 111.00 |     |  |  | 6.78  |  |  |  | 2.32 | 
|2003                              |  |                  | 291.85  |                   |  |      | 175.10 |     |  |  | 6.08  |  |  |  | 3.68 | 
|Fiscal
year 2002                  |  |                  |         |                   |  |      |        |     |  |  |       |  |  |  |      | 
|First Quarter                     |  |                  | 271.95  |                   |  |      | 148.60 |     |  |  | 5.78  |  |  |  | 3.16 | 
|Second Quarter                    |  |                  | 198.80  |                   |  |      | 111.00 |     |  |  | 4.15  |  |  |  | 2.32 | 
|Third Quarter                     |  |                  | 278.00  |                   |  |      | 114.25 |     |  |  | 5.76  |  |  |  | 2.37 | 
|Fourth Quarter                    |  |                  | 331.15  |                   |  |      | 225.00 |     |  |  | 6.78  |  |  |  | 4.61 | 
|Fiscal
year 2003                  |  |                  |         |                   |  |      |        |     |  |  |       |  |  |  |      | 
|First Quarter                     |  |                  | 280.15  |                   |  |      | 208.10 |     |  |  | 5.73  |  |  |  | 4.26 | 
|Second Quarter                    |  |                  | 258.85  |                   |  |      | 189.75 |     |  |  | 5.35  |  |  |  | 3.92 | 
|Third Quarter                     |  |                  | 291.85  |                   |  |      | 193.35 |     |  |  | 6.08  |  |  |  | 4.03 | 
|Fourth Quarter                    |  |                  | 282.85  |                   |  |      | 175.10 |     |  |  | 5.95  |  |  |  | 3.68 | 

|                                 |  |             |        |     |  |  |        | 
|-------------------------------- |  | ----------- | ------ | --- |  |  | ------ | 
|                                 |  | Price Range
|                                 |  |            
|Month high and low market prices |  | High        |        | Low
|                                 |  |             |        |    
|                                 |  | Rs.         |        | Rs.
|November, 2002                   |  |             | 280.75 |     |  |  | 230.10 | 
|December, 2002                   |  |             | 291.85 |     |  |  | 264.60 | 
|January, 2003                    |  |             | 282.85 |     |  |  | 215.10 | 
|February, 2003                   |  |             | 233.75 |     |  |  | 210.10 | 
|March, 2003                      |  |             | 237.50 |     |  |  | 175.10 | 

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|                                 |  |             |        |     |  |  |        | 
|-------------------------------- |  | ----------- | ------ | --- |  |  | ------ | 
|                                 |  | Price Range
|                                 |  |            
|Month high and low market prices |  | High        |        | Low
|                                 |  |             |        |    
|                                 |  | Rs.         |        | Rs.
|April, 2003                      |  |             | 195.45 |     |  |  | 127.30 | 
|May, 2003                        |  |             | 179.40 |     |  |  | 152.65 | 



---

|(1) |  | Data derived from the BSE website. The prices and volumes quoted on the
National Stock Exchange and the Hyderabad Stock Exchange may be different.                                                                                                                                                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For comparative purposes, the price per equity share data above is
adjusted for the September 1, 1999 two-for-one stock split which took
effect on the BSE on August 16, 1999 and the August 25, 2000 five-for-one
stock split which took effect on the BSE on August 7, 2000. The average
daily equity share trading volume has not been adjusted.

Our ADSs commenced trading on the New York Stock Exchange on May 15, 2001,
at an initial offering price of $9.71 per ADS. The tables below set forth, for
the periods indicated, high and low trading prices for our ADS.

|                                                                              |  |             |       |     |  |   |       | 
|----------------------------------------------------------------------------- |  | ----------- | ----- | --- |  | - | ----- | 
|                                                                              |  | Price Range
|                                                                              |  |            
|                                                                              |  | High        |       | Low
|                                                                              |  |             |       |    
|Fiscal
Year ended March 31, 2002                                              |  |             |       |     |  |   |       | 
|Quarterly High and low market prices of ADSs
First Quarter (beginning May 15) |  | $           | 12.57 |     |  | $ | 7.90  | 
|Second Quarter                                                                |  |             | 9.80  |     |  |   | 5.40  | 
|Third Quarter                                                                 |  |             | 13.74 |     |  |   | 5.05  | 
|Fourth Quarter                                                                |  |             | 14.74 |     |  |   | 11.10 | 
|Fiscal
Year ended March 31, 2003                                              |  |             |       |     |  |   |       | 
|Quarterly High and low market prices of ADSs
First Quarter                    |  | $           | 12.56 |     |  | $ | 9.46  | 
|Second Quarter                                                                |  |             | 11.75 |     |  |   | 7.93  | 
|Third Quarter                                                                 |  |             | 13.50 |     |  |   | 8.40  | 
|Fourth Quarter                                                                |  |             | 13.06 |     |  |   | 8.24  | 

|                                           |  |             |       |     |  |   |       | 
|------------------------------------------ |  | ----------- | ----- | --- |  | - | ----- | 
|                                           |  | Price Range
|                                           |  |            
|Monthly High and low market prices of ADSs |  | High        |       | Low
|                                           |  |             |       |    
|November, 2002                             |  | $           | 13.00 |     |  | $ | 10.40 | 
|December, 2002                             |  |             | 13.50 |     |  |   | 12.50 | 
|January, 2003                              |  |             | 13.06 |     |  |   | 10.05 | 
|February, 2003                             |  |             | 10.83 |     |  |   | 9.75  | 
|March, 2003                                |  |             | 10.70 |     |  |   | 8.24  | 
|April, 2003                                |  |             | 9.25  |     |  |   | 7.25  | 
|May, 2003                                  |  |             | 8.85  |     |  |   | 7.65  | 

Item 10. ADDITIONAL INFORMATION

Memorandum and Articles of Association

The following are summaries of our Articles of Association and Memorandum
of Association and the Companies Act which govern our affairs. Our Articles of
Association provides that the regulations contained in Table A of the
Companies Act apply to our company, so long as the regulations do not conflict
with the provisions of our Articles of Association. We have filed complete
copies of our Memorandum of Association and Articles of Association, as well as
Table A of the Companies Act, as exhibits to our registration statement on
Form F-1 filed with the Securities and Exchange Commission on May 7, 2001
(Registration No. 333-13464).

Objects and Purposes

Under our Memorandum of Association, the main objectives of our company
include, but are not limited to:



| |  |  | manufacturing and selling computer systems, peripherals,
accessories, consumables and other computer products;                                                                                                                                                                  
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | designing and developing computer systems and applications software
for our own use and for sale 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; and

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| |  |  | providing electronic data processing centers, word processing,
software consultancy, system studies, management consultancy,
feasibility studies and computer training.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Board of Directors

At each annual general meeting at least, one-third of our directors must
retire from office by rotation. A retiring director is eligible for re-election
and the directors to retire every year are those who have been longest in
office since their last re-election or appointment. No shares are required to
be held by a director for qualification as a director. In addition, save in
respect of the following managerial personnel, there are no age-limit
requirements for serving on our board of directors. Under the Companies Act, no
person under the age of 25 or over the age of 70 is eligible for appointment as
a managing director or a whole-time director or a manager of our Company,
provided that persons under the age of 25 or over age 70 may be appointed with
either the approval of our shareholders by a special resolution or with the
approval of the Central Government. Under the Companies Act, our directors must
refrain from participating in discussions and voting on any matters in which
they are interested party. In addition, directors are also required to disclose
such interests, if any, at meetings of the board of directors.

Managerial Remuneration

Under the Companies Act, the remuneration payable to our directors is to
be determined either by the articles of the company or by an ordinary
resolution passed by the company in the general meeting, unless the articles
require a special resolution for the same.

As a public company, the total managerial remuneration in any year cannot
exceed 11 per cent of our profits in that year. In addition, the remuneration
payable to a managing or any whole-time director in any year cannot exceed 5
per cent of our net profits in that year. If there is more than one managing or
whole-time director, then the aggregate remuneration to all of them cannot
exceed 10 per cent of our net profits.

In addition, where a company has made no or inadequate profits, there are
additional limits on the maximum remuneration payable to the directors.
Approval of the Central Government would be required for payment of
remuneration in excess of the limits prescribed.

Under our Articles of Association, our board of directors may, at its
discretion and by means of a resolution, borrow funds on behalf of the company,
create mortgages or liens on the companys property or uncalled capital and
issue debentures. However, the Companies Act imposes some restrictions on
the powers of the board to act without the consent of the shareholders
including, for example, the ability to borrow money beyond the aggregate of our
paid up capital and free reserves.

Equity Shares

Our authorized share capital is 375,000,000 equity shares, par value Rs.2
per share. The equity shares are our only class of share capital. However, our
Articles of Association and the Companies Act permit us to issue preference
shares in addition to the equity shares. The rights attached to a class of
shares may, subject to the provisions of the Companies Act, be varied only with
either the written consent of the holders of 75% of the issued shares of that
class or by special resolution passed at a separate meeting of the holders of
that class.

Our equity shares are under the control of our board of directors, who
may, with prior approval from the shareholders at a general meeting, allot or
otherwise dispose of new equity shares in its discretion, including allotments
of shares at a premium or discount in accordance with the provisions of the
Companies Act. Our Articles of Association permit our board of directors to
make calls on our equity shares, but only in respect of unpaid amounts on
equity shares which are not fully paid-up. All of our issued and outstanding
equity shares are fully paid-up.

Dividends

We paid out dividends of Rs.54.0 million ($1.3 million), Rs.91.6 million
($2.2 million), Rs.120.0 million ($2.8 million), Rs.187.8 million ($4.1
million), Rs. 279.0 million ($6.4 million.) and Rs.
469.0 million ($9.7
million) in fiscal 1998, fiscal 1999, fiscal 2000, fiscal 2001, fiscal 2002 and
fiscal 2003, respectively.

Under the Indian Companies Act, unless our board of directors recommends
the payment of a dividend, we may not declare a dividend. Similarly, under our
Articles of Association, although the shareholders may, at the annual

64



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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 of
Association and the Companies Act, 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), cash dividends declared and paid for such
fiscal year generally will be prorated from the date of issuance to the end of
such fiscal year. Under the Companies Act, dividends can only be paid in cash
to the registered shareholder at a record date fixed during or before the
annual general meeting or to his order or his bankers order.

Under the Indian Companies Act, dividends and interim dividends may be
paid out of profits of a company in the year in which the dividend and/or
interim dividend is declared or out of the undistributed profits of previous
fiscal years. Before declaring a dividend and/or interim dividend greater than
10.0% 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 10.0% 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 and/or interim dividend may be declared for such year out of the
accumulated profits, subject to the following conditions:



| |  |  | the rate of dividend to be declared may not exceed 10.0% 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 10.0% 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
15.0% of its paid up capital.                                                                                                                                                                                                                                                                                                

For additional information regarding dividends, please see Item 8.
Financial Information.

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. The last bonus shares
issued by us was in September 1999.

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 shareholding 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. If we issue equity shares and a special resolution is not
approved by our shareholders, the new shares must first be offered to the
existing shareholders as of a fixed record date. The offer must include: (1)
the right, exercisable by the shareholders of record, to renounce the shares
offered in favor of any other person; and (2) the number of shares offered and
the period of the offer, which may not be less than 15 days from the date of
offer. If the offer is not accepted it is deemed to have been declined. Our
board is authorized under the Companies Act to distribute any new shares not
purchased by the preemptive rights holders in the manner that it deems most
beneficial to our company.

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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 to adopt the accounts for such fiscal
year and to transact other businesses and may convene an extraordinary general
meeting of shareholders when necessary or at the request of a shareholder or
shareholders holding at least 10.0% 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 day of
mailing) before the date of the general meeting to the shareholders on record.
Shareholders who are registered as shareholders on the date of the general
meeting are entitled to attend or vote at such meeting. Our Articles of
Association provides that a quorum for a general meeting is the presence of at
least five shareholders in person.

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 Centre, S P Road, Secunderabad 500 003, Andhra Pradesh, India.

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 10.0% of the total shares entitled to vote on the resolution or by
those holding shares with an aggregate paid up value 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 shareholder. The chairman of our 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 before 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, special resolutions such as amendments to our Articles of
Association and the object clause of 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.
Under a recent amendment to the Indian Companies Act, certain resolutions may
and
certain resolutions must be passed by means of a postal ballot instead of
a vote at a meeting of shareholders.

Audit and Annual Report

At least 21 days before the date of the annual general meeting of
shareholders (excluding the day of mailing), 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. 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.

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 before 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 and our
listing agreements with the Indian stock exchanges require us to give at least
seven days and thirty days prior notice respectively to the public before
such closure. We may not close the register of shareholders for more than 30
consecutive days, and in no event for more than 45 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. Because
we are a public company, the provisions of Section 111A apply to us. Our
Articles currently contain provisions which give our directors discretion to
refuse to register a transfer of shares in some circumstances. According to our
Articles, our directors are required to exercise this right in the best
interests of our company. While our directors are not required to provide a
reason for any such refusal in writing, they must give notice of the refusal to
the transferee within one month after receipt of the application for
registration of transfer by our company. In accordance with the provisions of
Section 111A(2) of the Companies Act, our directors may exercise this
discretion if they have sufficient cause to do so. If our directors refuse to
register a transfer of shares, the shareholder wishing to transfer his, her or
its shares may file a civil suit or an appeal with the Company Law Board, or
CLB. Pursuant to Section 111A(3), if a transfer of shares contravenes any of
the provisions of the Securities and Exchange Board of India Act, 1992 or the
regulations issued thereunder or the Sick Industrial Companies (Special
Provisions) Act, 1985 or any other Indian laws, the CLB may, on application
made by the company, a depositary incorporated in India, an investor, the
Securities and Exchange Board of India or other parties, direct the
rectification of the register of records. The CLB may, in its discretion, issue
an interim order suspending the voting rights attached to the relevant shares
before making or completing its investigation into the alleged contravention.
Notwithstanding such investigation, the rights of a shareholder to transfer the
shares will not be restricted.

There are no maximum limits on foreign direct equity participation in the
business in which our Company is engaged. With regard to share transfers, if a
person resident outside India were to sell its shares to a person resident in
India, approval of the RBI would be required unless the sale is made on a stock
exchange or in connection with an offer made under the regulations regarding
takeovers. For additional information regarding ownership restrictions, please
see Investment by Foreign Institutional Investors below.

Our shares in excess of 500 are required to be transferred in
dematerialized form. Under the Companies Act, unless the shares of a company
are held in a dematerialized form, a transfer of shares is effected by a duly
stamped instrument of transfer in the form prescribed by the Companies Act and
the rules thereunder together with delivery of the share certificates.

We have entered into listing agreements with three of the Indian stock
exchanges: the Stock Exchange, Mumbai, the National Stock Exchange and the
Hyderabad Stock Exchange. Clause 40A of each of the listing agreements provides
that if an acquisition of a listed companys shares results in the acquirer and
its associates holding 5.0% or more of the companys outstanding equity shares
or voting rights, the acquirer must report its holding to the company and the
relevant stock exchanges. If an acquisition results in the acquirer and its
associates holding equity shares that
have 15.0% or more of the voting rights, then the acquirer must, before
acquiring such equity shares, make an offer, in accordance with clause 40B of
the listing agreements, on a uniform basis to all remaining shareholders of the
company to acquire equity shares that have at least an additional 20.0% of the
voting rights of the total equity shares of the company at a prescribed price.
The acquisition of shares of a company listed on an Indian stock exchange may
be subject to regulations governing takeovers of Indian companies. Although
clauses 40A and 40B and such regulations will not apply to the equity shares so
long as they are represented by ADSs, holders of ADSs may be required to comply
with such notification and disclosure obligations pursuant to the provisions of
the deposit agreements.

Disclosure of Ownership Interest

Section 187C of the Companies Act requires beneficial owners of shares of
Indian companies who are not holders of record to declare to us details of the
holder of record and the nature and details of the beneficial owners interest
in the shares. Any person who fails to make the required declaration within 30
days may be liable for a fine of up to Rs.1,000 for each day the declaration is
not made. Any lien, promissory note or other collateral agreement created,
executed or entered into with respect to any equity share by its registered
owner, or any hypothecation by the registered owner of any equity share, shall
not be enforceable by the beneficial owner or any person claiming through the
beneficial owner if such declaration is not made. Failure to comply with
Section 187C will not affect our obligation to register a transfer of shares or
to pay any dividends to the registered holder of any shares pursuant to which
the declaration has not been made. While it is unclear under Indian law whether
Section 187C applies to holders of ADSs, investors who exchange ADSs for the
underlying equity shares will be subject to the restrictions of Section 187C.
Additionally, holders of ADSs may be required to comply with the notification
and disclosure obligations pursuant to the provisions of the deposit agreement
covering the ADSs.

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Company Acquisition of Equity Shares

Under the Companies Act, approval of at least 75.0% of our shareholders
voting on the matter and approval of the High Court of Andhra Pradesh is
required to reduce our share capital. We may, under some circumstances, acquire
our own equity shares without seeking the approval of the High Court. However,
we would have to extinguish any shares we have so acquired within the
prescribed time period. Generally, a company is not permitted to acquire its
own shares for treasury operations. An acquisition of our own shares (without
having to obtain the approval of the High Court) must comply with prescribed
rules, regulations and conditions as laid down in the Companies Act and the
Securities and Exchange Board of India (Buy-back of Securities) Regulations,
1998, or Buy-back Regulations.

Liquidation Rights

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

Takeover Code

Under the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997, or Takeover Code, upon the acquisition
of more than 5% or 10% or 14% of the outstanding shares or voting rights of a
publicly-listed Indian company, a purchaser is required to notify the company,
and the company and the purchaser are required to notify all the stock
exchanges on which the shares of such company are listed. Further, the Takeover
Code requires that any person holding more than 15% and less than 75% of the
shares or voting rights in a company, upon the sale or purchase of 2% or more
of the shares or voting rights of the company, is required to notify the
company and all the stock exchanges where the shares are listed. A holder of
ADSs would be subject to these notification requirements.

Upon the acquisition of 15% or more of such shares or voting rights, or a
change in control of the company, the purchaser is required to make an open
offer to the other shareholders, offering to purchase at least 20% of all the
outstanding shares of the company at a minimum offer price determined pursuant
to the Takeover Code. Since we are a listed company in India, the provisions of
the Takeover Code will apply to us and to any person acquiring our equity
shares or voting rights in our company. However, the Takeover Code provides for
a specific exemption from this
provision to a holder of ADSs and states that this provision will apply to a
holder of ADSs only once he or she converts the ADSs into the underlying equity
shares.

Material Contracts

Except as described herein, we have not entered into any material
contracts in the two years preceding the date of this Annual Report, other than
contracts entered into in the ordinary course of business.

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.

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As of June 1, 2000, the Indian Foreign Exchange Regulation Act, 1973 was
replaced by the Indian Foreign Exchange Management Act, 1999. 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 Notifications and Guidelines issued by the Reserve Bank of
India which are not inconsistent with the Indian Foreign Exchange Management
Act, 1999 continue to be in force. The purchase and the transfer of shares of
Indian companies continues to be regulated by the RBI. Therefore, transaction
involving foreign investment in Indian securities is regulated by the
provisions of the Indian Foreign Exchange Management Act, 1999 and continues to
be regulated by the Reserve Bank of India.



| |               
| | --------------
| | ADR Guidelines

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

The Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme
is distinct from other policies or facilities, as described below, relating to
investments in Indian companies by foreign investors. The issuance of ADSs
pursuant to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
Scheme also affords to owners of ADSs the benefits of Section 115AC of the
Indian Income-tax Act, 1961 for purposes of the application of Indian tax law.
The Government of India does not restrict the payment of dividends to the
holders of our ADSs or equity shares, whether or not such holders reside in
India. For additional information, please see Taxation  Indian Taxation.



| |                          
| | -------------------------
| | Foreign Direct Investment

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

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

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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.



| |                                                                 
| | ----------------------------------------------------------------
| | 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, 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
all the securities traded on the primary and secondary markets 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 can be entirely removed,
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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There is uncertainty under Indian law about the tax regime applicable to
foreign institutional investors that hold and trade ADSs. 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) Regulations, upon the
acquisition of more than 5% of the outstanding shares of a public Indian
company, a purchaser is required to notify the company and the company and the
purchaser are required to notify all the stock exchanges on which the shares of
the company are listed. Upon the acquisition of 15% or more of such shares or a
change in control of the company, the purchaser is required 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. Upon conversion of ADSs into equity shares, an
ADS holder will be subject to the Takeover Code. 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.

Taxation



| |                
| | ---------------
| | Indian Taxation

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

This section is not intended to constitute a complete analysis of the
individual tax consequences to non-resident holders under Indian law for the
acquisition, ownership and sale of ADSs and equity shares. Personal tax

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consequences of an investment may vary for non-resident holders in various
circumstances, and potential investors should therefore consult their own tax
advisers on the tax consequences of such acquisition, ownership and sale,
including specifically the tax consequences under the law of the jurisdiction
of their residence and any tax treaty between India and their country of
residence.

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



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

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

Taxation of Distributions.There is no withholding tax on dividends paid
to stockholders. However, the company paying the dividend is subject to a
dividend distribution tax of 12.5%, including the presently applicable
surcharge of 2.5%, 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 35.75%, including the presently applicable surcharge of 5.0%.

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

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

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

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

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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.

The Finance Bill, 2003 proposes to exempt long-term capital gains from tax
when they are derived from the transfer of equity shares in a company listed on
a recognized stock exchange in India and acquired on or after March 1, 2003,
but before March 1, 2004. 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%. 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 in physical form 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.
Blocks of 500 or less of our equity shares may be issued and traded in physical
form, and are thus subject to Indian stamp duty. Blocks of more than 500 of our
equity shares must be issued and traded in dematerialized form and are not
subject to Indian stamp duty.

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

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

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



| |                               
| | ------------------------------
| | United States Federal Taxation

The following is a summary of the material U.S. federal income and estate
tax consequences that may be relevant with respect to the acquisition,
ownership and disposition of equity shares or ADSs. This summary addresses the
U.S. federal income and estate tax considerations of holders that are U.S.
persons, i.e., citizens or residents of the United States, partnerships or
corporations created in or under the laws of the United States or any political
subdivision thereof or therein, estates, the income of which is subject to U.S.
federal income taxation regardless of its source and trusts for which a U.S.
court exercises primary supervision and a U.S. person has the authority to
control all substantial decisions and that will hold equity shares or ADSs as
capital assets. We refer to these persons as U.S. holders. This summary does
not address tax considerations applicable to holders that may be subject to
special tax rules, such as banks, insurance companies, dealers in securities or
currencies, tax-exempt entities, persons that hold equity shares or ADSs as a
position in a straddle or as part of a hedging or conversion transaction
for tax purposes, persons that have a functional currency other than the U.S.
dollar or holders of 10% or more, by voting power or value, of the stock of our
company. This summary is based on the tax laws of the United States as in
effect on the date of this Annual Report and on United States Treasury

Regulations in effect or, in some cases, proposed, as of the date of this
Annual Report, as well as judicial and administrative interpretations thereof
available on or before such date and is based in part on representations of the
depositary and the assumption that each obligation in the deposit agreement and
any related agreement will be performed in accordance with its terms. All of
the foregoing are subject to change, which change could apply retroactively and
could affect the tax consequences described below.

73



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##### 



Each prospective investor should consult his, her or its own tax advisor
with respect to the U.S. Federal, state, local and 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. Subject to special rules discussed below governing passive
foreign investment companies, distributions of cash or property (other than
equity shares, if any, that are distributed pro rata to all stockholders of our
company, including holders of ADSs and also meet certain conditions) with
respect to equity shares will be includible in income by a U.S. holder as
foreign source dividend income at the time of receipt, which in the case of a
U.S. holder of ADSs generally will be the date of receipt by the depositary, to
the extent such distributions are made from the current or accumulated earnings
and profits of our company as determined under U.S. federal income tax
principles. Such dividends will not be eligible for the dividends received
deduction generally allowed to corporate U.S. holders. To the extent, if any,
that the amount of any distribution by our company exceeds our companys
current and accumulated earnings and profits, it will be treated first as a
tax-free return of the U.S. holders tax basis in the equity shares or ADSs and
thereafter as capital gain.

A U.S. holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Indian dividend distribution taxes paid
by our company, unless it is a U.S. company holding at least 10% of our company
paying the dividends. 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 of
distribution, 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, to include in their
taxable income their pro rata share of undistributed amounts of our
income; or                                                

74



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##### 





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

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

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

75



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##### 



DOCUMENTS ON DISPLAY

Publicly filed documents concerning our company which are referred to in
this document may be inspected and copied at the public reference facilities
maintained by the SEC at:

Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549

Copies of these materials can also be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates.

The SEC maintains a website at www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that
make electronic filings with the SEC using its EDGAR system.

Subsidiary Information



| |                
| | ---------------
| | Not applicable.

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our currency, maturity and interest rate information relative to our
short-term and long-term debt are disclosed in Note Borrowings to our
consolidated financial statements.

The table below provides information about our financial instruments that
are sensitive to changes in interest rates and foreign currencies as of the
dates shown. Weighted average variable rates were based on average interest
rates applicable to the loans. The information is presented in U.S. dollar
equivalents, which is our reporting currency, based on the applicable exchange
rates as of the relevant period end. Actual cash flows are denominated in
various currencies, including U.S. dollars and Indian rupees.

|                              |  |                             |       |                      |  |        |      |            |  |   |       |   |  |   |       | 
|----------------------------- |  | --------------------------- | ----- | -------------------- |  | ------ | ---- | ---------- |  | - | ----- | - |  | - | ----- | 
|                              |  | As of
March 31, 2003        |       | As of
March 31, 2002
|                              |  | Total Recorded              |       | Total Recorded      
|                              |  |                             |       |                     
|                              |  | Amount                      |       | Fair Value           |  | Amount |      | Fair Value
|                              |  |                             |       |                      |  |        |      |           
|                              |  | ($ equivalent in thousands) |       |                      |  |       
|Debt:                         |  |                             |       |                      |  |        |      |            |  |   |       |   |  |   |       | 
|Variable rate short-term debt |  | $                           |      |                      |  | $      |     |            |  |   | 1,764 |   |  |   | 1,764 | 
|Average interest rate         |  |                             |      |                      |  |        |      |            |  |   | 9.5   | % |  |   |       | 
|Fixed rate long-term debt     |  | $                           | 4,074 |                      |  | $      | 4081 |            |  | $ | 5,499 |   |  | $ | 5,516 | 
|Average interest rate         |  |                             | 11.88 | %                    |  |        |      |            |  |   | 12.7  | % |  |   |       | 

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

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 have receipts in
foreign currency from overseas customers and hold balances in foreign currency
with overseas banks.

During fiscal 2003 and fiscal 2002, 93.9% and 92.3%, respectively, of our
revenues were generated outside of India. Using sensitivity analysis, a
hypothetical 10.0% increase in the value of the Indian rupee against all other
currencies would decrease revenue by 1.7%, or $7.2 million in fiscal 2002 and
1.9% or $8.6 million in the fiscal 2003, while a hypothetical 10.0% decrease in
the value of the Indian rupee against all other currency would increase revenue
by 1.7%, or $7.2 million, in fiscal 2002 and 1.9%, or $8.6 million, in the
fiscal 2003. In the opinion of management, a substantial portion of this
fluctuation would be offset by expenses incurred in local currencies. As a
result, a
hypothetical 10.0% movement of the value of the Indian rupee against all
other currencies in either direction would

76



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##### 



have impacted our earnings before
interest and taxes by $7.2 million in fiscal 2002 and $8.6 million in the
fiscal 2003. This amount would be offset, in part, from the impacts of local
income taxes and local currency interest expense. As at March 31, 2003, we had
approximately $55 million of non-Indian rupee denominated cash and cash
equivalents.

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



| |                
| | ---------------
| | Not applicable.

77



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##### 



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

In May 2001, we completed an offering of 16,675,000 ADSs (representing
33,350,000 equity shares) at a price of $9.71 per ADS. We received
approximately $150.6 million in cash, net of underwriting discounts,
commissions and other offering costs. Our Securities Act registration statement
on Form F-1 with respect to the offering was declared effective by the
Securities and Exchange Commission on May 14, 2001 (Registration No.
333-13464). As of May 31, 2003, approximately $64.3 million of these proceeds
has been used for prepayment of loans ($26.9 million); strategic investments in
our subsidiaries ($11.6 million); development of facilities and infrastructure
($7.2 million) and working capital and general corporate purposes ($19.98
million). We intend to use the balance of the net proceeds to fund expansion of
our existing facilities and communication network in different locations in
India and outside India; to develop new facilities within and outside India; to
investment in joint ventures and other strategic investments; and for working
capital and general corporate purposes. None of the net proceeds from our ADS
offering were paid, directly or indirectly, to any of our directors, officers
or general partners or any of their associates, or to any persons owning ten
percent or more of any class of our equity securities, or any affiliates.

Item 15. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the U.S. Securities and Exchange Commissions rules and forms, and that such
information is accumulated and communicated to our management, to allow timely
decisions regarding required disclosures. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and, in
reaching a reasonable level of assurance, management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Also, we have investments in certain unconsolidated
entities. As we do not control or manage these entities, our disclosure
controls and procedures with respect to such entities are necessarily
substantially more limited than those we maintain with respect to our
consolidated subsidiaries.

In the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures.

There have been no significant changes in our internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date we completed our evaluation.

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Reserved.

Item 16B. CODE OF ETHICS

Reserved.

78



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##### 



PART III

Item 17. FINANCIAL STATEMENTS

See Item 18 for a list of financial statements filed under Item 17.

Item 18. FINANCIAL STATEMENTS

The following financial statements are filed as part of this document,
together with the report of the independent auditors:



| |  | Report of Price Waterhouse, Independent Accountants                                                                       
|- |  | --------------------------------------------------------------------------------------------------------------------------
| 
| |  | Consolidated Balance Sheets as of March 31, 2002 and 2003                                                                 
| 
| |  | Consolidated Statements of Operations for the years ended March 31, 2001, 2002 and 2003                                   
| 
| |  | Consolidated Statements of Shareholders Equity and Comprehensive
Income for the years ended March 31, 2001, 2002 and 2003
| 
| |  | Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2002 and 2003                                   
| 
| |  | Notes to the Consolidated Financial Statements                                                                            

Item 19. EXHIBITS

|       |  |                                                                                                                                                                                                                                                        
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                        
|1.1    |  | Memorandum and Articles of Association of Satyam Computer Services. (1)                                                                                                                                                                                
|1.2    |  | Schedule 1  Table A: Regulations for Management of a Company Limited by Shares. (1)                                                                                                                                                                   
|2.1    |  | Specimens of Share Certificates. (1)                                                                                                                                                                                                                   
|2.2    |  | Deposit Agreement dated May 14, 2001, by and among Satyam Computer Services, Citibank,
N.A. and the holders from time to time of American Depositary Receipts issued
thereunder (including as an exhibit, the form of American Depositary Receipt). (2)
|4.1    |  | Associate Stock Option Plan (including Deed of Trust). (1)                                                                                                                                                                                             
|4.2    |  | Associate Stock Option Plan B. (1)                                                                                                                                                                                                                     
|4.3    |  | Associate Stock Option Plan ADR. (1)                                                                                                                                                                                                                   
|4.4    |  | Investor Rights Agreement, dated October 7, 2002, by and among Sify Limited (formerly
Satyam Infoway Limited), Satyam Computer Services Limited, SAIF Investment Company
Limited and Venture Tech Solutions Pvt. Ltd. (3)                              
|8.1    |  | List of Subsidiaries. (4)                                                                                                                                                                                                                              
|10.1   |  | Consent of Price Waterhouse, Independent Accountants. (4)                                                                                                                                                                                              
|99.1   |  | Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act(4)                                                                                                                                                                
|99.2   |  | Certification of Financial Officer under Section 906 of the Sarbanes-Oxley Act(4)                                                                                                                                                                      



---

|(1) |  | Previously filed as an exhibit to our Registration Statement on Form F-1
(File No. 333-13464) filed on May 7, 2001 and incorporated herein by
reference.       
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Previously filed as an exhibit to our Form 20F (File No. 00115190)
filed on August 13, 2001 and incorporated herein by reference.                            
|   
|(3) |  | Previously furnished by Sify Limited to the Commission as an exhibit to
Form 6-K (file No. 00027-663) on October 10, 2002 and incorporated herein
by reference.
|   
|(4) |  | Filed herewith.                                                                                                                                                

79



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##### 



SIGNATURES

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

|                    |  |  |                                  |                                                                         
|------------------- |  |  | -------------------------------- | ------------------------------------------------------------------------
|                    |  |  | SATYAM COMPUTER SERVICES LIMITED
|                   
|                    |  |  |                                  |                                                                         
|                    |  |  | By:                              | /s/ B. Rama Raju                                                        
|                    |  |  |                                  |                                                                         
|                   
|                    |  |  | Name:
Title:                     | B. Rama Raju
Managing Director and Chief Executive Officer              
|                   
|                    |  |  | By:                              | /s/ Srinivas V                                                          
|                   
|                    |  |  |                                  |                                                                         
|                    |  |  | Name:
Title:                     | Srinivas V
Director and Senior Vice President & 
Chief Financial Officer
|Date: June 30, 2003 |  |  |                                  |                                                                         

80



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##### 



CHIEF EXECUTIVE OFFICER CERTIFICATION

I, B. Rama Raju, certify that:



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



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



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



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



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

Dated this 30th day of June, 2003.

| |  |     |                                                              
| |  | --- | -------------------------------------------------------------
| |  | By: | /s/B. Rama Raju
Managing Director and Chief Executive Officer

81



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##### 



CHIEF FINANCIAL OFFICER CERTIFICATION

I, Srinivas V., certify that:



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



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



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



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

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

Dated this 30th day of June, 2003.

| |  |     |                                                                            
| |  | --- | ---------------------------------------------------------------------------
| |  | By: | /s/Srinivas V.
Director and Senior Vice President &
Chief Financial Officer

82



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##### 



SATYAM COMPUTER SERVICES LIMITED

INDEX TO THE U.S. GAAP CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                           |  |      |      | 
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                           |  | Page
|                                                                                                                           |  |     
|Report of Price Waterhouse, Independent Accountants                                                                        |  |      | F-2  | 
|Consolidated Balance Sheets as of March 31, 2002 and 2003                                                                  |  |      | F-3  | 
|Consolidated Statements of Operations for the years ended March 31, 2001, 2002 and 2003                                    |  |      | F-4  | 
|Consolidated Statements of Shareholders Equity and Comprehensive Income
for the years ended March 31, 2001, 2002 and 2003 |  |      | F-5  | 
|Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2002 and 2003                                    |  |      | F-8  | 
|Notes to the Consolidated Financial Statements                                                                             |  |      | F-10 | 

F-1



---



##### 






To the Board of Directors of:
Satyam Computer Services Limited

In our opinion, based upon our audits and the report of other independent
auditors, the accompanying consolidated balance sheets, the related
consolidated statements of operations, of cash flows and of shareholders
equity and comprehensive income present fairly, in all material respects, the
financial position of Satyam Computer Services Limited and its subsidiaries as
at March 31, 2002 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 2003, in
conformity with accounting principles generally accepted in the United States
of America. 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 did not audit the financial statements of
Satyam Infoway Limited, a 52.51% owned subsidiary, as at March 31, 2002 and for
the year then ended, which statements reflect total assets of US$84,953
thousands as at March 31, 2002 and total revenues of US$33,050 thousands for
the year then ended. Those statements were audited by other independent
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Satyam
Infoway Limited as at March 31, 2002 and for the year then ended, is based
solely on the report of the other independent auditors. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits and the report of other independent
auditors provide a reasonable basis for our opinion.

Price Waterhouse



Secunderabad, India

April 24, 2003

F-2



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##### 



Satyam Computer Services Limited
Consolidated Balance Sheets(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                                                                                                                                                                                              |  | As of March 31
|                                                                                                                                                                                              |  |               
|                                                                                                                                                                                              |  | 2002           |         | 2003
|                                                                                                                                                                                              |  |                |         |     
|Assets                                                                                                                                                                                        |  |                |         |      |  |   |         |  
|Current assets                                                                                                                                                                                |  |                |         |      |  |   |         |  
|Cash and cash equivalents                                                                                                                                                                     |  | $              | 243,454 |      |  | $ | 62,202  |  
|Accounts receivable, net of allowance for doubtful debts                                                                                                                                      |  |                | 88,209  |      |  |   | 96,764  |  
|Unbilled revenue on contracts                                                                                                                                                                 |  |                | 3,860   |      |  |   | 5,542   |  
|Inventory                                                                                                                                                                                     |  |                | 725     |      |  |   |        |  
|Deferred income taxes                                                                                                                                                                         |  |                | 3,151   |      |  |   | 4,488   |  
|Prepaid expenses and other receivables                                                                                                                                                        |  |                | 13,439  |      |  |   | 20,081  |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total current assets                                                                                                                                                                          |  |                | 352,838 |      |  |   | 189,077 |  
|Investments in bank deposits                                                                                                                                                                  |  |                |        |      |  |   | 259,359 |  
|Premises and equipment, net                                                                                                                                                                   |  |                | 123,507 |      |  |   | 69,158  |  
|Goodwill, net                                                                                                                                                                                 |  |                | 11,106  |      |  |   | 14,186  |  
|Other intangible assets, net                                                                                                                                                                  |  |                | 3,591   |      |  |   |        |  
|Investments                                                                                                                                                                                   |  |                | 3,423   |      |  |   | 210     |  
|Investments in associated companies                                                                                                                                                           |  |                | 10,735  |      |  |   | 29,578  |  
|Other assets                                                                                                                                                                                  |  |                | 10,302  |      |  |   | 7,275   |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total assets                                                                                                                                                                                  |  | $              | 515,502 |      |  | $ | 568,843 |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Liabilities and shareholders equity                                                                                                                                                          |  |                |         |      |  |   |         |  
|Current liabilities                                                                                                                                                                           |  |                |         |      |  |   |         |  
|Short term and current portion of long-term debts                                                                                                                                             |  | $              | 4,551   |      |  | $ | 4,836   |  
|Accounts payable                                                                                                                                                                              |  |                | 11,077  |      |  |   | 10,946  |  
|Accrued expenses and other current liabilities                                                                                                                                                |  |                | 39,740  |      |  |   | 51,193  |  
|Unearned and deferred revenue                                                                                                                                                                 |  |                | 3,079   |      |  |   | 1,725   |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total current liabilities                                                                                                                                                                     |  |                | 58,447  |      |  |   | 68,700  |  
|Long-term debts, excluding current portion                                                                                                                                                    |  |                | 2,712   |      |  |   | 1,738   |  
|Deferred income taxes                                                                                                                                                                         |  |                | 36,682  |      |  |   | 37,737  |  
|Other liabilities                                                                                                                                                                             |  |                | 16,935  |      |  |   |        |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total liabilities                                                                                                                                                                             |  |                | 114,776 |      |  |   | 108,175 |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Contingencies
and Commitments (Note No. 21)                                                                                                                                                   |  |                |         |      |  |   |         |  
|Minority interest                                                                                                                                                                             |  |                | 30,884  |      |  |   |        |  
|Shareholders equity                                                                                                                                                                          |  |                |         |      |  |   |         |  
|Common stock  par value Rs.2 (US$0.042*) per equity share
(375 million equity shares authorized. 314,540,000
equity shares issued as of March 31, 2002 and 314,542,800
as of March 31, 2003) |  |                | 17,144  |      |  |   | 17,146  |  
|Additional paid-in capital                                                                                                                                                                    |  |                | 405,530 |      |  |   | 406,704 |  
|Deferred stock-based compensation                                                                                                                                                             |  |                | (2,511  | )    |  |   | (876    | )
|Retained earnings/(deficit)                                                                                                                                                                   |  |                | (9,996  | )    |  |   | 60,090  |  
|Accumulated other comprehensive loss                                                                                                                                                          |  |                | (36,727 | )    |  |   | (20,113 | )
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|                                                                                                                                                                                              |  |                | 373,440 |      |  |   | 462,951 |  
|Shares held by the SC-Trust under associate stock option
plan (3,483,820 and 2,210,820 equity shares as of March
31, 2002 and 2003 respectively)                                              |  |                | (3,598  | )    |  |   | (2,283  | )
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total shareholders equity                                                                                                                                                                    |  |                | 369,842 |      |  |   | 460,668 |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  
|Total liabilities and shareholders equity                                                                                                                                                    |  | $              | 515,502 |      |  | $ | 568,843 |  
|                                                                                                                                                                                              |  |                |         |      |  |   |         |  

*     the par value in
US$ has been converted at the closing rate as of March 31, 2003, 1 US$ = Rs.47.53

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

F-3



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##### 



Satyam Computer Services Limited
Consolidated Statements of Operations(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | - | ------------------- | ------- | ---- | - | -------- | ------- |  | - | -------- | ------- | 
|                                                                                                                                                                                         |         |   | Year ended March 31
|                                                                                                                                                                                         |         |   |                    
|                                                                                                                                                                                         |         |   | 2001                |         | 2002 |   | 2003    
|                                                                                                                                                                                         |         |   |                     |         |      |   |         
|Revenues                                                                                                                                                                                 |         | $ | 310,307             |         |      | $ | 414,491  |         |  | $ | 459,207  |        
|Cost of revenues                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|(Includes deferred stock- based compensation of $31,336,
$7,212 and$1,591 for the years ended March 31, 2001, 2002
and 2003 respectively)                                                |         |   | (208,121            | )       |      |   | (238,996 | )       |  |   | (272,688 | )      
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Gross profit                                                                                                                                                                             |         |   | 102,186             |         |      |   | 175,495  |         |  |   | 186,519  |        
|Selling, general and administrative expenses
(Includes deferred stock- based compensation of US$14,782,
$3,582 and$2,930 for the years ended March 31, 2001, 2002
and 2003 respectively) |         |   | (124,100            | )       |      |   | (140,896 | )       |  |   | (119,424 | )      
|Amortization of goodwill                                                                                                                                                                 |         |   | (24,728             | )       |      |   | (16,997  | )       |  |   |         |        
|Impairment of goodwill                                                                                                                                                                   |         |   |                    |         |      |   | (81,115  | )       |  |   |         |        
|Impairment of other non marketable investments (Refer note 9)                                                                                                                            |         |   |                    |         |      |   |         |         |  |   | (3,299   | )      
|Reversal of put option charge (Refer note 3)                                                                                                                                             |         |   |                    |         |      |   |         |         |  |   | 19,843   |        
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Total operating expenses                                                                                                                                                                 |         |   | (148,828            | )       |      |   | (239,008 | )       |  |   | (102,880 | )      
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Operating income/(loss)                                                                                                                                                                  |         |   | (46,642             | )       |      |   | (63,513  | )       |  |   | 83,639   |        
|Interest income                                                                                                                                                                          |         |   | 5,732               |         |      |   | 3,806    |         |  |   | 7,158    |        
|Interest expense                                                                                                                                                                         |         |   | (9,632              | )       |      |   | (2,856   | )       |  |   | (800     | )      
|Gain on sale of shares in Infoway                                                                                                                                                        |         |   |                    |         |      |   | 45,594   |         |  |   |         |        
|Gain on sales of shares in Satyam GE                                                                                                                                                     |         |   |                    |         |      |   |         |         |  |   | 830      |        
|Gain/(loss) on foreign exchange transactions                                                                                                                                             |         |   | 5,816               |         |      |   | 10,813   |         |  |   | (4,757   | )      
|Other income / (expense), net                                                                                                                                                            |         |   | 646                 |         |      |   | 1,277    |         |  |   | (1,746   | )      
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Income/(loss) before income taxes, minority interest and
equity in earnings / (losses) of associated companies                                                                           |         |   | (44,080             | )       |      |   | (4,879   | )       |  |   | 84,324   |        
|Income taxes                                                                                                                                                                             |         |   | (4,137              | )       |      |   | (17,234  | )       |  |   | (12,295  | )      
|Minority Interest                                                                                                                                                                        |         |   | 25,772              |         |      |   | 73,406   |         |  |   | 11,082   |        
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Income/(loss) before equity in earnings / (losses) of
associated companies                                                                                                               |         |   | (22,445             | )       |      |   | 51,293   |         |  |   | 83,111   |        
|Equity in earnings / (losses) of associated companies, net
of taxes                                                                                                                      |         |   | (5,467              | )       |      |   | (25,401  | )       |  |   | (3,339   | )      
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Net income/(loss)                                                                                                                                                                        |         | $ | (27,912             | )       |      | $ | 25,892   |         |  | $ | 79,772   |        
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Earnings/(loss) per share:                                                                                                                                                               |         |   |                     |         |      |   |          |         |  |   |          |        
|Basic                                                                                                                                                                                    |         | $ | (0.10               | )       |      | $ | 0.08     |         |  | $ | 0.26     |        
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Diluted                                                                                                                                                                                  |         | $ | (0.10               | )       |      | $ | 0.08     |         |  | $ | 0.25     |        
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        
|Weighted average shares used in computing earnings per share
 (in thousands)*                                                                                                           |         |   |                     |         |      |   |          |         |  |   |          |        
|                                                                                                                                                                                         | Basic   |   |                     | 269,943 |      |   |          | 305,751 |  |   |          | 311,797 | 
|                                                                                                                                                                                         | Diluted |   |                     | 269,943 |      |   |          | 307,113 |  |   |          | 318,658 | 
|                                                                                                                                                                                         |         |   |                     |         |      |   |          |         |  |   |          |        

F-4



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Satyam Computer Services Limited
Consolidated Statements of Shareholders Equity and Comprehensive Income(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                                             |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |         |  
|------------------------------------------------------------------------------------------------------------ | --------------------------------------------- |  | ------------ | - | ---------- | - | ----------- | - | ------------ | - | ----------- | - | -------------------- | - | ------------- | - | ------ | - | ------- | - |  | - | ------- | ------- | - | - | ------- | - |  | - | ------- | ------- | -
|                                                                                                             |                                               |  | Common Stock |   | Additional |   | Deferred    |   | Retained     |   | Accumulated |   |                      |   |               |   | Total 
|                                                                                                             |                                               |  |              |   | paid-in    |   | stock-based |   | earnings/    |   | Other       |   | Shares held by       |   | Shareholders
|                                                                                                             |                                               |  | Shares       |   | Par Value  |   | capital     |   | compensation |   | (deficit)   |   | Comprehensive (loss) |   | SC-Trust      |   | Equity
|                                                                                                             |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |       
|Balance as of March 31, 2000                                                                                 |                                               |  | 281,190,000  |   |            | $ | 15,726      |   |              | $ | 189,508     |   |                      | $ | (17,972       | ) |        | $ | 2,563   |   |  | $ | (9,194  | )       |   | $ | (12,157 | ) |  | $ | 168,474 |        
|Net loss                                                                                                     |                                               |  |             |   |            |   |            |   |              |   |            |   |                      |   |              |   |        |   | (27,912 | ) |  |   |        |         |   |   |        |   |  |   | (27,912 | )      
|Other comprehensive loss                                                                                     |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|                                                                                                             | Loss on foreign currency
translation          |  |              |  |            |   |             |  |              |   |             |  |                      |   |               |  |        |   |         |  |  |   |         | (12,429 | ) |   |         |  |  |   |         | (12,429 | )
|                                                                                                             | Unrealized losses on
securities, net of taxes |  |              |  |            |   |             |  |              |   |             |  |                      |   |               |  |        |   |         |  |  |   |         | (36     | ) |   |         |  |  |   |         | (36     | )
|                                                                                                             |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|Total Comprehensive loss                                                                                     |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   | (40,377 | )      
|Gain on dilution of interest in
subsidiary on subsidiarys
issuance of new shares, net of
taxes (Note No. 4) |                                               |  |             |   |            |   |            |   |              |   | 24,599      |   |                      |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 24,599  |        
|Loss on sale of Infoway shares
held by CricInfo                                                              |                                               |  |             |   |            |   |            |   |              |   | (466        | ) |                      |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | (466    | )      
|Warrants issued to TRW (Note No. 5)                                                                          |                                               |  |             |   |            |   |            |   |              |   | 1,657       |   |                      |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 1,657   |        
|Deferred stock-based compensation                                                                            |                                               |  |             |   |            |   |            |   |              |   | 38,034      |   |                      |   | (38,034       | ) |        |   |        |   |  |   |        |         |   |   |        |   |  |   |        |        
|Amortization of deferred
stock-based compensation                                                            |                                               |  |             |   |            |   |            |   |              |   |            |   |                      |   | 44,219        |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 44,219  |        
|Shares transferred by SC-Trust to
employees on vesting                                                       |                                               |  |             |   |            |   |            |   |              |   | 77          |   |                      |   |              |   |        |   |        |   |  |   |        |         |   |   | 619     |   |  |   | 696     |        
|Cash dividend paid at the rate of
US$0.008 per share                                                         |                                               |  |             |   |            |   |            |   |              |   |            |   |                      |   |              |   |        |   | (4,107  | ) |  |   |        |         |   |   |        |   |  |   | (4,107  | )      
|                                                                                                             |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|Balance as of March 31, 2001                                                                                 |                                               |  | 281,190,000  |   |            | $ | 15,726      |   |              | $ | 253,409     |   |                      | $ | (11,787       | ) |        | $ | (29,456 | ) |  | $ | (21,659 | )       |   | $ | (11,538 | ) |  | $ | 194,695 |        
|                                                                                                             |                                               |  |              |   |            |   |             |   |              |   |             |   |                      |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        

|                                                                                       |  |                               
|-------------------------------------------------------------------------------------- |  | ------------------------------
|The accompanying notes are an integral part of these consolidated financial statements |  | (Continuing on following page)

F-5



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Satyam Computer Services Limited
Consolidated Statements of Shareholders Equity and Comprehensive Income(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                                |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |         |  
|----------------------------------------------------------------------------------------------- | --------------------------------------------- |  | ------------ | - | ---------- | - | ----------- | - | ------------ | - | ----------- | - | ------------------ | - | ------------- | - | ------ | - | ------- | - |  | - | ------- | ------- | - | - | ------- | - |  | - | ------- | ------- | -
|                                                                                                |                                               |  | Common Stock |   | Additional |   | Deferred    |   | Retained     |   | Accumulated |   |                    |   |               |   | Total 
|                                                                                                |                                               |  |              |   | paid-in    |   | stock-based |   | earnings/    |   | other       |   | Shares held by     |   | Shareholders
|                                                                                                |                                               |  | Shares       |   | Par Value  |   | capital     |   | compensation |   | (deficit)   |   | comprehensive loss |   | SC-Trust      |   | Equity
|                                                                                                |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |       
|Balance as of March 31, 2001                                                                    |                                               |  | 281,190,000  |   |            | $ | 15,726      |   |              | $ | 253,409     |   |                    | $ | (11,787       | ) |        | $ | (29,456 | ) |  | $ | (21,659 | )       |   | $ | (11,538 | ) |  | $ | 194,695 |        
|Net income                                                                                      |                                               |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   | 25,892  |   |  |   |        |         |   |   |        |   |  |   | 25,892  |        
|Other comprehensive loss                                                                        |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|                                                                                                | Loss on foreign currency
translation          |  |              |  |            |   |             |  |              |   |             |  |                    |   |               |  |        |   |         |  |  |   |         | (15,063 | ) |   |         |  |  |   |         | (15,063 | )
|                                                                                                | Unrealized losses on
securities, net of taxes |  |              |  |            |   |             |  |              |   |             |  |                    |   |               |  |        |   |         |  |  |   |         | (5      | ) |   |         |  |  |   |         | (5      | )
|                                                                                                |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|Total Comprehensive income                                                                      |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   | 10,824  |        
|Gain on dilution of interest in
subsidiary on subsidiarys
issuance of new shares, net of
taxes |                                               |  |             |   |            |   |            |   |              |   | 375         |   |                    |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 375     |        
|Loss on sale of Infoways shares
held by CricInfo                                               |                                               |  |             |   |            |   |            |   |              |   | (645        | ) |                    |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | (645    | )      
|Issuance of common stock, net of
issuance cost                                                  |                                               |  | 33,350,000   |   |            |   | 1,418       |   |              |   | 149,196     |   |                    |   |              |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 150,614 |        
|Deferred stock-based compensation                                                               |                                               |  |             |   |            |   |            |   |              |   | 1,203       |   |                    |   | (1,203        | ) |        |   |        |   |  |   |        |         |   |   |        |   |  |   |        |        
|Amortization of deferred
stock-based compensation                                               |                                               |  |             |   |            |   |            |   |              |   |            |   |                    |   | 10,479        |   |        |   |        |   |  |   |        |         |   |   |        |   |  |   | 10,479  |        
|Shares transferred by SC-Trust
to employees on vesting                                          |                                               |  |             |   |            |   |            |   |              |   | 1,992       |   |                    |   |              |   |        |   |        |   |  |   |        |         |   |   | 7,940   |   |  |   | 9,932   |        
|Cash dividend paid at the rate
of US$0.01 per share                                             |                                               |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   | (6,432  | ) |  |   |        |         |   |   |        |   |  |   | (6,432  | )      
|                                                                                                |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        
|Balance as of March 31, 2002                                                                    |                                               |  | 314,540,000  |   |            | $ | 17,144      |   |              | $ | 405,530     |   |                    | $ | (2,511        | ) |        | $ | (9,996  | ) |  | $ | (36,727 | )       |   | $ | (3,598  | ) |  | $ | 369,842 |        
|                                                                                                |                                               |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |         |   |  |   |         |         |   |   |         |   |  |   |         |        

|                                                                                       |  |                               
|-------------------------------------------------------------------------------------- |  | ------------------------------
|The accompanying notes are an integral part of these consolidated financial statements |  | (Continuing on following page)

F-6



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##### 



Satyam Computer Services Limited
Consolidated Statements of Shareholders Equity and Comprehensive Income(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                                |                                              |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |        |   |  |   |         |        |  |   |        |   |  |   |         |        | 
|----------------------------------------------------------------------------------------------- | -------------------------------------------- |  | ------------ | - | ---------- | - | ----------- | - | ------------ | - | ----------- | - | ------------------ | - | ------------- | - | ------ | - | ------ | - |  | - | ------- | ------ |  | - | ------ | - |  | - | ------- | ------ | 
|                                                                                                |                                              |  | Common Stock |   | Additional |   | Deferred    |   | Retained     |   | Accumulated |   |                    |   |               |   | Total 
|                                                                                                |                                              |  |              |   | paid-in    |   | stock-based |   | earnings/    |   | other       |   | Shares held by     |   | Shareholders
|                                                                                                |                                              |  | Shares       |   | Par Value  |   | capital     |   | compensation |   | (deficit)   |   | comprehensive loss |   | SC-Trust      |   | Equity
|                                                                                                |                                              |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |       
|Balance as of March 31, 2002                                                                    |                                              |  | 314,540,000  |   |            | $ | 17,144      |   |              | $ | 405,530     |   |                    | $ | (2,511        | ) |        | $ | (9,996 | ) |  | $ | (36,727 | )      |  | $ | (3,598 | ) |  | $ | 369,842 |       
|Net income                                                                                      |                                              |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   | 79,772 |   |  |   |        |        |  |   |       |   |  |   | 79,772  |       
|Other comprehensive income                                                                      |                                              |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   |       |   |  |   |        |        |  |   |       |   |  |   |        |       
|                                                                                                | Gain on foreign currency
translation         |  |              |  |            |   |             |  |              |   |             |  |                    |   |               |  |        |   |        |  |  |   |         | 16,612 |  |   |        |  |  |   |         | 16,612 | 
|                                                                                                | Unrealized gains on
securities, net of taxes |  |              |  |            |   |             |  |              |   |             |  |                    |   |               |  |        |   |        |  |  |   |         | 2      |  |   |        |  |  |   |         | 2      | 
|                                                                                                |                                              |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |        |   |  |   |         |        |  |   |        |   |  |   |         |       
|Total Comprehensive income                                                                      |                                              |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   |       |   |  |   |        |        |  |   |       |   |  |   | 96,386  |       
|Issuance of common stock, net of
issuance cost                                                  |                                              |  | 2,800        |   |            |   | 2           |   |              |   | 10          |   |                    |   |              |   |        |   |       |   |  |   |        |        |  |   |       |   |  |   | 12      |       
|Loss on dilution of interest in
subsidiary on subsidiarys
issuance of new shares, net of
taxes |                                              |  |             |   |            |   |            |   |              |   | (1,181      | ) |                    |   |              |   |        |   |       |   |  |   |        |        |  |   |       |   |  |   | (1,181  | )     
|Deferred stock-based compensation                                                               |                                              |  |             |   |            |   |            |   |              |   | 1,745       |   |                    |   | (1,745        | ) |        |   |       |   |  |   |        |        |  |   |       |   |  |   |        |       
|Amortization of deferred
stock-based compensation                                               |                                              |  |             |   |            |   |            |   |              |   |            |   |                    |   | 3,380         |   |        |   |       |   |  |   |        |        |  |   |       |   |  |   | 3,380   |       
|Shares transferred by SC-Trust
to employees on vesting                                          |                                              |  |             |   |            |   |            |   |              |   | 600         |   |                    |   |              |   |        |   |       |   |  |   |        |        |  |   | 1,315  |   |  |   | 1,915   |       
|Cash dividend paid at the rate
of US$0.03 per share                                             |                                              |  |             |   |            |   |            |   |              |   |            |   |                    |   |              |   |        |   | (9,686 | ) |  |   |        |        |  |   |       |   |  |   | (9,686  | )     
|                                                                                                |                                              |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |        |   |  |   |         |        |  |   |        |   |  |   |         |       
|Balance as of March 31, 2003                                                                    |                                              |  | 314,542,800  |   |            | $ | 17,146      |   |              | $ | 406,704     |   |                    | $ | (876          | ) |        | $ | 60,090 |   |  | $ | (20,113 | )      |  | $ | (2,283 | ) |  | $ | 460,668 |       
|                                                                                                |                                              |  |              |   |            |   |             |   |              |   |             |   |                    |   |               |   |        |   |        |   |  |   |         |        |  |   |        |   |  |   |         |       

|                                                                                      
|--------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements

F-7



---



##### 



Satyam Computer Services Limited
Consolidated Statements of Cash Flows(Thousands of US Dollars except per share data and as stated otherwise)

|                                                                                  |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |          |  
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | - | ------------------- | ------- | ---- | - | ------- | ------- | - | - | -------- | -------- | -
|                                                                                  |                                                                                                                |   | Year ended March 31
|                                                                                  |                                                                                                                |   |                     |        
|                                                                                  |                                                                                                                |   | 2001                |         | 2002 |   | 2003   
|                                                                                  |                                                                                                                |   |                     |         |      |   |        
|Cash Flows From Operating Activities                                              |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|Net income/ (loss)                                                                |                                                                                                                | $ | (27,912             | )       |      | $ | 25,892  |         |   | $ | 79,772   |         
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|                                                                                  | Depreciation and impairment of premises and equipment                                                          |   |                     | 29,637  |      |   |         | 37,486  |   |   |          | 35,982   |  
|                                                                                  | Impairment of investments                                                                                      |   |                     |        |      |   |         |        |   |   |          | 3,299    |  
|                                                                                  | Amortization and impairment of goodwill                                                                        |   |                     | 24,728  |      |   |         | 98,112  |   |   |          |         |  
|                                                                                  | Amortization of license fees                                                                                   |   |                     | 128     |      |   |         | 720     |   |   |          | 1,195    |  
|                                                                                  | Deferred stock-based compensation                                                                              |   |                     | 46,118  |      |   |         | 10,794  |   |   |          | 4,521    |  
|                                                                                  | Deferred income taxes                                                                                          |   |                     | 154     |      |   |         | (427    | ) |   |          | (1,224   | )
|                                                                                  | (Gain) / loss on sale of investments                                                                           |   |                     | (1      | )    |   |         | 2       |   |   |          | (830     | )
|                                                                                  | (Gain) / loss on sale of premises and equipment                                                                |   |                     | 43      |      |   |         | (59     | ) |   |          | 67       |  
|                                                                                  | Foreign currency translation on excess of amount received on sale of shares
of Infoway over its carrying value |   |                     | 1,014   |      |   |         | 928     |   |   |          |         |  
|                                                                                  | Excess of cash received over carrying value of investment in Infoway, net
of taxes                             |   |                     |        |      |   |         | (35,156 | ) |   |          |         |  
|                                                                                  | Amortization of discount on share warrants issued to TRW and change in fair
value of put option                |   |                     | 2,685   |      |   |         | 10,144  |   |   |          | (11,898  | )
|                                                                                  | Minority Interest                                                                                              |   |                     | (25,772 | )    |   |         | (73,406 | ) |   |          | (11,082  | )
|                                                                                  | Equity in share of (earnings) / losses of associated companies                                                 |   |                     | 5,467   |      |   |         | 25,401  |   |   |          | 3,339    |  
|Changes in assets and liabilities:                                                |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|                                                                                  | Accounts receivable, net and unbilled revenue on contracts                                                     |   |                     | (49,452 | )    |   |         | 1,262   |   |   |          | (15,385  | )
|                                                                                  | Prepaid expenses, other receivables and inventory, net                                                         |   |                     | (10,164 | )    |   |         | 9,840   |   |   |          | (11,183  | )
|                                                                                  | Other assets, net                                                                                              |   |                     | (9,797  | )    |   |         | 1,356   |   |   |          | 856      |  
|                                                                                  | Accounts payable                                                                                               |   |                     | 4,584   |      |   |         | (4,363  | ) |   |          | (435     | )
|                                                                                  | Accrued expenses and other current liabilities                                                                 |   |                     | 20,348  |      |   |         | 8,342   |   |   |          | 19,669   |  
|                                                                                  | Unearned and deferred revenue                                                                                  |   |                     | 937     |      |   |         | (904    | ) |   |          | 3,510    |  
|                                                                                  | Other liabilities                                                                                              |   |                     | (6,810  | )    |   |         | 407     |   |   |          | (1,633   | )
|                                                                                  |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|Net cash provided by operating activities                                         |                                                                                                                |   | 5,935               |         |      |   | 116,371 |         |   |   | 98,540   |         
|Cash Flows From Investing Activities                                              |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|                                                                                  | Investments in bank deposits                                                                                   |   |                     |        |      |   |         |        |   |   |          | (259,321 | )
|                                                                                  | Purchase of premises and equipment                                                                             |   | $                   | (84,764 | )    |   | $       | (34,157 | ) |   |          | (10,989  | )
|                                                                                  | Expenditure on license fees                                                                                    |   |                     | (612    | )    |   |         | (1,238  | ) |   |          | (623     | )
|                                                                                  | Proceeds from sale of premises and equipment                                                                   |   |                     | 68      |      |   |         | 503     |   |   |          | 148      |  
|                                                                                  | Acquisitions and investments in associated companies                                                           |   |                     | (52,470 | )    |   |         | (4,608  | ) |   |          | (5,121   | )
|                                                                                  | Purchase of investments                                                                                        |   |                     |        |      |   |         | (3,131  | ) |   |          | (2,228   | )
|                                                                                  | Proceeds from sale of investments                                                                              |   |                     | 3       |      |   |         | 2,271   |   |   |          | 6,175    |  
|                                                                                  |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|Net cash used in investing activities                                             |                                                                                                                |   | (137,775            | )       |      |   | (40,360 | )       |   |   | (271,959 | )       
|Cash Flows From Financing Activities                                              |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|                                                                                  | Proceeds from / (repayments) of short-term debt                                                                |   | $                   | 8,330   |      |   | $       | (35,725 | ) |   |          | (2,439   | )
|                                                                                  | Share warrant consideration                                                                                    |   |                     | 500     |      |   |         |        |   |   |          |         |  
|                                                                                  | Issuance of common stock, net of issuance cost                                                                 |   |                     |        |      |   |         | 150,614 |   |   |          | 11       |  
|                                                                                  | Issuance of common stock under Associate Stock Option Plans                                                    |   |                     | 696     |      |   |         | 9,932   |   |   |          | 1,915    |  
|                                                                                  | Issuance of common stock by Infoway and other subsidiaries, net of issuance
cost                               |   |                     | 240     |      |   |         |        |   |   |          | 1,410    |  
|                                                                                  | Repayment of long-term debts                                                                                   |   |                     | (40,425 | )    |   |         | (7,642  | ) |   |          | (3,356   | )
|                                                                                  | Proceeds from sale of shares of Infoway, net of cost                                                           |   |                     | 48,978  |      |   |         |        |   |   |          |         |  
|                                                                                  | Cash dividends paid                                                                                            |   |                     | (4,107  | )    |   |         | (6,432  | ) |   |          | (9,686   | )
|                                                                                  |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         
|Net cash provided by (used in) financing activities                               |                                                                                                                |   | 14,212              |         |      |   | 110,747 |         |   |   | (12,145  | )       
|                                                                                  |                                                                                                                |   |                     |         |      |   |         |         |   |   |          |         

F-8



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##### 



Satyam Computer Services Limited
Consolidated Statements of Cash Flows(Thousands of US Dollars except per share data and as stated otherwise)

|                                 |                                                              |                                          |   |                     |        |      |   |         |       |  |   |          |       | 
|-------------------------------- | ------------------------------------------------------------ | ---------------------------------------- | - | ------------------- | ------ | ---- | - | ------- | ----- |  | - | -------- | ----- | 
|                                 |                                                              |                                          |   | Year ended March 31
|                                 |                                                              |                                          |   |                    
|                                 |                                                              |                                          |   | 2001                |        | 2002 |   | 2003   
|                                 |                                                              |                                          |   |                     |        |      |   |        
|                                 | Effect of exchange rate changes on cash and cash equivalents |                                          |   | (8,608              | )      |      |   | (9,372  | )     |  |   | 4,312    |      
|                                 | Net change in cash and cash equivalents                      |                                          |   | (126,236            | )      |      |   | 177,386 |       |  |   | (181,252 | )    
|                                 | Cash and cash equivalents at beginning of the year / period  |                                          |   | 192,304             |        |      |   | 66,068  |       |  |   | 243,454  |      
|                                 | Cash and cash equivalents at end of the year / period        |                                          | $ | 66,068              |        |      | $ | 243,454 |       |  | $ | 62,202   |      
|Supplementary information:       |                                                              |                                          |   |                     |        |      |   |         |       |  |   |         
|Cash paid during the period for: |                                                              |                                          |   |                     |        |      |   |         |       |  |   |         
|                                 |                                                              | Income taxes                             |   | $                   | 4,898  |      |   | $       | 7,744 |  |   | $        | 4,486 | 
|                                 |                                                              | Interest                                 |   |                     | 9,250  |      |   |         | 2,859 |  |   |          | 553   | 
|Non-cash items:                  |                                                              |                                          |   |                     |        |      |   |         |       |  |   |         
|                                 |                                                              | Shares issued by Infoway on acquisitions |   | $                   | 69,815 |      |   | $       | 1,044 |  |   |          |      | 
|                                 |                                                              | Capital leases and hire purchase         |   |                     | 1,624  |      |   |         | 1,300 |  |   |          | 1,100 | 

For a number of reasons, principally the effects of translation differences and acquisitions, certain items in the statements of cash flows
do not correspond to the differences between the balance sheet amounts for the respective items.

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

F-9



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|1. |  | Description of Business
|-- |  | -----------------------

Satyam Computer Services Limited and its consolidated subsidiaries and
associated companies (hereinafter referred to as Satyam) are engaged in
providing information technology services, internet services and developing
software products.

Satyam Computer Services Limited (hereinafter referred to as Satyam Computer
Services) is an information technology (IT) services provider that uses a
global infrastructure to deliver value-added services to its customers, to
address IT needs in specific industries and to facilitate electronic business,
or eBusiness, initiatives. Satyam Computer Services was incorporated on June
24, 1987 in Hyderabad, Andhra Pradesh, India. Satyam Computer Services has
offshore development centers located throughout India that enable it to provide
high quality and cost-effective solutions to clients. It also has offsite
centers located in the United States, Europe, Japan, Singapore, China,
Malaysia, Hongkong, Dubai and Germany. Satyam offers a comprehensive range of
IT services, including software development, packaged software integration,
system maintenance and engineering design services. Satyam Computer Services
has established a diversified base of corporate customers in a wide range of
industries including insurance, banking and financial services, manufacturing,
telecommunications, transportation and engineering services.

Sify Limited (formerly Satyam Infoway Limited hereinafter referred to as
Infoway) a former subsidiary of Satyam computer services (Refer note 9) is
engaged in providing various services such as corporate network and technology
services, internet access services, online portal and content offerings.

On June 5, 2002 Satyam Computer Services formed Nipuna Services Limited
(Nipuna) a wholly owned subsidiary in Secunderabad, Andhra Pradesh, India for
providing various services connected with Business Process Outsourcing.



|2. |  | Summary of Significant Accounting Policies           
|-- |  | -----------------------------------------------------
|  
|a) |  | Principles of Consolidation and Basis of Presentation

The consolidated financial statements of Satyam Computer Services and its
majority owned domestic and foreign subsidiaries are prepared in accordance
with generally accepted accounting principles applicable in the United States
(U.S. GAAP). All significant inter-company balances and transactions are
eliminated.

The consolidated financial statements of Satyam include the financial
statements of Infoway upto December 9, 2002. Subsequently, Satyam Computer
Services has accounted for its investment in Infoway using the equity method
(Refer note 9). The consolidated financial statements for the years ended March
31, 2002 and 2003 are not comparable due to the above.

Minority interest in subsidiaries represents the minority shareholders
proportionate share of the net assets and the results of operations of Satyams
majority owned subsidiaries.

Investments in business entities in which Satyam does not have control, but has
the ability to exercise significant influence over operating and financial
policies (generally 20-50 percent ownership), are accounted for by the equity
method.

On occasion, a subsidiary or associated company accounted for by the equity
method (offering company) may issue its shares to third parties as either a
public offering or private placement at per share amounts in excess of or less
than Satyams average per share carrying value. With respect to such
transactions, the resulting gains or losses arising from the change in interest
are recorded in additional paid-in capital. Gains or losses arising on the
direct sales by Satyam of its investment in its subsidiaries or associated
companies to third parties are recognized as income in the statement of
operations. Such gains or losses are the difference between the sale proceeds
and net carrying value of investments.

The excess of the cost over the underlying net equity of investments in
subsidiaries and associated companies accounted for on an equity basis is
allocated to identifiable assets based on fair values at the date of
acquisition. The unassigned residual value of the excess of the cost over the
underlying net equity is recognized as goodwill.



|b) |  | Use of Estimates
|-- |  | ----------------

The preparation of the consolidated financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
liabilities as of the date of the financial statements and the reported amount
of revenues and expenses during the reported period. Examples of such estimates
include: estimates of expected contract costs to be incurred to complete
software development, allowance for doubtful debts, future obligations under
employee benefit plans, valuation allowances for deferred taxes, impairment of
goodwill and useful lives of premises and equipment (fixed assets). Actual
results could differ materially from those estimates.

F-10



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|c) |  | Foreign Currency Translation
|-- |  | ----------------------------

The accompanying consolidated financial statements are reported in U.S.
dollars. The Indian rupee is the functional currency for Satyam Computer
Services, its domestic subsidiaries and associated companies. However, the
Japanese Yen, U.S. Dollar, Pound Sterling, Singapore Dollar and Yuan are the
functional currencies for its foreign subsidiaries located in Japan, U.S., UK,
Singapore and China respectively. The translation of the functional currencies
into U.S. dollars is performed for assets and liabilities using the current
exchange rates in effect at the balance sheet date and for revenues, costs and
expenses using average exchange rates prevailing during the reporting periods.
Adjustments resulting from the translation of functional currency financial
statements to reporting currency are accumulated and reported as other
comprehensive income/(loss), a separate component of shareholders equity.

Transactions in foreign currency are recorded at the exchange rate prevailing
on the date of transaction. Monetary assets and liabilities denominated in
foreign currencies are expressed in the functional currency at the exchange
rates in effect at the balance sheet date. Revenues, costs and expenses are
recorded using average exchange rates prevailing during the reporting periods.
Gains or losses resulting from foreign currency transactions are included in
the statement of operations.



|d) |  | Revenue Recognition
|-- |  | -------------------
|  
|i) |  | IT Services        

Revenues from IT services, which includes software development, system
maintenance, package software implementation, engineering design services and
eBusiness consist of revenues earned from services performed either on a time
and material basis or time bound fixed price engagements.

Revenues earned from services performed on a time and material basis are
recognized as the services are performed. IT services performed on time bound
fixed-price engagements, require accurate estimation of the costs which include
salaries and related expenses of technical associates, related communication
expenses, travel costs, scope and duration of each engagement. Revenue and the
related costs for these projects are recognized on percentage of completion
basis, with revisions to estimates reflected in the period in which changes
become known. Provisions for estimated losses on such engagements are made
during the period in which a loss becomes probable and can be reasonably
estimated.

Amounts included in the financial statements, which relate to recoverable costs
and accrued profits not yet billed on contracts, are classified in current
assets as Unbilled revenue on contracts. Billings on uncompleted contracts
in excess of accrued cost and accrued profit are classified in current
liabilities under the heading Unearned and deferred revenue. Satyam provides
its clients with one to three months warranty as post-sale support for its
fixed price engagements. Costs associated with such services are accrued at the
time the related revenues are recorded. Satyam has not provided for any
warranty costs for the years ended March 31, 2002 and 2003 as historically
Satyam has not incurred any expenditure on account of warranties and since the
customer is required to formally sign off on the work performed, any subsequent
work is usually covered by an additional contract.

In accordance with EITF Topic D 103, Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred, Satyam has
accounted for reimbursements received for out-of-pocket expenses incurred as
revenues in the statement of operations.



|ii) |  | Internet Services
|--- |  | -----------------

Revenues from corporate network services, which include providing e-commerce
solutions, electronic data interchange and other network based services, are
recognized upon actual usage of such services by customers and are based on
either the time for which the network is used or the volume of data
transferred, or both.

Revenues from web-site hosting are recognized ratably over the period for which
the site is hosted. Revenue from development of internet networking solutions
comprise income from time and material contracts and fixed price contracts.
Revenues are recognized in accordance with the revenue recognition policy of IT
Services.

Internet access is provided to customers either for unlimited hours or for a
specified number of hours, which is to be utilized 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. Satyam recognizes revenue based on usage by the customer over the
specified period. At the end of the specified period, the remaining unutilized
hours, if any, are recognized as revenue. Unlimited internet access and
electronic mail access is sold to customers for a specified period of time over
which the related revenue is recognized.

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 transaction is
completed.

F-11



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|e) |  | Cash and Cash Equivalents
|-- |  | -------------------------

Satyam considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents are stated at
cost, which approximates their fair value due to the short maturity of the
investments. Cash and claims to cash that are restricted as to withdrawal or
use in the ordinary course of business are classified as other receivables
under current assets, unless they are to be utilized for other than current
operations in which case they are classified as other assets, non-current.



|f) |  | Inventory
|-- |  | ---------

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



|g) |  | Premises, Equipment and Depreciation
|-- |  | ------------------------------------

Premises and equipment are stated at actual cost less accumulated depreciation.
Assets under capital leases are stated at the present value of minimum lease
payments. Depreciation is computed using the straight-line method over the
estimated useful lives. Assets under capital leases and leasehold improvements
are amortized straight-line over their estimated useful life or the lease term,
as appropriate. Costs of application software for internal use are generally
charged to income as incurred due to its estimated useful lives being
relatively short, usually less than one year.

The cost and the accumulated depreciation for premises and equipment sold,
retired or otherwise disposed off are removed from the stated values and the
resulting gains and losses are included in the statement of operations.
Interest related to the construction of qualifying assets is capitalized.
Advances paid towards the acquisition of premises and equipment outstanding at
each balance sheet date and the cost of premises and equipment not put to use
before such date are disclosed as Assets under Construction.



|h) |  | Software Development Costs
|-- |  | --------------------------

Satyam capitalizes internally generated software development costs under the
provisions of Statement of Financial Accounting (SFAS) 86, Accounting for
Costs of Computer Software to be Sold, Leased or Otherwise Marketed.
Capitalization of computer software development cost begins upon the
establishment of technological feasibility, which Satyam has defined as the
completion of a prototype. Costs incurred prior to establishment of
technological feasibility and other research and development expenses are
charged to income as incurred. Costs incurred by Satyam between completion of
the prototype and the point at which the product is ready for general release
have been insignificant.

Research and development expenses charged to income amounted to US$3,124
thousand, US$2,156 thousand and US$1,365 thousand for the years ended March 31,
2001, 2002 and 2003 respectively.



|i) |  | Goodwill and Other Intangible Assets
|-- |  | ------------------------------------

Goodwill represents the difference between either a) the purchase price and the
fair value of assets and liabilities acquired and/or b) the purchase price and
additional interest in subsidiaries acquired from minority shareholders. Upto
March 31, 2002, goodwill and other intangible assets including license fees
were amortized over the useful lives principally over a period of 5 years based
on managements estimate. Satyam has adopted SFAS 142 on April 1, 2002 and
accordingly goodwill is tested for impairment under certain circumstances, and
written down when impaired, rather than being amortized as required by previous
standards. Further in accordance with SFAS 142 purchased intangible assets
other than goodwill are amortized over their useful lives unless these lives
are determined to be indefinite.

F-12



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|j) |  | Impairment of Long-lived Assets
|-- |  | -------------------------------

Satyam has adopted the provisions of SFAS 144 Accounting for the Impairment or
Disposal of Long-Lived Assets on April 1, 2002. Satyam reviews long-lived
assets, for impairment whenever events or changes in business circumstances
indicate the carrying amount of assets may not be fully recoverable. Each
impairment test is based on a comparison of the undiscounted cash flows
expected to be generated from the use of the asset to its recorded value. If
impairment is indicated, the asset is written down to its fair value. Assets to
be disposed are reported at the lower of the carrying value or the fair value
less cost to sell.



|k) |  | Investments
|-- |  | -----------

Satyam 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 marketable 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 a
separate component of other comprehensive income/(loss) until realized.
Realized gains and losses and declines in value judged to be
other-than-temporary are included in other income. The cost of securities sold
is based on the first-in-first-out (FIFO) method. Interest and dividends on
securities classified as available-for-sale are recognized when earned and
included in other income. Other investments that are not marketable are carried
at cost, subject to tests of other than temporary impairment.



|l) |  | Cost of Revenues and Selling, General and Administrative Expenses
|-- |  | -----------------------------------------------------------------

Cost of revenues primarily include the compensation cost of technical staff,
depreciation on dedicated assets and system software, travel costs, data
communication expenses and other expenses incurred that are related to the
generation of revenue.

Selling, general and administrative expenses generally include the compensation
costs of sales, management and administrative personnel, travel costs, research
and development costs, advertising, business promotion, depreciation on assets,
application software costs, rent, repairs, electricity and other general
expenses not attributable to cost of revenues.



|m) |  | Advertising Costs
|-- |  | -----------------

Satyam expenses all advertising costs as incurred. Advertising costs charged to
income amounted to US$11,301 thousand, US$1,008 thousand and US$1,914 thousand
for the years ended March 31, 2001, 2002 and 2003 respectively.



|n) |  | Employee Benefits
|-- |  | -----------------
|  
|i) |  | Provident Fund   

In accordance with Indian law, all employees in India are entitled to
receive benefits under the Provident Fund, which is a defined contribution
plan. Both the employee and the employer make monthly contributions to the plan
at a predetermined rate (presently 12.0%) of the employees basic salary.
Satyam has no further obligations under the plan beyond its monthly
contributions. These contributions are made to the fund administered and
managed by the Government of India. Satyams monthly contributions are charged
to income in the period they are incurred.



|ii) |  | Gratuity Plan
|--- |  | -------------

Satyam makes contributions to a defined benefit retirement plan (the
Gratuity Plan) covering all its employees in India. The Gratuity Plan
provides a lump sum payment to vested employees at retirement or termination of
employment based on the respective employees salary and years of employment
with Satyam.

Satyam provides for the Gratuity Plan on the basis of actuarial
valuations. The entire Gratuity Plan of Satyam Computer Services is unfunded.
Infoway makes annual contributions to a fund administered and managed by the
Life Insurance Corporation of India (LIC). Under this scheme, the settlement
obligation remains with Infoway, although the LIC administers the scheme and
determines the contribution premium required to be paid by Infoway.

F-13



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|iii) |  | Superannuation Plan
|---- |  | -------------------

In addition to the above benefits, the senior employees of Satyam Computer
Services in India are entitled to receive benefits under the Superannuation
Plan, a defined contribution plan. Satyam Computer Services makes yearly
contributions under the Superannuation plan administered and managed by LIC,
based on a specified percentage (presently 10.0%) of each covered employees
basic salary. Satyam Computer Services has no further obligations under the
plan beyond its contributions.



|iv) |  | Other Benefit Plans
|--- |  | -------------------

Satyam maintains a 401(k) retirement plan (the 401(k) Plan) covering all its
employees in the United States. Each participant in the 401(k) Plan may elect
to contribute up to 15.0% of his or her annual compensation to the 401(k) Plan.
Satyam matches 50.0% of employee contributions, subject to a maximum of 3.0% of
gross salary for all employees participating in the 401(k) plan.



|o) |  | Income Taxes
|-- |  | ------------

In accordance with the provisions of SFAS 109,
Accounting for Income Taxes,
income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements 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 the statement of operations in the period of change. Based on managements
judgment, the measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits for which it is more likely than not
that some portion or all of such benefits will not be realized.



|p) |  | Earnings Per Share
|-- |  | ------------------

In accordance with the provisions of SFAS 128, Earnings Per Share, basic
earnings per share is computed on the basis of the weighted average number of
shares outstanding during the period. Diluted earnings per share is computed
on the basis of the weighted average number of common and dilutive common
equivalent shares outstanding during the period, using the treasury stock
method for options and warrants, except where the results will be
anti-dilutive.



|q) |  | Stock-Based Compensation
|-- |  | ------------------------

Satyam 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. Satyam has therefore adopted
the pro forma disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Pursuant to SFAS No. 123, all equity instruments
issued to non-employees are accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.



|r) |  | Derivative financial instruments
|-- |  | --------------------------------

Satyam has adopted the provisions of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities as amended. Satyam enters into forward
foreign exchange contracts where the counter party is generally a bank. Satyam
purchases forward foreign exchange contracts to mitigate the risk of changes in
foreign exchange rates on cash flows denominated in certain foreign currencies.
These contracts do not qualify for hedge accounting under SFAS 133, as
amended. Any derivative that is either not a designated hedge, or is so
designated but is ineffective per SFAS 133, is marked to market and recognized
in earnings immediately.

F-14



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|s) |  | Recently Issued Accounting Pronouncements
|-- |  | -----------------------------------------

In June 2002, the FASB issued SFAS No. 146, Accounting for Exit or Disposal
Activities (SFAS No. 146), SFAS No. 146 addresses significant issues regarding
the recognition measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring activities that are
currently accounted for under EITF No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). The scope of SFAS No. 146 also
includes costs related to terminating a contract that is not a capital lease
and termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual deferred-compensation contract. We
are required to adopt the provisions of SFAS No. 146 effective for exit or
disposal activities initiated after December 31, 2002. The provisions of EITF
No. 94-3 shall continue to apply for an exit activity initiated under an exit
plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS No.
146. The effect-on-adoption of SFAS No. 146 will change on a prospective basis
the timing of when restructuring charges are recorded from a commitment date
approach to when the liability is incurred. The adoption of this standard does
not have any material impact on Satyams results of operations or financial
position.

In November 2002, the Emerging Issues Task Force reached a consensus on Issue
No. 00-21, Revenue Arrangements with Multiple Deliverables applicable for
fiscal periods beginning after June 2003. This issue addresses when and, if so,
how an arrangement involving multiple deliverables should be divided into
separate units of accounting, where the deliverables (the revenue generating
activities) are sufficiently separable and have standalone value to the
customer. It is also necessary that there exists sufficient evidence of fair
value to separately account for some or all of the deliverables. Satyam
believes that the adoption of the consensus will not have a material impact on
Satyams revenue recognition policies.

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

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation-Transition and Disclosure: An amendment of FASB Statement No. 123.
This Statement amends SFAS 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure provisions of
SFAS 148 are applicable for fiscal periods beginning after December 15, 2002.
Satyam continues to account for its fixed plan stock options under the
recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. Satyam has adopted the
disclosure provisions of SFAS 148 as of December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB 51 that applies to
variable interest entities created after January 31, 2003 and to variable
interest entities in which our enterprise obtains an interest after that date.
Satyam is in the process of assessing the impact of the adoption of this
interpretation.



|t) |  | Reclassifications
|-- |  | -----------------

Certain items previously reported in specific financial statement captions have
been reclassified to conform to the current periods presentation.

F-15



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|3. |  | Acquisition of Minority Interest in joint venture
|-- |  | -------------------------------------------------

On March 28, 2003, in accordance with the share purchase and joint venture
termination agreement, Satyam Computer Services acquired the remaining 24%
equity shares of Satyam Manufacturing Technologies Inc. (SMTI) for a
consideration of US$3,500 thousand. The acquisition has been accounted using
the purchase method and the allocation of the purchase price was almost
entirely related to goodwill. Satyam Computer Services recognized goodwill of
US$3,365 thousand on this acquisition equal to the excess of the consideration
paid of US$3,500 thousand over the fair value of that portion of the net assets
acquired as of March 28, 2003. In accordance with the provisions of SFAS 142,
the goodwill has not been amortized post acquisition.

Joint Venture and warrant agreement

In June 2000, Satyam Computer Services signed a non-binding framework agreement
to form a non-exclusive joint venture with TRW Inc. (TRW) to be managed by
Satyam Computer Services and issued warrants for a consideration of US$5
million to TRW that were convertible into equity shares of Satyam Computer
Services in eighteenth month after issuance. These warrants were
non-forfeitable as of the date of grant.

On August 22, 2000, Satyam Computer Services issued 63,896 warrants (each
warrant exercisable to purchase five equity shares) to ESL Inc., an affiliate
of TRW in exchange of Rs.71.6 (US$1.6) per share totaling to US$500 thousand in
cash representing 10.0% of the total consideration to acquire the underlying
equity shares in accordance with applicable Indian regulations. These warrants
were convertible into 319,480 equity shares of Satyam Computer Services for
Rs.644.4 (US$14.1) per share totaling US$4.5 million during the period from
January 22, 2002 to February 21, 2002. The excess of the fair value of the
warrants, as determined at the date of grant, over the consideration of
warrants paid by ESL Inc., amounted to US$1,157 thousand. It was amortized
ratably over five years and three months i.e starting from the date of signing
of the joint venture agreement (September 26, 2000) to December 31, 2005. The
amortization is classified as a reduction of the revenues recognized under the
agreements. However, if the amortization exceeds the amount of revenue
recognized in any period, the excess amortization is recorded as an expense.
The fair value of the warrants had been determined on the grant date by
reference to the prevailing market price of Satyam Computer Services equity
shares on the Indian exchanges using the Black Scholes model and the following
assumptions: volatility of 90.0% and a risk free interest rate of 10.672%. The
amortization classified as a deduction of the revenues amounted to US$113
thousand and US$221 thousand for the years ended March 31, 2001 and 2002
respectively.

On September 26, 2000, the joint venture agreement was signed with equity
participation in the ratio of 76:24 between Satyam Computer Services and TRW,
respectively. After December 31, 2003, TRW had the option, on meeting certain
specified minimum levels of revenues, to require Satyam Computer Services to
purchase its 24.0% interest (put option). The buyout price of TRWs interest
in the joint venture depended on the aggregate amount of revenue, which TRW
would provide to the joint venture from June 1, 2000 to December 31, 2005.

Satyam Computer Services recorded the put option at fair value at each balance
sheet date, with the initial fair value of the put option included as part of
the consideration for its 76.0% interest in the joint venture. The difference
between the fair values of the put option at each valuation date was charged to
selling, general and administration expenses in the statement of operations.
Based on the terms of the agreement the value of put option was US$12,495
thousand as of March 31, 2002.

Share Purchase and Joint Venture Termination agreement

TRW was acquired by Northrop Grumman Corporation in October 2002 and
subsequently TRW Inc. name was changed to the Northrop Grumman Space & Mission
Systems Corporation (NGSM). Pursuant to the restructuring in TRW, Satyam
Computer Services entered into a share purchase and joint venture termination
agreement with NGSM and BDM International Inc. (hereinafter referred to as
NGSM Parties) on February 28, 2003 whereby it agreed to purchase the 24%
holding of NGSM Parties in the joint venture on the closing date for a mutually
agreed consideration of US$3,500 thousand based on business prospects and
synergies on account of the acquisition to Satyam. Upon completion of the
agreement all the existing agreements between Satyam Computer Services and NGSM
Parties have been terminated and have no further effect. The transaction was
subsequently effected on March 28, 2003 with the transfer of shares and
purchase consideration.

Satyam Computer Services has issued a non interest bearing unsecured promissory
note of US$3,500 thousand for the share purchase to BDMI which is payable in
four installments at quarterly rests from April 1, 2003 to January 1, 2004 as
per the agreement.

Due to the share purchase and joint venture termination agreement the
unamortized cost on warrants as at December 31, 2002 amounting to US$657
thousand has been fully amortized in the year ended March 31, 2003 as a
reduction of the revenues and the value of put option as of December 31, 2002
amounting to US$19,843 thousand has been accounted for as operating income in
the year ended March 31, 2003.

F-16



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##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|4. |  | Investments in Bank Deposits
|-- |  | ----------------------------

During the year ended March 31, 2003, Satyam Computer Services invested
US$259,359 thousands in fixed rate bank deposits for a term of 2 years.



|5. |  | Premises, Equipment and Depreciation
|-- |  | ------------------------------------

Premises and equipment at cost less accumulated depreciation consist of:

|                               |  |                    |         |      |  |   |          |  
|------------------------------ |  | ------------------ | ------- | ---- |  | - | -------- | -
|                               |  | (US$ in thousands)
|                               |  |                   
|                               |  | As of March 31    
|                               |  |                   
|                               |  | 2002               |         | 2003
|                               |  |                    |         |     
|Freehold land                  |  | $                  | 7,559   |      |  | $ | 3,816    |  
|Leasehold land                 |  |                    | 1,666   |      |  |   | 1,711    |  
|Premises                       |  |                    | 18,220  |      |  |   | 9,196    |  
|Computers including servers    |  |                    | 73,347  |      |  |   | 69,417   |  
|System software                |  |                    | 11,640  |      |  |   | 10,988   |  
|Office equipment               |  |                    | 68,929  |      |  |   | 39,975   |  
|Furniture and fixtures         |  |                    | 25,780  |      |  |   | 25,888   |  
|Vehicles                       |  |                    | 2,968   |      |  |   | 3,618    |  
|Leasehold improvements         |  |                    | 2,235   |      |  |   |         |  
|Assets under construction      |  |                    | 10,859  |      |  |   | 6,233    |  
|                               |  |                    |         |      |  |   |          |  
|Total                          |  |                    | 223,203 |      |  |   | 170,842  |  
|Less: Accumulated depreciation |  |                    | (99,696 | )    |  |   | (101,684 | )
|                               |  |                    |         |      |  |   |          |  
|Premises and equipment, net    |  | $                  | 123,507 |      |  | $ | 69,158   |  
|                               |  |                    |         |      |  |   |          |  

Satyam has established the estimated useful lives of assets for depreciation
purposes as follows:

|                            |  |           |  | 
|--------------------------- |  | --------- |  | 
|Premises                    |  | 28 years 
|Computers including servers |  | 25 years
|System Software             |  | 3 years  
|Office equipment            |  | 5 years  
|Furniture and fixtures      |  | 5 years  
|Vehicles                    |  | 5 years  

Depreciation expense amounted to US$29,637 thousands, US$37,486 thousand and
US$33,576 for the years ended March 31, 2001, 2002 and 2003 respectively.

During the period April 1, 2002 to
December 9, 2002, Infoway identified certain
assets under the requirements of SFAS 144 whose carrying amounts are not
recoverable. As a result of this review, the impairment was measured under the
requirements of SFAS 144 and the Infoway recorded asset impairment charges
totaling to US$2,406 thousand. These charges mainly include the write-off of
assets under construction of US$1,800 thousand and write-off of systems
software costs of US$600 thousand.

F-17



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##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|6. |  | Investments
|-- |  | -----------

Investments of Satyam consist of available-for-sale securities (AFS) and
other non-marketable securities.

|                                |  |                    |       |      |  |   |        |  
|------------------------------- |  | ------------------ | ----- | ---- |  | - | ------ | -
|                                |  | (US$ in thousands)
|                                |  |                   
|                                |  | As of March 31    
|                                |  |                   
|                                |  | 2002               |       | 2003
|                                |  |                    |       |     
|Available-for-sale securities   |  |                    |       |      |  |   |        |  
|Cost                            |  | $                  | 263   |      |  | $ | 210    |  
|Gross unrealized holding gains  |  |                    | 3     |      |  |   |       |  
|Gross unrealized holding losses |  |                    | (72   | )    |  |   |       |  
|                                |  |                    |       |      |  |   |        |  
|AFS  Fair Value                |  | $                  | 194   |      |  | $ | 210    |  
|Other investments, at cost      |  | $                  | 3,229 |      |  | $ | 3,317  |  
|Less: Provision for impairment  |  |                    |      |      |  |   | (3,317 | )
|                                |  |                    |       |      |  |   |        |  
|Investments  Non current       |  | $                  | 3,423 |      |  | $ | 210    |  
|                                |  |                    |       |      |  |   |        |  

Aggregate proceeds from the sale of available-for-sale securities amounted to
US$3 thousand, US$2,263 thousand (purchased during the year ended March 31,
2002 for US$2,263 thousand) and US$2,175 thousand (purchased during the year
ended March 31, 2003 for US$2,175 thousand) ended March 31, 2001, 2002 and 2003
respectively.

Satyam records an investment impairment charge on other non-marketable
investments, which are carried at cost, when management believes an investment
has experienced a decline in value that is judged to be other than temporary.
Satyam monitors its investments for impairment by considering current factors
including economic environment, market conditions and the operational
performance and other specific factors relating to the business underlying the
investment. Based on its assessment of its carrying values of investments,
Satyam recorded US$3,317 thousand of impairments on the carrying values of
other non marketable investments during the year ended March 31, 2003 due to
adverse changes in the above factors.



|7. |  | Sale of shares by Infoway
|-- |  | -------------------------

In the year March 31, 2002 and year ended March 31, 2003, Infoway issued new
shares to third parties. After this, Satyam Computer Services ownership
reduced from 52.55% as of March 31, 2001 to 52.51 % as of March 31, 2002 and to
37.15% as of March 31, 2003.

During year ended March 31, 2002 Infoway issued 19,073 shares to the
shareholders of Kheladi.com (Refer Note 18)at amounts per share in excess of
Satyams average per share carrying value. With respect to these transactions,
US$375 thousand, net of taxes, during the year ended March 31, 2002 arising
from the change in interest has been recorded as additional paid in capital.

Infoways shareholders approved the issue of shares to an affiliate of Softbank
Asia Infrastructure Fund (SAIF) and VentureTech Solutions Private Ltd.
(VentureTech) in a pending financing transaction at the Extraordinary General
Meeting held on December 9, 2002. On December 16, 2002, Softbank Asia
Infrastructure Fund (SAIF) and VentureTech invested US$13 million and US$3.5
million respectively into Infoway. Infoway issued 7,558,140 shares to
shareholders of SAIF and 2,034,884 shares to shareholders of VentureTech at
amounts per share less than Satyams average per share carrying value.
VentureTech is obligated to purchase an additional approximately 2.03 million
newly issued equity shares for the Indian Rupee equivalent of US$3.5 million,
or US$1.72 per equity share, prior to May 1, 2003. With respect to this
transaction, the resulting loss of US$1,181 thousand, net of taxes, during the
year ended March 31, 2003 arising from the change in interest has been recorded
as a reduction in additional paid in capital.



|8. |  | Sale of shares in Infoway to the Government of Singapore Investment
Corporation Pte Ltd. (GSIC)
|-- |  | -------------------------------------------------------------------------------------------------

In May 2000, Satyam Computer Services entered into an agreement for sale of
347,200 equity shares of Infoway at a price of US$144 per share, representing
1.6% of Infoways outstanding equity shares to the Government of Singapore
Investment Corporation Pte Ltd. (GSIC) for a consideration of US$50 million
(before transaction costs). The transaction was consummated and proceeds were
received in June 2000. GSIC had a put option to sell the shares back to Satyam
Computer Services if Infoway did not complete an initial public offering on a
recognized stock exchange in India by September 2001. Infoway did not complete
an initial public offering on a recognized stock exchange in India by September
2001 and the put option held by GSIC expired unexercised on October 15, 2001.
Satyam Computer Services recognized gain of US$45,594 thousand on the sale of
shares in Infoway to GSIC in the statement of operations for the year ended
March 31, 2002.

F-18



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|9. |  | Investment in associated companies
|-- |  | ----------------------------------

The carrying values of investments in various associated companies of Satyam
are as follows:

|               |  |                    |        |      |  |   |        | 
|-------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|               |  | (US$ in thousands)
|               |  |                   
|               |  | As of March 31    
|               |  |                   
|               |  | 2002               |        | 2003
|               |  |                    |        |     
|Infoway        |  |                    |       |      |  | $ | 27,058 | 
|Satyam Venture |  | $                  | 957    |      |  |   | 1,185  | 
|CA Satyam      |  |                    | 486    |      |  |   | 1,335  | 
|Satyam GE      |  |                    | 2,999  |      |  |   |       | 
|Cricinfo       |  |                    | 3,824  |      |  |   |       | 
|Refco-Sify     |  |                    | 2,456  |      |  |   |       | 
|Placements.com |  |                    | 13     |      |  |   |       | 
|               |  |                    |        |      |  |   |        | 
|Total          |  | $                  | 10,735 |      |  | $ | 29,578 | 
|               |  |                    |        |      |  |   |        | 

Infoway

During the year ended March 31, 2003, due to the sale of new shares by Infoway
to Softbank Asia Infrastructure Fund (SAIF) and VentureTech Solutions Private
Ltd. (VentureTech), Satyam Computer Services ownership interest in Infoway
reduced from 52.51% to 37.15%. Subsequent to December 9, 2002, Satyam Computer
Services has accounted for its interest in Infoway under the equity method of
accounting, primarily due to lack of controlling interest in Infoway. Infoway
has changed its name from Satyam Infoway Limited to Sify Limited effective
January 6, 2003. In addition, Satyam Computer Services will have no future
obligation to fund additional operating or financing requirements of Infoway.

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

|                              |  |                    |         |  
|----------------------------- |  | ------------------ | ------- | -
|                              |  | (US$ in thousands)
|                              |  |                   
|                              |  | As of             
|                              |  | March 31, 2003    
|                              |  |                   
|Balance sheet                 |  |                    |         |  
|Current assets                |  | $                  | 36,451  |  
|Non-current assets            |  |                    | 41,351  |  
|Current liabilities           |  |                    | (15,219 | )
|Net current asset/(liability) |  |                    | 21,232  |  
|Stockholders equity           |  |                    | (60,776 | )

The US$ numbers in the above table have been translated using the closing exchange rate as
of March 31, 2003 1 US$ = Rs47.53

|                        |  |                   |        | 
|----------------------- |  | ----------------- | ------ | 
|                        |  | For the period   
|                        |  | December 10, 2002
|                        |  | to March 31, 2003
|                        |  |                  
|Statement of operations |  |                   |        | 
|Revenues                |  | $                 | 15,286 | 
|Gross profit            |  |                   | 5,116  | 
|Net loss                |  |                   | 4,452  | 

The US$ numbers in the above table have been
translated using the average exchange rate for
the period December 10, 2002 to March 31,
2003 1 US $= Rs47.80

Satyam Computer Services equity in the loss of Infoway, net of taxes for the
period December 10, 2002 to March 31, 2003 was US$1307 thousands.

Satyam Venture

On October 28, 2000, Satyam Computer Services entered into an agreement with
Venture Industries, USA (Venture) to form an equally held joint venture
company Satyam Venture Engineering Services Private Limited. (Satyam
Venture). Satyam Computer Services holds 50% in Satyam Venture. The joint
venture was formed in January 3, 2000 at Hyderabad, India. Satyam Venture is
engaged in providing engineering solutions, software development and
customization services specifically for the automotive industries worldwide.
Satyam Computer Services equity in the profit / (loss) of Satyam Venture, net
of taxes amounted to US$(122) thousand, US$323 thousand and US$179 thousand
for the years ended March 31, 2001, 2002 and 2003 respectively.

F-19



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

CA Satyam

On December 29, 2000, Satyam Computer Services entered into an agreement with
Computer Associates International, Inc. (CA) to form an equally held joint
venture company CA Satyam ASP Private Limited. (CA Satyam). Satyam Computer
Services holds 50% in CA Satyam. The joint venture was formed in January 2001
at Mumbai, India. As per the agreement, both Satyam Computer Services and CA
are to invest US$1,500 thousand each in the joint venture. Satyam Computer
Services equity in the profit / (loss) of CA Satyam, net of taxes amounted to
US$ Nil, US$4 thousand and US$(126) thousand for the years ended March 31,
2001, 2002 and 2003 respectively.

Satyam GE

In January 2002, Satyam Computer Services initiated the process of transfer of
its 50% shareholding in Satyam GE Software Services Private Limited (Satyam
GE) to GE Pacific (Mauritius) Limited, Mauritius (GEPL) in accordance with
the shareholders agreement for a consideration of approximately US$4,000
thousand. The transfer was subject to fulfillment of terms and conditions
specified in the agreement and obtaining necessary approvals from appropriate
authorities. Satyam Computer Services continued to have the ability to
exercise significant influence over the operating and financial policies of
Satyam GE and hence accounted for its 50% interest in Satyam GE using the
equity method upto June 30, 2002. During the year ended March 31, 2003 the
necessary approvals were received and Satyam recorded a gain of US$830
thousand, the excess of sales consideration received over the carrying value as
of June 30, 2002 in the statement of operations.

Cricinfo

On July 29, 2000, Infoway acquired 25% of the outstanding shares of Cricinfo
Limited (Cricinfo), a private company incorporated in the United Kingdom and
the Company accounted for its interest in Cricinfo by the equity method. The
difference between the cost of the investment and the amount of underlying
equity in net assets of Cricinfo resulted in goodwill of US$33,479 thousand.
On October 5, 2001, Infoway entered into an agreement to subscribe for
unsecured convertible loan notes (loan notes) to be issued by Cricinfo in an
aggregate amount of up to GBP 1.6 million to meet Cricinfos short-medium term
working capital requirements over the next year. These loan notes were
redeemable on October 5, 2004 and the terms of the loan note instrument
provided for the payment of interest on the principal amount at the rate of 8%
per annum. Infoway had also entered into a Term Loan Agreement with Cricinfo
for granting a term loan facility of GBP 0.1 million. The Loan would carry an
interest rate of 4% per annum and was repayable on 31st December 2004. This
term loan and the convertible loan had been secured by a Debenture document
executed by Cricinfo. In the year ended March 31, 2002, Satyam recorded an
impairment charge of US$21,399 thousand out of the carrying value of goodwill
as at September 30, 2001 of US$24,458 thousand, relating to goodwill on the
Cricinfo acquisition by Infoway as a result of an ongoing impairment assessment
of goodwill recorded in connection with various acquisitions. Infoway has
reassessed the carrying amount of goodwill of the affiliate in accordance with
APB 18 and its accounting policies and impaired US$1,761 thousand during the
nine months ended December 31, 2002.



|10. |  | Income Taxes
|--- |  | ------------

The provision for income taxes consists of:

|                |  |                     |         |      |  |      |        |   |  |   |        |  
|--------------- |  | ------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | -
|                |  | (US$ in thousands) 
|                |  |                    
|                |  | Year ended March 31
|                |  |                    
|                |  | 2001                |         | 2002 |  | 2003
|                |  |                     |         |      |  |     
|Foreign taxes   |  |                     |         |      |  |      |        |   |  |   |        |  
|Current         |  | $                   | 3,437   |      |  | $    | 4,596  |   |  | $ | 10,491 |  
|Deferred        |  |                     | 530     |      |  |      | (3,709 | ) |  |   | 433    |  
|Domestic taxes  |  |                     |         |      |  |      |        |   |  |   |        |  
|Current         |  |                     | 10,984  |      |  |      | 2,627  |   |  |   | 3,046  |  
|Deferred        |  |                     | (10,814 | )    |  |      | 13,720 |   |  |   | (1,675 | )
|                |  |                     |         |      |  |      |        |   |  |   |        |  
|Aggregate taxes |  | $                   | 4,137   |      |  | $    | 17,234 |   |  | $ | 12,295 |  
|                |  |                     |         |      |  |      |        |   |  |   |        |  

F-20



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

A reconciliation between the provision for income taxes to the amount computed
by applying the statutory income tax rate to income before provision for income
taxes is summarized below:

|                                                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|------------------------------------------------------------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                          |  | (US$ in thousands) 
|                                                                          |  |                    
|                                                                          |  | Year ended March 31
|                                                                          |  |                    
|                                                                          |  | 2001                |         | 2002 |  | 2003
|                                                                          |  |                     |         |      |  |     
|Net income/(loss) before taxes                                            |  | $                   | (44,080 | )    |  | $    | (4,879  | ) |  | $ | 84,324  |  
|Enacted tax rates in India                                                |  |                     | 39.55   | %    |  |      | 35.70   | % |  |   | 36.75   | %
|                                                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|Computed tax expense / (benefit)                                          |  | $                   | (17,434 | )    |  | $    | (1,742  | ) |  | $ | 30,989  |  
|Tax effect due to non-taxable export income                               |  |                     | (28,040 | )    |  |      | (37,688 | ) |  |   | (31,089 | )
|Difference arising from different tax rate in other tax jurisdictions     |  |                     | 1,241   |      |  |      | 1,119   |   |  |   | 3,363   |  
|Difference arising from different tax rate on gain on sale of investments |  |                     |        |      |  |      | (5,839  | ) |  |   | 48      |  
|Stock compensation (non-deductible)                                       |  |                     | 18,235  |      |  |      | 3,854   |   |  |   | 1,662   |  
|Goodwill (non-deductible)                                                 |  |                     | 9,759   |      |  |      | 35,026  |   |  |   |        |  
|Changes in valuation allowance, including losses of subsidiaries          |  |                     | 15,963  |      |  |      | 23,775  |   |  |   | 11,578  |  
|Effect of tax rate change                                                 |  |                     | 7       |      |  |      | (246    | ) |  |   | (9      | )
|Others                                                                    |  |                     | 4,158   |      |  |      | (1,971  | ) |  |   | (4,259  | )
|                                                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|Income taxes                                                              |  |                     | 3,889   |      |  |      | 16,288  |   |  |   | 12,283  |  
|Tax for earlier years                                                     |  |                     | 248     |      |  |      | 946     |   |  |   | 12      |  
|                                                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|Income taxes recognized in the statement of operations                    |  | $                   | 4,137   |      |  | $    | 17,234  |   |  | $ | 12,295  |  
|                                                                          |  |                     |         |      |  |      |         |   |  |   |         |  

The current provisions for income taxes, net of payments, were US$6,770
thousand and US$16,086 thousand as of March 31, 2002 and 2003 respectively.
The provision for foreign taxes is due to income taxes payable in overseas tax
jurisdictions by its offsite and onsite centers, principally in the United
States. Satyam Computer Services benefits from certain significant tax
incentives provided to software entities under Indian tax laws. These
incentives presently include: (i) a deduction from payment of Indian corporate
taxes to the extent of 90% of the profits derived from export of software from
software development facilities designated as Software Technology Parks (STP
units) upto 2010; and (ii) a tax deduction of 50% of profits from exporting
computer software progressively reduced to Nil by the year 2004-05. The
benefits of these tax incentives have historically resulted in an effective tax
rate for Satyam Computer Services well below statutory rates. In case of Satyam
Computer Services for various registered STP units these exemptions expire
starting from fiscal 2006 through fiscal 2010. However, Satyam Computer
Services earns certain other income and domestic income, which are taxable
irrespective of the tax holiday as stated above. Satyam Computer Services
subsidiaries are subject to income taxes of the countries in which they
operate.

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

|                                                                                     |  |                    |         |      |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                                                                     |  | (US$ in thousands)
|                                                                                     |  |                   
|                                                                                     |  | As of March 31    
|                                                                                     |  |                   
|                                                                                     |  | 2002               |         | 2003
|                                                                                     |  |                    |         |     
|Deferred tax assets:                                                                 |  |                    |         |      |  |   |         |  
|Operating loss carry forwards                                                        |  | $                  | 35,139  |      |  | $ | 15,265  |  
|Provision for accounts receivable, advances and investments                          |  |                    | 13,430  |      |  |   | 3,354   |  
|Premises and equipment                                                               |  |                    | 2,666   |      |  |   | 698     |  
|Others                                                                               |  |                    | 3,071   |      |  |   | 3,132   |  
|                                                                                     |  |                    |         |      |  |   |         |  
|Gross deferred tax assets                                                            |  | $                  | 54,306  |      |  | $ | 22,449  |  
|Less: Valuation allowance                                                            |  |                    | (49,515 | )    |  |   | (15,265 | )
|                                                                                     |  |                    |         |      |  |   |         |  
|Total deferred tax assets                                                            |  |                    | 4,791   |      |  |   | 7,184   |  
|                                                                                     |  |                    |         |      |  |   |         |  
|Deferred tax liabilities:                                                            |  |                    |         |      |  |   |         |  
|Premises and equipment                                                               |  |                    | (3,081  | )    |  |   | (2,581  | )
|Provision for accounts receivable and advances                                       |  |                    | (1,165  | )    |  |   | (1,686  | )
|Investments in associated companies and gain on dilution
of interest in a subsidiary |  |                    | (33,358 | )    |  |   | (35,155 | )
|Others                                                                               |  |                    | (243    | )    |  |   |        |  
|                                                                                     |  |                    |         |      |  |   |         |  
|Total deferred tax liabilities                                                       |  |                    | (37,847 | )    |  |   | (39,422 | )
|                                                                                     |  |                    |         |      |  |   |         |  
|Net deferred tax liabilities                                                         |  | $                  | (33,056 | )    |  | $ | (32,238 | )
|                                                                                     |  |                    |         |      |  |   |         |  

Satyam has not provided for any deferred income taxes on undistributed earnings
of foreign subsidiaries due to the losses incurred by them since their
inception. These losses aggregated to approximately US$36,552 thousand and
US$36,782 thousand as of March 31, 2002 and 2003 respectively.

F-21



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Satyam has not recognized deferred income taxes arising on income of Satyam
Computer Services due to the tax benefit available to it in the form of a
deduction from taxable income, except to the extent of timing differences which
reverse after the tax holiday period or unless they reverse under foreign
taxes.

Operating loss carryforwards for tax purposes of Satyam Computer Services and
its consolidated subsidiaries amount to approximately US$35,139 thousand and
US$15,265 thousand as of March 31, 2002 and 2003 respectively and are available
as an offset against future taxable income of such entities. These
carryforwards expire at various dates primarily over 8 to 20 years.
Realization is dependent on such subsidiaries generating sufficient taxable
income prior to expiration of the loss carryforwards. A valuation allowance is
established attributable to deferred tax assets and loss carryforwards in
subsidiaries where, based on available evidence, it is more likely than not
that they will not be realized.

Net deferred tax liabilities included in the consolidated balance sheets are as
follows:

|                                                              |  |                    |         |      |  |   |         |  
|------------------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                                              |  | (US$ in thousands)
|                                                              |  |                   
|                                                              |  | As of March 31    
|                                                              |  |                   
|                                                              |  | 2002               |         | 2003
|                                                              |  |                    |         |     
|Current assets  deferred income taxes                        |  | $                  | 3,151   |      |  | $ | 4,488   |  
|Non-current assets  other assets*                            |  |                    | 1,640   |      |  |   | 2,696   |  
|Current liabilities  accrued expenses and other liabilities* |  |                    | (1,165  | )    |  |   | (1,685  | )
|Long-term liabilities  Deferred income taxes                 |  |                    | (36,682 | )    |  |   | (37,737 | )
|                                                              |  |                    |         |      |  |   |         |  
|Net deferred tax liabilities                                  |  | $                  | (33,056 | )    |  | $ | (32,238 | )
|                                                              |  |                    |         |      |  |   |         |  

* Included in other assets and accrued expenses and other liabilities respectively.



|11. |  | Borrowings
|--- |  | ----------

Short-term debts

Short-term debts amounted to US$1,764 thousand and US$2,500 thousand as of
March 31, 2002 and 2003 respectively. Short-term debt as of March 31, 2003 is
represented by a non-interest bearing unsecured promissory note issued by
Satyam Computer Services for acquisition of minority interest in SMTI amounting
to US$3,500 thousand. The promissory note is payable in four installments at
quarterly rests from April 1, 2003 to January 1, 2004. As at March 31, 2003
Satyam Computer Services has paid the first installment of the promissory note
amounting to US$1,000 thousand. The weighted-average interest rate on these
borrowings was 9.14% p.a. and 5.74% p.a. for the fiscal ended March 31, 2002
and 2003 respectively.

Long-term debts

Long-term debts outstanding comprise of:

|                                                                                      |  |                    |        |      |  |   |        |  
|------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                                                      |  | (US$ in thousands)
|                                                                                      |  |                   
|                                                                                      |  | As of March 31    
|                                                                                      |  |                   
|                                                                                      |  | 2002               |        | 2003
|                                                                                      |  |                    |        |     
|Secured debts,representing obligation principally to
banks and financial institutions |  |                    |        |      |  |   |        |  
|
Rupee loans of SC-Trust, maturing serially through fiscal 2006  10.75% to 14.25%   |  | $                  | 4,155  |      |  | $ | 2,675  |  
|Hire Purchase Loans                                                                   |  |                    | 1,344  |      |  |   | 1,399  |  
|                                                                                      |  |                    |        |      |  |   |        |  
|Total Debt                                                                            |  |                    | 5,499  |      |  |   | 4,074  |  
|Less: Current portion of long-term debts                                              |  |                    | (2,787 | )    |  |   | (2,336 | )
|                                                                                      |  |                    |        |      |  |   |        |  
|Long-term debts, net of current portion                                               |  | $                  | 2,712  |      |  | $ | 1,738  |  
|                                                                                      |  |                    |        |      |  |   |        |  

MLR = Minimum lending rate prevailing in India
(as of March 31, 2002  12.50% and as of March 31,
2003  12.5%)

Rupee loans are secured by equity shares of Satyam Computer Services held by
the SC-Trust. In March 2003, SC-Trust has repaid one of its rupee loans
maturing in March 2004 amounting to US$1,410 thousand with a current interest
rate of 13%p.a. and has substituted the same with a new loan of US$1,410
thousand with a fixed interest rate of 10.75% p.a. maturing in July 2005.
There were no prepayment costs associated with this extinguishment.

Aggregate maturities of long-term debts subsequent to March 31, 2003, are
US$2,336 thousand in fiscal 2004, US$1,173 thousand in fiscal 2005 and US$565
thousand in fiscal 2006.

F-22



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Unused lines of credit

Unused lines of credit comprise of:

|                                 |  |                    |        |      |  |   |        | 
|-------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                 |  | (US$ in thousands)
|                                 |  |                   
|                                 |  | As of March 31    
|                                 |  |                   
|                                 |  | 2002               |        | 2003
|                                 |  |                    |        |     
|Cash credit and short term debts |  | $                  | 7,168  |      |  | $ | 7,364  | 
|Non-fund facilities              |  |                    | 4,820  |      |  |   | 8,005  | 
|                                 |  |                    |        |      |  |   |        | 
|Total Unused lines of credits    |  | $                  | 11,988 |      |  | $ | 15,369 | 
|                                 |  |                    |        |      |  |   |        | 



|12. |  | Employee Benefits
|--- |  | -----------------

The Gratuity Plan

The following table sets forth the funded status of the Gratuity Plan of
Satyam, and the amounts recognized in Satyams consolidated balance sheet.

|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------------- | ------ | ---- |  | ------------------ | ------ | - |  | - | ------ | -
|                                                                                                   |  |                     |        |      |  | (US$ in thousands)
|                                                                                                   |  |                    
|                                                                                                   |  | Year ended March 31
|                                                                                                   |  |                    
|                                                                                                   |  | 2001                |        | 2002 |  | 2003              
|                                                                                                   |  |                     |        |      |  |                   
|Change in projected benefit obligation *                                                           |  |                     |        |      |  |                    |        |   |  |   |        |  
|Projected benefit obligation at beginning of the year                                              |  | $                   | 572    |      |  | $                  | 1,179  |   |  | $ | 1,536  |  
|Service cost                                                                                       |  |                     | 323    |      |  |                    | 609    |   |  |   | 623    |  
|Interest cost                                                                                      |  |                     | 60     |      |  |                    | 124    |   |  |   | 156    |  
|Actuarial loss (gain)                                                                              |  |                     | 279    |      |  |                    | (41    | ) |  |   | 144    |  
|Benefits paid                                                                                      |  |                     | (5     | )    |  |                    | (12    | ) |  |   | (25    | )
|Effect of exchange rate changes                                                                    |  |                     | (50    | )    |  |                    | (63    | ) |  |   | 47     |  
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Projected benefit obligation at end of the year *                                                  |  |                     | 1,179  |      |  |                    | 1,796  |   |  |   | 2,481  |  
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Change in plan assets *                                                                            |  |                     |        |      |  |                    |        |   |  |   |        |  
|Fair value of plan assets at beginning of the year                                                 |  |                     | 25     |      |  |                    | 39     |   |  |   |       |  
|Actual return on plan assets                                                                       |  |                     | 3      |      |  |                    | 6      |   |  |   |       |  
|Employer contribution                                                                              |  |                     | 18     |      |  |                    | 46     |   |  |   | 24     |  
|Benefits paid from plan assets                                                                     |  |                     | (7     | )    |  |                    | (19    | ) |  |   | (24    | )
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Fair value of plan assets at end of the year *                                                     |  |                     | 39     |      |  |                    | 72     |   |  |   |       |  
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Funded status of the plans                                                                         |  |                     | (1,140 | )    |  |                    | (1,724 | ) |  |   | (2,481 | )
|Unrecognized transition obligation                                                                 |  |                     | 35     |      |  |                    | 22     |   |  |   | 11     |  
|Unrecognized net actuarial loss (gain)                                                             |  |                     | 251    |      |  |                    | 211    |   |  |   | 339    |  
|Amount recognized during the year                                                                  |  |                     |       |      |  |                    | (11    | ) |  |   | (3     | )
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Accrued benefit cost                                                                               |  | $                   | (854   | )    |  | $                  | (1,502 | ) |  | $ | (2,134 | )
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|* This financial information above includes Infoway for fiscal 2001 and 2002 only.
(Refer note 9).
|The components of net gratuity costs are reflected below:                                          |  |                     |        |      |  |                    |        |   |  |   |        |  
|Service cost                                                                                       |  | $                   | 323    |      |  | $                  | 609    |   |  | $ | 623    |  
|Interest cost                                                                                      |  |                     | 60     |      |  |                    | 124    |   |  |   | 156    |  
|Expected returns on plan assets                                                                    |  |                     | (3     | )    |  |                    | 5      |   |  |   |       |  
|Amortization                                                                                       |  |                     | 12     |      |  |                    | 11     |   |  |   | 11     |  
|Amount recognized during the year                                                                  |  |                     |       |      |  |                    | 11     |   |  |   | 3      |  
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Net gratuity costs                                                                                 |  | $                   | 392    |      |  | $                  | 760    |   |  | $ | 793    |  
|                                                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Principal actuarial assumptions:                                                                   |  |                     |        |      |  |                    |        |   |  |   |        |  
|Discount rate                                                                                      |  |                     | 11.0   | %    |  |                    | 10.0   | % |  |   | 8.0    | %
|Long-term rate of compensation increase                                                            |  |                     | 10.0   | %    |  |                    | 9.0    | % |  |   | 7.0    | %
|Long-term rate of return on plan assets                                                            |  |                     | 11.0   | %    |  |                    | 9.0    | % |  |   | 7.0    | %

F-23



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Provident Fund

Satyams contribution towards the Provident Fund amounted to US$1,839
thousand, US$2,201 thousand and US$2,633 thousand for the years ended March
31, 2001, 2002 and 2003 respectively.

Superannuation Plan

Satyam Computer Services contribution towards the Superannuation Plan
maintained by LIC amounted to US$26 thousand US$35 thousand and US$26 thousand
for the years ended March 31, 2001, 2002 and 2003 respectively.

401(k) Plan

Satyams matching contribution under 401(k) Plan amounted to US$376 thousand,
US$345 thousand and US$569 thousand for the years ended March 31, 2001, 2002
and 2003 respectively.



|13. |  | Earnings Per Share
|--- |  | ------------------

Basic earnings per share is computed on the basis of the weighted average
number of shares outstanding (weighted average number of shares issued less
unallocated, unvested or unexercised shares held by the SC-Trust). Allocated
but unvested or unexercised shares not included in the calculation of
weighted-average shares outstanding for basic earnings per share were 1,924,890
and 1,167,380 as of March 31, 2002 and 2003 respectively. Diluted earnings per
share is computed on the basis of the weighted average number of shares
outstanding plus the effect of outstanding stock options using the treasury
stock method.

In addition to the above, the unallocated shares
held by SC-Trust, which are
by definition unvested, have been excluded from all earnings per share
calculations. Such shares amounted to 1,558,930 and 1,043,440 as of March 31,
2002 and 2003 respectively.

The components of basic and diluted earnings per share were as follows:

|                                            |  |                                      |         |      |  |      |         |  |  |   |         | 
|------------------------------------------- |  | ------------------------------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                            |  | (US$ in thousands except share data)
|                                            |  |                                     
|                                            |  | Year ended March 31                 
|                                            |  |                                     
|                                            |  | 2001                                 |         | 2002 |  | 2003
|                                            |  |                                      |         |      |  |     
|Net income/(loss)                           |  | $                                    | (27,912 | )    |  | $    | 25,892  |  |  | $ | 79,772  | 
|Average outstanding shares (in thousands)*  |  |                                      | 269,943 |      |  |      | 305,751 |  |  |   | 311,797 | 
|Dilutive effect of:                         |  |                                      |         |      |  |      |         |  |  |   |         | 
|Associate Stock Options                     |  |                                      |        |      |  |      | 1,362   |  |  |   | 6,861   | 
|Share and share equivalents (in thousands)* |  |                                      | 269,943 |      |  |      | 307,113 |  |  |   | 318,658 | 
|Earnings/(loss) per share                  
|Basic                                       |  | $                                    | (0.10   | )    |  | $    | 0.08    |  |  | $ | 0.26    | 
|Diluted                                     |  | $                                    | (0.10   | )    |  | $    | 0.08    |  |  | $ | 0.25    | 

*   on an adjusted basis



|14. |  | Stock-based Compensation Plans
|--- |  | ------------------------------

Stock-based compensation plans of Satyam Computer Services

ASOP plan

In May 1998, Satyam Computer Services established its Associate Stock Option
Plan (the ASOP plan). Satyam Computer Services subsequently established a
controlled associate welfare trust called the Satyam Associate Trust (the
SC-Trust), to administer the ASOP and issued warrants to purchase 13,000,000
shares of Satyam Computer Services. In turn, the SC-Trust periodically grants
eligible associates warrants to purchase equity shares held by or reserved for
the issuance to the SC-Trust. The warrants may vest immediately or may vest
over a period ranging from two to three years, depending on the associates
length of service and performance. Upon vesting, associates have 30 days in
which to exercise these warrants.

F-24



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

In order to ensure all its associates received the benefits of the Satyam
Computer Services stock split in December 1999, the SC-Trust exercised all its
warrants to purchase Satyam Computer Services shares prior to the split using
the proceeds obtained from bank loans amounting to US$13,226 thousand. Prior to
August 31, 1999, the exercise price of the remaining SC-Trust warrants was
Rupees (Rs.) 450 per warrant. Subsequent to August 31, 1999, each warrant
entitles the holder to purchase ten shares (adjusted for stock splits) of
Satyam Computer Services at a price of Rs.450 per warrant plus an interest
component, associated with the loan which the SC-Trust assumed, for conversion
of the warrants it held. The interest component is computed based on fixed
vesting period and a fixed interest rate. This stock bonus had been treated as
an equity restructuring and correspondingly no additional compensation cost had
been recognized as a result of the conversion of warrants held by the SC-Trust.

ASOP B plan

In April 2000, Satyam Computer Services established its Associate Stock Option
Plan B (the ASOP B) and reserved warrants for 13,000,000 equity shares to be
issued to eligible associates with the intention to issue the warrants at the
market price of the underlying equity shares on the date of the grant. These
warrants vest over a period ranging from two to four years, starting with 20.0%
in second year, 30.0% in the third year and 50.0% in the fourth year. Upon
vesting, associates have 5 years to exercise these warrants. No equity shares
have been issued by Satyam Computer Services to the SC-Trust as under the ASOP
plan B as was issued under ASOP A.

ASOP ADS plan

In May 2000, Satyam Computer Services established its Associate Stock Option
Plan (ADS) (the ASOP (ADS)) to be administered by the Administrator of the
ASOP (ADS) which is a committee appointed by the Board of Directors of Satyam
Computer Services and reserved 2,574,665 ADSs (5,149,330 shares) to be issued
to eligible associates with the intention to issue the warrants at a price per
option which is not less than 90% of the value of one ADS as reported on NYSE
(fair market value) on the date of grant converted into Indian Rupees at the
rate of exchange prevalent on the day of grant as decided by the Administrator
of the ASOP(ADS) . These warrants vest over a period of 1-10 years from the
date of the grant. The time available to exercise the warrants upon vesting is
as decided by the Administrator of the ASOP (ADS). No equity shares underlying
the ADS (options) have been issued by Satyam Computer Services to the SC-Trust
similar to ASOP B plan.

Warrant grants

During the year ended March 31, 2001, the SC-Trust issued immediately vesting
warrants for 716,020 (net of 4,600 forfeited) shares and warrants for 1,795,750
(net of 1,200,740 forfeited) shares with longer vesting periods to the
associates under the ASOP plan. Further, during the same period, under the ASOP
B plan, Satyam Computer Services issued warrants for 5,759,209 (net of 291,200
warrants forfeited) shares to the associates.

During the year ended March 31, 2002, the SC-Trust issued immediately vesting
warrants for 702,010 (net of 60,000 forfeited) shares and warrants for 80,050
(net of 49,620 forfeited) shares with longer vesting periods to the associates
under the ASOP plan. Further, during the same period, under the ASOP B plan,
Satyam Computer Services issued warrants for 4,438,118 (net of 598,563
forfeited) shares to the associates and warrants for 1,169,425 ADS representing
2,338,850 equity shares to associates under the ASOP(ADS) plan.

During the year ended March 31, 2003, the SC-Trust issued immediately vesting
warrants for 526,900 shares and warrants for 128,750 (net of 38,750 forfeited)
shares with longer vesting periods to the associates under the ASOP plan.
Further, during the same period, under the ASOP B plan, Satyam Computer
Services issued warrants for 4,269,621 (net of 1,133,723 forfeited) shares to
the associates. During the same period warrants for 187,700 (net of 232,300
forfeited) representing 375,400 equity shares to associates under the ASOP(ADS)
plan.

F-25



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Changes in number of shares representing stock options outstanding for each of
the plans were as follows:

|                                     |  |                     |           |          |  |           |      |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 
|------------------------------------ |  | ------------------- | --------- | -------- |  | --------- | ---- | -------- |  | --------- | ---------- | -------- |  | - | ---- |  |  | -------- | ---------- | - |  | - | ---- | 
|                                     |  | Year ended March 31
|                                     |  |                    
|                                     |  | 2001                |           | 2002     |  | 2003     
|                                     |  |                     |           |          |  |          
|                                     |  |                     |           |          |  | Weighted  |      |          |  |           |            | Weighted |  |   |      |  |  | Weighted
|                                     |  |                     |           |          |  | Average   |      |          |  |           |            | Average  |  |   |      |  |  | Average 
|                                     |  | Number of           |           | Exercise |  | Number of |      | Exercise |  | Number of |            | Exercise
|ASOP  Plan                          |  | shares              |           | Price    |  | shares    |      | Price    |  | shares    |            | Price   
|                                     |  |                     |           |          |  |           |      |          |  |           |            |         
|Balance at the beginning of the year |  |                     | 7,536,100 |          |  | $         | 1.26 |          |  |           | 9,454,140  |          |  | $ | 1.24 |  |  |          | 1,924,890  |   |  | $ | 1.28 | 
|Granted                              |  |                     | 3,717,110 |          |  | $         | 1.27 |          |  |           | 891,680    |          |  | $ | 1.29 |  |  |          | 694,400    |   |  | $ | 1.52 | 
|Exercised                            |  |                     | (598,330  | )        |  | $         | 1.05 |          |  |           | (7,686,250 | )        |  | $ | 1.17 |  |  |          | (1,273,000 | ) |  | $ | 1.42 | 
|Cancelled                            |  |                     | (521,500  | )        |  | $         | 1.08 |          |  |           | (109,620   | )        |  | $ | 1.40 |  |  |          | (38,750    | ) |  | $ | 1.72 | 
|Lapsed                               |  |                     | (679,240  | )        |  | $         | 1.59 |          |  |           | (625,060   | )        |  | $ | 1.28 |  |  |          | (140,160   | ) |  | $ | 1.28 | 
|                                     |  |                     |           |          |  |           |      |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 
|Balance at the end of the year       |  |                     | 9,454,140 |          |  | $         | 1.24 |          |  |           | 1,924,890  |          |  | $ | 1.28 |  |  |          | 1,167,380  |   |  | $ | 1.31 | 
|                                     |  |                     |           |          |  |           |      |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 

|                                     |  |                     |           |          |  |           |       |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 
|------------------------------------ |  | ------------------- | --------- | -------- |  | --------- | ----- | -------- |  | --------- | ---------- | -------- |  | - | ---- |  |  | -------- | ---------- | - |  | - | ---- | 
|                                     |  | Year ended March 31
|                                     |  |                    
|                                     |  | 2001                |           | 2002     |  | 2003     
|                                     |  |                     |           |          |  |          
|                                     |  |                     |           |          |  | Weighted  |       |          |  |           |            | Weighted |  |   |      |  |  | Weighted
|                                     |  |                     |           |          |  | Average   |       |          |  |           |            | Average  |  |   |      |  |  | Average 
|                                     |  | Number of           |           | Exercise |  | Number of |       | Exercise |  | Number of |            | Exercise
|ASOP  B Plan                        |  | shares              |           | Price    |  | shares    |       | Price    |  | shares    |            | Price   
|                                     |  |                     |           |          |  |           |       |          |  |           |            |         
|Balance at the beginning of the year |  |                     |          |          |  |           |      |          |  |           | 5,759,209  |          |  | $ | 7.17 |  |  |          | 10,197,327 |   |  | $ | 5.60 | 
|Granted                              |  |                     | 6,050,409 |          |  | $         | 7.32  |          |  |           | 5,036,681  |          |  | $ | 4.41 |  |  |          | 5,403,344  |   |  | $ | 4.78 | 
|Exercised                            |  |                     |          |          |  |           |      |          |  |           |           |          |  |   |     |  |  |          | (2,800     | ) |  | $ | 3.75 | 
|Cancelled                            |  |                     | (291,200  | )        |  | $         | 10.38 |          |  |           | (598,563   | )        |  | $ | 7.87 |  |  |          | (1,133,723 | ) |  | $ | 6.50 | 
|Lapsed                               |  |                     |          |          |  |           |      |          |  |           |           |          |  |   |     |  |  |          |           |   |  |   |     | 
|                                     |  |                     |           |          |  |           |       |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 
|Balance at the end of the year       |  |                     | 5,759,209 |          |  | $         | 7.17  |          |  |           | 10,197,327 |          |  | $ | 5.60 |  |  |          | 14,464,148 |   |  | $ | 5.33 | 
|                                     |  |                     |           |          |  |           |       |          |  |           |            |          |  |   |      |  |  |          |            |   |  |   |      | 

|                                     |  |                     |   |          |  |           |   |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 
|------------------------------------ |  | ------------------- | - | -------- |  | --------- | - | -------- |  | --------- | --------- | -------- |  | - | ---- |  |  | -------- | --------- | - |  | - | ---- | 
|                                     |  | Year ended March 31
|                                     |  |                    
|                                     |  | 2001                |   | 2002     |  | 2003     
|                                     |  |                     |   |          |  |          
|                                     |  |                     |   |          |  | Weighted  |   |          |  |           |           | Weighted |  |   |      |  |  | Weighted
|                                     |  |                     |   |          |  | Average   |   |          |  |           |           | Average  |  |   |      |  |  | Average 
|                                     |  | Number of           |   | Exercise |  | Number of |   | Exercise |  | Number of |           | Exercise
|ASOP  ADS Plan                      |  | shares              |   | Price    |  | shares    |   | Price    |  | shares    |           | Price   
|                                     |  |                     |   |          |  |           |   |          |  |           |           |         
|Balance at the beginning of the year |  |                     |  |          |  |           |  |          |  |           |          |          |  |   |     |  |  |          | 2,338,850 |   |  | $ | 4.97 | 
|Granted                              |  |                     |  |          |  |           |  |          |  |           | 2,338,850 |          |  | $ | 4.97 |  |  |          | 420,000   |   |  | $ | 5.23 | 
|Exercised                            |  |                     |  |          |  |           |  |          |  |           |          |          |  |   |     |  |  |          |          |   |  |   |     | 
|Cancelled                            |  |                     |  |          |  |           |  |          |  |           |          |          |  |   |     |  |  |          | (232,300  | ) |  | $ | 5.01 | 
|Lapsed                               |  |                     |   |          |  |           |  |          |  |           |          |          |  |   |     |  |  |          |          |   |  |   |     | 
|                                     |  |                     |   |          |  |           |   |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 
|Balance at the end of the year       |  |                     |  |          |  |           |  |          |  |           | 2,338,850 |          |  | $ | 4.97 |  |  |          | 2,526,550 |   |  | $ | 5.08 | 
|
|                                     |  |                     |   |          |  |           |   |          |  |           |           |          |  |   |      |  |  |          |           |   |  |   |      | 

F-26



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Information about number of shares representing stock options outstanding:

|       |  |                         |        |        |  |             |  |                |        |             |  |                |  |            |            |       |       |          |       |           |         |  |         |  |  |  |  | 
|------ |  | ----------------------- | ------ | ------ |  | ----------- |  | -------------- | ------ | ----------- |  | -------------- |  | ---------- | ---------- | ----- | ----- | -------- | ----- | --------- | ------- |  | ------- |  |  |  |  | 
|       |  |                         |        |        |  |             |  |                |        | Outstanding |  | Exercisable   
|       |  |                         |        |        |  |             |  |                |        |             |  |               
|       |  |                         |        |        |  |             |  |                |        | Weighted    |  |                |  |            |            |       |       |          |       | Weighted  |         |  |         | 
|       |  |                         |        |        |  |             |  |                |        | Average     |  | Weighted       |  |            |            |       |       | Average  |       |           |         | 
|       |  |                         |        |        |  |             |  |                |        | Exercise    |  | Average        |  |            |            |       |       | Exercise |       | Number of
|       |  |                         |        |        |  |             |  |                |        | Price       |  | remaining      |  | Number of  |            | Price |       | shares  
|       |  | Range of Exercise Price |        | (per   |  | contractual |  | shares arising |        | (per        |  | arising out of
|Period |  | (per share)             |        | share) |  | Life        |  | out of options |        | share)      |  | options       
|       |  |                         |        |        |  |             |  |                |        |             |  |               
|Fiscal |  | Rs.                     | 45.0   |        |  | US$0.9      |  | Rs.            | 239.86 |             |  | 1.63 year      |  |            | 14,461,067 |       |       | Rs.      | 57.23 |           |         |  | 762,010 | 
|2002   |  | Rs.                     | 278.8  |        |  | US$5.6      |  | US$4.91        |        |             |  |                |  |            |            |       |       | US$1.2   |       |           |         | 
|Fiscal |  | Rs.                     | 73.80  |        |  | US$1.55     |  | Rs.            | 239.86 |             |  | 1.28 year      |  | 18,158,078 |            | Rs.   | 71.19 |          |       |           | 526,900 | 
|2002   |  | Rs.                     | 665.61 |        |  | US$13.79    |  | US$5.04        |        |             |  |                |  |            |            |       |       | US$1.50  |       |           |         | 

The US$ numbers in the above tables have been
translated using the closing exchange rate as of March 31, 2003
1 US$ = Rs47.53

Deferred stock-based compensation

Satyam Computer Services recognized deferred stock based compensation of
US$1,203 thousand and US$1,745 thousand for the years ended March 31, 2002 and
2003 respectively. Satyam Computer Services amortized and charged to income
US$10,479 thousand and US$3,380 for the years ended March 31, 2002 and 2003
respectively.

Pursuant to APB 25, deferred stock compensation has been computed as of grant
date based on the difference between the exercise price of the warrants and the
fair value of underlying shares of Satyam Computer Services. Deferred stock
compensation is amortized on a straight-line basis over the vesting period of
the related warrants. The weighted-average grant-date implicit value of
options granted during the year 2002 and 2003 was US$4.21 and US$5.04
respectively.

Stock-based compensation plan of Infoway

In fiscal 1999, Infoway 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. Infoway recognized deferred
stock based compensation of US$2,225 thousand and US$1,485 thousand for the
year ended March 31, 2001 and 2002 respectively. Infoway amortized and charged
to income US$1,899 thousand, US$315 thousand and US$1,313 thousand for the
years ended March 31, 2001, 2002 and 2003 respectively. The amortization for
the period April 1, 2002 to December 9, 2002 amounted to US$1,141 thousands.

Stock-based compensation plan of VisionCompass Inc.

In October 1999, VisionCompass Inc. (VCI) Board of Directors adopted the 1999
Stock Option Plan (the VCI-Plan), which provides for the issuance of
Incentive Stock Options (ISOs) and nonqualified options to eligible individuals
responsible for the management, growth and financial success of VCI. As of
March 31, 2000, 25,000,000 shares were reserved for issuance under the
VCI-Plan. The option price is determined by the Board of Directors at the time
the option is granted, and, in the case of ISOs, in no event is less than the
fair market value of the VCIs shares at the date of grant, as determined by
the Board. The shares acquired through the exercise of options carries certain
restrictions, as specified in the VCI-Plan. Options generally vest over a
four-year period and expire ten years from the date of grant.

During the year ended March 31, 2001, 652,600 stock options with a weighted
average fair value of US$0.10 were granted with an exercise price of US$0.10
per share. No options were exercised and 383,300 options were forfeited during
this period. As of March 31, 2001, 130,025 outstanding options are exercisable,
and the outstanding options have a weighted average remaining contractual life
of 9.27 years.

During the years ended March 31, 2002 and 2003 no stock options were granted or
exercised and 849,400 and no options were forfeited respectively. As of March
31, 2002 and 2003, 17,500 and 17,500 outstanding options were exercisable. The
weighted-average remaining contractual life of outstanding options is 8.53
years and 0.25 years as of March 31, 2002 and 2003 respectively.

F-27



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Additional Disclosure

Had compensation cost been recognized based on the fair value at the date of
grant in accordance with SFAS 123, the pro-forma amounts of Satyams net income/(loss) and earnings/(loss) per share would have been as follows for the
years ended March 31, 2001, 2002 and 2003 respectively.

|                           |               |  |                                          |         |      |  |      |        |   |  |   |        | 
|-------------------------- | ------------- |  | ---------------------------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                           |               |  | (US$ in thousands except per share data)
|                           |               |  |                                         
|                           |               |  | Year ended March 31                     
|                           |               |  |                                         
|                           |               |  | 2001                                     |         | 2002 |  | 2003
|                           |               |  |                                          |         |      |  |     
|Net Income (loss)          |               |  |                                          |         |      |  |      |        |   |  |   |       
|                           | - As reported |  | $                                        | (27,912 | )    |  | $    | 25,892 |   |  | $ | 79,772 | 
|                           | - Pro forma   |  |                                          | (29,933 | )    |  |      | (276   | ) |  |   | 59,903 | 
|Earnings (loss) Per Share: |               |  |                                          |         |      |  |      |        |   |  |   |       
|Basic                      |               |  |                                          |         |      |  |      |        |   |  |   |       
|                           | - As reported |  | $                                        | (0.10   | )    |  | $    | 0.08   |   |  | $ | 0.26   | 
|                           | - Pro forma   |  |                                          | (0.11   | )    |  |      | (0.01  | ) |  |   | 0.19   | 
|Diluted                    |               |  |                                          |         |      |  |      |        |   |  |   |       
|                           | - As reported |  | $                                        | (0.10   | )    |  | $    | 0.08   |   |  | $ | 0.25   | 
|                           | - Pro forma   |  |                                          | (0.11   | )    |  |      | (0.01  | ) |  |   | 0.19   | 

Note: The pro forma disclosures shown above are not representative of the effects on net income and earnings per share in future years.

The fair value of Satyam Computer Services stock options used to compute pro
forma net income / (loss) and earnings / (loss) per share disclosures is the
estimated present value at grant date using the Black-Scholes option-pricing
model.

The following assumptions were used:

|                        |  |                     |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ------------------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  | Year ended March 31
|                        |  |                    
|                        |  | 2001                |       | 2002 |  | 2003
|                        |  |                     |       |      |  |     
|Dividend yield          |  |                     | 0.51  | %    |  |      | 0.52  | % |  |  | 0.86  | %
|Expected volatility     |  |                     | 73.00 | %    |  |      | 75.00 | % |  |  | 69.00 | %
|Risk-free interest rate |  |                     | 10.40 | %    |  |      | 10.32 | % |  |  | 9.00  | %
|Expected term           |  |                     | 2.09  |      |  |      | 3.47  |   |  |  | 2.77  |  



|15. |  | Segmental Reporting
|--- |  | -------------------

Satyam has adopted SFAS 131, Disclosures about Segments of an Enterprise and
Related Informationwhich requires disclosure of financial and descriptive
information about Satyams reportable operating segments. The operating
segments reported below are the segments of Satyam for which separate financial
information is available and for which operating profit/loss amounts are
evaluated regularly by executive management in deciding how to allocate
resources and in assessing performance. Management evaluates performance based
on stand-alone revenues and net income for the companies in Satyam. Satyams
reportable operating segments consist of the following three business groups:



| |  | IT services, providing a comprehensive range of services, including software development, packaged software integration,
system maintenance and engineering design services. Satyam Computer Services provides its customers the ability to meet
all of their information technology needs from one service provider. Satyam Computer Services eBusiness services include
designing, developing integrating and maintaining Internet-based applications, such as eCommerce websites, and implementing
packaged software applications, such as customer or supply chain management software applications. Satyam Computer
Services also assists its customers in making their existing computing systems accessible over the Internet.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Internet Services, providing consumer Internet access services, including dial-up Internet access, e-mail and web page
hosting services. Infoways corporate network and technology services include dial-up and dedicated Internet access,
private network services, business-to-business electronic commerce and website development and hosting services. Infoway
also operates an on-line portal, Sify.com (formerly satyamonline.com), and related content sites specifically tailored to
Indian interests worldwide for news, personal finance, movies, music and automobiles.                                                                                                                                                  
| 
| |  | Software Products, product development and creation of propriety software.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-28



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Satyams operating segment information for the years ended March 31, 2001, 2002
and 2003 were as follows:

Business Segments

|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------- | -------- |  | -------- | -------- | ----------- |  | ------ | ------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                                  |  | (US$ in thousands)
|                                                                                  |  |                   
|                                                                                  |  |                    |         |          |  | Internet |          | Software    |  |        |         |   |  | Consolidated
|                                                                                  |  | IT Services        |         | Services |  | Products |          | Elimination |  | totals
|                                                                                  |  |                    |         |          |  |          |          |             |  |       
|For the year ended March 31, 2001                                                 |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Revenue  External customers                                                      |  | $                  | 273,467 |          |  | $        | 36,840   |             |  |        |        |   |  |              |        |   |  | $ | 310,307 |  
|Revenue  Inter-segment                                                           |  |                    | 3,547   |          |  |          | 2,148    |             |  |        | 213     |   |  |              | (5,908  | ) |  |   |        |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Total Revenues                                                                    |  | $                  | 277,014 |          |  | $        | 38,988   |             |  | $      | 213     |   |  | $            | (5,908  | ) |  | $ | 310,307 |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Operating income / (loss)                                                         |  | $                  | 24,230  |          |  | $        | (56,994  | )           |  | $      | (13,878 | ) |  |              |        |   |  | $ | (46,642 | )
|Equity in earnings / (losses) of
associated companies, net of taxes               |  |                    | 891     |          |  |          | (6,358   | )           |  |        |        |   |  |              |        |   |  |   | (5,467  | )
|Net income / (loss)                                                               |  |                    | 14,765  |          |  |          | (28,804  | )           |  |        | (13,873 | ) |  |              |        |   |  |   | (27,912 | )
|Segment assets                                                                    |  |                    | 257,143 |          |  |          | 246,766  |             |  |        | 2,243   |   |  |              | (25,053 | ) |  |   | 481,099 |  
|Depreciation, amortization and
impairment of goodwill and other
intangible assets |  |                    | 24,374  |          |  |          | 29,695   |             |  |        | 424     |   |  |              |        |   |  |   | 54,493  |  
|Capital expenditures for
long-lived assets                                        |  |                    | 42,296  |          |  |          | 41,934   |             |  |        | 926     |   |  |              |        |   |  |   | 85,156  |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|For the year ended March 31, 2002                                                 |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Revenue  External customers                                                      |  | $                  | 377,321 |          |  | $        | 36,585   |             |  | $      | 585     |   |  |              |        |   |  | $ | 414,491 |  
|Revenue  Inter-segment                                                           |  |                    | 618     |          |  |          | 2,806    |             |  |        | 284     |   |  |              | (3,708  | ) |  |   |        |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Total Revenues                                                                    |  | $                  | 377,939 |          |  | $        | 39,391   |             |  | $      | 869     |   |  | $            | (3,708  | ) |  | $ | 414,491 |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Operating income / (loss)                                                         |  | $                  | 68,030  |          |  | $        | (128,913 | )           |  | $      | (2,630  | ) |  |              |        |   |  | $ | (63,513 | )
|Equity in earnings / (losses) of
associated companies, net of taxes               |  |                    | 1,364   |          |  |          | (26,765  | )           |  |        |        |   |  |              |        |   |  |   | (25,401 | )
|Net income / (loss)                                                               |  |                    | 109,230 |          |  |          | (80,708  | )           |  |        | (2,630  | ) |  |              |        |   |  |   | 25,892  |  
|Segment assets                                                                    |  |                    | 463,934 |          |  |          | 83,047   |             |  |        | 754     |   |  |              | (32,233 | ) |  |   | 515,502 |  
|Depreciation, amortization and
impairment of goodwill and other
intangible assets |  |                    | 29,319  |          |  |          | 106,614  |             |  |        | 385     |   |  |              |        |   |  |   | 136,318 |  
|Capital expenditures for
long-lived assets                                        |  |                    | 30,265  |          |  |          | 400      |             |  |        | (1,001  | ) |  |              |        |   |  |   | 29,664  |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|For the year ended March 31, 2003 *                                               |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Revenue  External customers                                                      |  | $                  | 432,621 |          |  | $        | 25,715   |             |  | $      | 871     |   |  |              |        |   |  | $ | 459,207 |  
|Revenue  Inter-segment                                                           |  |                    | 44      |          |  |          | 270      |             |  |        | 253     |   |  |              | (567    | ) |  |   |        |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Total Revenues                                                                    |  |                    | 432,665 |          |  |          | 25,985   |             |  |        | 1,124   |   |  |              | (567    | ) |  |   | 459,207 |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  
|Operating income / (loss)                                                         |  |                    | 105,104 |          |  |          | (21,697  | )           |  |        | 232     |   |  |              |        |   |  |   | 83,639  |  
|Equity in earnings / (losses) of
associated companies, net of taxes               |  |                    | (499    | )        |  |          | (2,840   | )           |  |        |        |   |  |              |        |   |  |   | (3,339  | )
|Net income / (loss)                                                               |  |                    | 92,052  |          |  |          | (12,512  | )           |  |        | 232     |   |  |              |        |   |  |   | 79,772  |  
|Segment assets                                                                    |  |                    | 597,581 |          |  |          |         |             |  |        | 1,036   |   |  |              | (29,774 | ) |  |   | 568,843 |  
|Depreciation and amortization of
other intangible assets                          |  |                    | 26,202  |          |  |          | 10,900   |             |  |        | 75      |   |  |              |        |   |  |   | 37,177  |  
|Capital expenditures for
long-lived assets                                        |  |                    | 11,015  |          |  |          |         |             |  |        | 1       |   |  |              |        |   |  |   | 11,016  |  
|                                                                                  |  |                    |         |          |  |          |          |             |  |        |         |   |  |              |         |   |  |   |         |  

The capital expenditures for long-lived assets in the above table represent the
additions to premises and equipment (fixed assets) of each segment.



|* |  | The Internet Services segment contains the financial information of Infoway
upto December 9, 2002 (Refer note. 9).
|- |  | ------------------------------------------------------------------------------------------------------------------

F-29



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Geographic Information

The revenues that are attributable to countries based on location of customers
and long-lived assets are as follows:

|                  |  |                           |         |                           |  |                           |         |               |  |            |         |               |  |       |         |  |  |   |         |  |  |   |        | 
|----------------- |  | ------------------------- | ------- | ------------------------- |  | ------------------------- | ------- | ------------- |  | ---------- | ------- | ------------- |  | ----- | ------- |  |  | - | ------- |  |  | - | ------ | 
|                  |  | (US$ in thousands)       
|                  |  |                          
|                  |  | Year ended March 31, 2001 |         | Year ended March 31, 2002 |  | Year ended March 31, 2003
|                  |  |                           |         |                           |  |                          
|                  |  | Revenues from             |         |                           |  |                           |         | Revenues from |  | Long-      |         | Revenues from |  | Long-
|                  |  | external                  |         | Long-lived                |  | external                  |         | lived         |  | external   |         | lived        
|                  |  | customers                 |         | assets                    |  | customers                 |         | assets        |  | customers* |         | assets       
|                  |  |                           |         |                           |  |                           |         |               |  |            |         |              
|North America     |  | $                         | 224,315 |                           |  | $                         | 3,715   |               |  | $          | 298,458 |               |  | $     | 4,280   |  |  | $ | 335,930 |  |  | $ | 3,939  | 
|Europe            |  |                           | 20,593  |                           |  |                           | 127     |               |  |            | 39,202  |               |  |       | 657     |  |  |   | 53,265  |  |  |   | 579    | 
|India             |  |                           | 31,467  |                           |  |                           | 238,958 |               |  |            | 32,089  |               |  |       | 132,428 |  |  |   | 27,911  |  |  |   | 77,785 | 
|Japan             |  |                           | 7,327   |                           |  |                           | 262     |               |  |            | 9,152   |               |  |       | 348     |  |  |   | 10,473  |  |  |   | 348    | 
|Rest of the World |  |                           | 26,605  |                           |  |                           | 164     |               |  |            | 35,590  |               |  |       | 491     |  |  |   | 31.628  |  |  |   | 693    | 
|                  |  |                           |         |                           |  |                           |         |               |  |            |         |               |  |       |         |  |  |   |         |  |  |   |        | 
|Total             |  | $                         | 310,307 |                           |  | $                         | 243,226 |               |  | $          | 414,491 |               |  | $     | 138,204 |  |  | $ | 459,207 |  |  | $ | 83,344 | 
|                  |  |                           |         |                           |  |                           |         |               |  |            |         |               |  |       |         |  |  |   |         |  |  |   |        | 

The long-lived assets in the above table represent premises and equipment and
intangible assets of each segment. Transfers between reportable business or
geographic segments are made either at cost or at arms-length prices



|* |  | The geographic information contains the financial information of Infoway upto
December 9, 2002 (Refer note. 9).
|- |  | ---------------------------------------------------------------------------------------------------------------



|16. |  | Related Party Transactions
|--- |  | --------------------------

Related party transactions comprise of

|                                                        |                |  |                     |       |      |  |      |       |  |  |   |     | 
|------------------------------------------------------- | -------------- |  | ------------------- | ----- | ---- |  | ---- | ----- |  |  | - | --- | 
|                                                        |                |  | (US$ in thousands) 
|                                                        |                |  |                    
|                                                        |                |  | Year ended March 31
|                                                        |                |  |                    
|                                                        |                |  | 2001                |       | 2002 |  | 2003
|                                                        |                |  |                     |       |      |  |     
|Infrastructure and other services provided by Satyam to |                |  |                     |       |      |  |      |       |  |  |   |    
|                                                        | Satyam GE      |  | $                   | 461   |      |  | $    | 142   |  |  | $ | 9   | 
|                                                        | Satyam Venture |  |                     | 1,031 |      |  |      | 928   |  |  |   | 875 | 
|                                                        | Cricinfo       |  |                     |      |      |  |      | 30    |  |  |   | 6   | 
|                                                        | Refco-SIFY     |  |                     | 492   |      |  |      | 973   |  |  |   | 62  | 
|                                                        | Placements.com |  |                     |      |      |  |      | 75    |  |  |   |    | 
|                                                        |                |  |                     |       |      |  |      |       |  |  |   |     | 
|                                                        | Total          |  | $                   | 1,984 |      |  | $    | 2,148 |  |  | $ | 952 | 
|                                                        |                |  |                     |       |      |  |      |       |  |  |   |     | 
|Services/Interest received by Satyam from               |                |  |                     |       |      |  |      |       |  |  |   |    
|                                                        | Infoway        |  |                     |      |      |  |      |      |  |  | $ | 122 | 
|                                                        | Satyam Venture |  |                     |      |      |  |      |      |  |  |   | 357 | 
|                                                        | Cricinfo       |  |                     |      |      |  | $    | 47    |  |  |   | 123 | 
|                                                        |                |  |                     |       |      |  |      |       |  |  |   |     | 
|                                                        | Total          |  |                     |      |      |  | $    | 47    |  |  | $ | 602 | 
|                                                        |                |  |                     |       |      |  |      |       |  |  |   |     | 

The balances receivable from and payable to related parties are as follows:

|                                                   |                |  |                    |      |      |  |   |      |  
|-------------------------------------------------- | -------------- |  | ------------------ | ---- | ---- |  | - | ---- | -
|                                                   |                |  | (US$ in thousands)
|                                                   |                |  |                   
|                                                   |                |  | As of March 31    
|                                                   |                |  |                   
|                                                   |                |  | 2002               |      | 2003
|                                                   |                |  |                    |      |     
|Advance towards investment in associated companies |                |  |                    |      |      |  |   |     
|                                                   | Refco-SIFY     |  | $                  | 925  |      |  |   |     |  
|                                                   |                |  |                    |      |      |  |   |      |  
|                                                   | Total          |  | $                  | 925  |      |  |   |     |  
|                                                   |                |  |                    |      |      |  |   |      |  
|Amount due from/(to) associated companies          |                |  |                    |      |      |  |   |     
|                                                   | Infoway        |  |                    |     |      |  | $ | (78  | )
|                                                   | Satyam Venture |  | $                  | 267  |      |  |   | (69  | )
|                                                   | CA Satyam      |  |                    | (287 | )    |  |   |     |  
|                                                   | Satyam GE      |  |                    | 189  |      |  |   |     |  
|                                                   | Cricinfo       |  |                    | 31   |      |  |   |     |  
|                                                   | Refco-SIFY     |  |                    | 27   |      |  |   |     |  
|                                                   | Placements.com |  |                    | 53   |      |  |   |     |  
|                                                   |                |  |                    |      |      |  |   |      |  
|                                                   | Total          |  | $                  | 280  |      |  | $ | (147 | )
|                                                   |                |  |                    |      |      |  |   |      |  

F-30



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|17. |  | Shareholders Equity and Dividends
|--- |  | ----------------------------------
|   
|a)  |  | Issuance of common stock          

In May 2001, Satyam Computer Services listed its American Depository Shares
(ADS) for trading on the New York Stock Exchange (NYSE ticker symbol
SAY). Satyam Computer Services issued 16,675,000 ADS (representing
33,350,000 equity shares of Rs. 2 each fully paid up) at a price of US$9.71 per
ADS, including ADS issued on exercise of 15% Greenshoe option by the
Underwriters. Each ADS represents two equity shares of Rs 2 each fully paid
up.



|b) |  | Dividends
|-- |  | ---------

Final dividends proposed by the Board of Directors are payable when formally
declared by the shareholders, who have the right to decrease but not increase
the amount of the dividend recommended by the Board of Directors. Interim
dividends are declared by the Board of Directors without the need for
shareholders approval. With respect to equity shares issued by Satyam Computer
Services during a particular fiscal year, 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. Satyam Computer Services accrues dividends payable and
pays them after obtaining shareholders approval.

Dividends payable to equity shareholders are based on the net income available
for distribution as reported in Satyam Computer Services unconsolidated
financial statements prepared in accordance with Indian GAAP. As such,
dividends are declared and paid in Indian Rupees. The net income in accordance
with U.S. GAAP may, in certain years, either not be fully available or will be
additionally available for distribution to equity shareholders. Under Indian
GAAP the net income available for distribution to equity shareholders was
US$103,797 thousand, US$92,029 thousand and US$64,680 thousand for the years
ended March 31, 2001, 2002 and 2003 respectively.
Under the Indian Companies Act, dividends may be paid out of the profits of a
company in the year in which the dividend is declared or out of the
undistributed profits of previous fiscal years. Before declaring a dividend
greater than 10.0% of the par value of its equity shares, a company is required
to transfer to its reserves a minimum percentage of its profits for that year,
ranging from 2.5% to 10.0%, depending on the dividend percentage to be declared
in such year.



|18. |  | Business Combinations  Acquisition of Kheladi.com by Infoway
|--- |  | -------------------------------------------------------------

On October 12, 2000, Infoway entered into an agreement to acquire a 100% stake
in Kheladi.com (India) Private Limited (Kheladi), a sports portal promoted by
sports personalities in India. Infoways intention is to assimilate the
strengths of Kheladi, including the network of sports personalities, into its
portal, Khel.com. Infoway paid cash and 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 equity shares have been issued which are subject to a lock in until
September 14, 2001 and September 14, 2002, respectively. Infoway paid
US$1,108 thousand as consideration for the above acquisition and the
acquisition has been accounted for using the 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 amounting to
US$795 thousand and the excess of cost over fair value of assets acquired has
been recognized as goodwill amounting to US$309 thousand. In accordance with
the provisions of SFAS 142, the goodwill has not been amortized post
acquisition. 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. Infoway will record contingent payments as compensation for
post-combination services to be expensed in the period in which the contingency
is resolved.



|19. |  | Goodwill
|--- |  | --------

Goodwill consists of:

|                               |                                     |                                         |         |                    |        |      |         |   |        | 
|------------------------------ | ----------------------------------- | --------------------------------------- | ------- | ------------------ | ------ | ---- | ------- | - | ------ | 
|                               |                                     |                                         |         | (US$ in thousands)
|                               |                                     |                                         |         |                   
|                               |                                     |                                         |         | As of March 31    
|                               |                                     |                                         |         |                   
|                               |                                     |                                         |         | 2002               |        | 2003
|                               |                                     |                                         |         |                    |        |     
|Goodwill                       |                                     |                                         |         |                    |        |      |         |  
|                               | Acquisition of minority interest in |                                         |         |                    |        |      |         |   |       
|                               |                                     | Satyam Enterprise Solutions Limited     |         | $                  | 21,066 |      |         | $ | 21,642 | 
|                               |                                     | Satyam Manufacturing Technologies Inc,. |         |                    |       |      |         |   | 3,365  | 
|                               | Others                              |                                         |         | 830                |        |      |         |  |       
|                               |                                     |                                         |         |                    |        |      |         |   |        | 
|Total                          |                                     |                                         | 21,896  |                    |        |      | 25,007  |  
|Less: Accumulated amortization |                                     |                                         | (10,790 | )                  |        |      | (10,821 | )
|                               |                                     |                                         |         |                    |        |      |         |   |        | 
|Goodwill, net                  |                                     | $                                       | 11,106  |                    |        | $    | 14,186  |  
|                               |                                     |                                         |         |                    |        |      |         |   |        | 

F-31



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements

Goodwill represents the excess of amount paid towards purchase price and
non-refundable deposit over the fair value of assets acquired, and currently
primarily relates to the acquisition of the minority interest in Satyam
Enterprise Solutions Limited by Satyam Computer Services.

In the year ended March 31, 2002, Satyam recorded an impairment charge of
US$81,115 thousand relating to goodwill acquired in the IndiaWorld, India Plaza
and Eduempire acquisitions by Infoway as a result of an ongoing impairment
assessment of goodwill recorded in connection with various acquisitions. Since
the operations of those entities were completely integrated into the operations
of Infoway. Satyam assessed the recoverability of goodwill arising out of the
India World and India Plaza acquisitions at the enterprise level of Infoway.
The impairment charge was calculated as the difference between the market value
of Infoway and its net assets. The assessment was performed due to significant
decline in Infoways stock price for a sustained period, Infoways market
capitalization relative to its net book value, significant under performance
relative to expected historical or projected future operating results,
significant negative industry and economic trends and the overall decline in
market conditions which indicate that this decline in the market value of
Infoways stock price is other-than temporary. The shortfall in the market
capitalization had indicated an impairment of goodwill. Thus the entire
carrying value of goodwill as at September 30, 2001, pertaining to India World
of US$73,110 thousand, India Plaza of US$7,955 thousand and Eduempire of US$50
thousand had been charged to the statement of operations for the year ended
March 31, 2002.

Effective April 1, 2002, Satyam adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. SFAS
142 requires, among other things, the discontinuance of amortization related to
goodwill and indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. In addition, the statement
includes provisions upon adoption for the reclassification of certain existing
recognized intangibles to goodwill, the identification of reporting units for
the purpose of assessing potential future impairments of goodwill, the
reassessment of the useful lives of existing recognized intangibles and the
reclassification of certain intangibles out of previously reported goodwill.

Satyam is required to perform goodwill impairment tests on an annual basis and
between annual tests in certain circumstances. Satyam has performed an initial
impairment review of goodwill on the adoption of SFAS 142 and has also carried
out an annual impairment review in 2003. Based on these tests there is no
impairment of goodwill during the year ended March 31, 2003. However there can
be no assurance that future goodwill impairment tests will not result in a
charge to earnings.

Due to the adoption of SFAS 142, Satyam ceased amortizing goodwill. The effect
of this accounting change is reflected prospectively. The following table
presents the impact of SFAS 142 on net income / (loss), net income / (loss) per
share, and the related tax effect had the standard been in effect for the years
ended March 31, 2001 and 2002:

|                                     |                                                                                                |   |                                             |        |      |   |        |        | 
|------------------------------------ | ---------------------------------------------------------------------------------------------- | - | ------------------------------------------- | ------ | ---- | - | ------ | ------ | 
|                                     |                                                                                                |   | (US$ in thousands except per share amounts)
|                                     |                                                                                                |   |                                            
|                                     |                                                                                                |   | Year ended March 31                        
|                                     |                                                                                                |   |                                            
|                                     |                                                                                                |   | 2001                                        |        | 2002
|                                     |                                                                                                |   |                                             |        |     
|Reported net income/(loss)           |                                                                                                | $ | (27,912                                     | )      |      | $ | 25,892 |       
|Add:                                 |                                                                                                |   |                                             |        |      |   |        |       
|                                     | Goodwill amortization                                                                          |   |                                             | 24,728 |      |   |        | 16,997 | 
|                                     | Amortization of excess of cost of
investment over equity in net assets of
associated companies |   |                                             | 4,402  |      |   |        | 3,639  | 
|                                     |                                                                                                |   |                                             |        |      |   |        |       
|Adjusted net income                  |                                                                                                | $ | 1,218                                       |        |      | $ | 46,528 |       
|                                     |                                                                                                |   |                                             |        |      |   |        |       
|Basic and diluted earnings per share |                                                                                                |   |                                             |        |      |   |        |       
|                                     | As reported                                                                                    |   | $                                           | (0.10  | )    |   | $      | 0.08   | 
|                                     | As adjusted                                                                                    |   |                                             | 0.01   |      |   |        | 0.15   | 

F-32



---



##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|20. |  | Other intangible assets
|--- |  | -----------------------

Other intangible assets pertain to Infoway and are all amortizable. Their
original estimated useful lives are as follows: Technical Know-how fees  3 to
5 years; Portals and web content  5 years; Employment contracts  5 years;
Customer Contract and others  3 years.

The following tables present details of Satyams total other intangible assets

|                        |  |                    |       |              |  |     |      |   |  |   |       | 
|----------------------- |  | ------------------ | ----- | ------------ |  | --- | ---- | - |  | - | ----- | 
|                        |  | (US$ in thousands)
|                        |  |                   
|                        |  |                    |       | Accumulated  |  |    
|                        |  | Gross              |       | amortization |  | Net
|                        |  |                    |       |              |  |    
|As at March 31, 2002    |  |                    |       |              |  |     |      |   |  |   |       | 
|Technical Know-how      |  | $                  | 1,791 |              |  | $   | (310 | ) |  | $ | 1,481 | 
|Portals and Web content |  |                    | 1,999 |              |  |     | (544 | ) |  |   | 1,455 | 
|Employment contracts    |  |                    | 768   |              |  |     | (113 | ) |  |   | 655   | 
|                        |  |                    |       |              |  |     |      |   |  |   |       | 
|Total                   |  | $                  | 4,558 |              |  | $   | (967 | ) |  | $ | 3,591 | 
|                        |  |                    |       |              |  |     |      |   |  |   |       | 

Amortization of other intangible assets amounted to US$128 thousand, US$720
thousand and US$1,195 thousand for the years ended March 31, 2001, 2002 and
upto December 9, 2002 respectively.



|21. |  | Contingencies and Commitments
|--- |  | -----------------------------
|   
|a)  |  | Bank guarantees              

The bank guarantees outstanding are US$1,638 thousand and US$3,503 thousand as
of March 31, 2002 and 2003 respectively. Bank guarantees are generally
provided to government agencies, primarily to the Telegraph Authorities as
security for compliance with and performance of terms and conditions contained
in the Internet Service Provider license granted to Satyam and Videsh Sanchar
Nigam Limited, towards the supply and installation of an electronic commerce
platform respectively. Satyam also provides guarantees to Excise and Customs
authorities for the purposes of maintaining a bonded warehouse. These
guarantees may be revoked by the governmental agencies if they suffer any
losses or damage through the breach of any of the covenants contained in the
agreements.



|b) |  | Capital commitments
|-- |  | -------------------

Capital commitments comprise of:

|                                                             |  |                    |       |      |  |   |       | 
|------------------------------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                                             |  | (US$ in thousands)
|                                                             |  |                   
|                                                             |  | As of March 31    
|                                                             |  |                   
|                                                             |  | 2002               |       | 2003
|                                                             |  |                    |       |     
|Contractual commitments for capital expenditure              |  | $                  | 3,601 |      |  | $ | 4,441 | 
|Commitment towards investment in equity capital of CA Satyam |  |                    | 1,000 |      |  |   |      | 
|                                                             |  |                    |       |      |  |   |       | 
|Total                                                        |  | $                  | 4,601 |      |  | $ | 4,441 | 
|                                                             |  |                    |       |      |  |   |       | 

Contractual commitments for capital expenditures are relating to acquisition of
premises, equipment and new network infrastructure.



|c) |  | Operating lease
|-- |  | ---------------

Satyam has certain operating leases for office premises and guesthouses. Most
of the operating leases provide for increased rent through increases in general
price levels. Rental expense for operating leases amounted to US$7,626
thousand, US$9,243 thousand and US$8,735 thousand for the years ended March 31,
2001, 2002 and 2003 respectively.
 
Future minimum annual lease commitments, including those leases for which
renewal options may be exercised as of March 31, 2003 are US$1,914 thousands in
fiscal 2004, US$1,782 thousands in fiscal 2005, US$1,326 thousands in fiscal
2006, US$1,234 thousands in fiscal 2007, US$431 thousands in fiscal 2008 and
US$725 thousands thereafter.

F-33



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##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|22. |  | Concentration of Credit Risk
|--- |  | ----------------------------

Accounts receivable balances are typically unsecured and are derived from
revenues earned from customers primarily located in the United States. Satyam
monitors the creditworthiness of its customers to which it grants credit terms
in the normal course of business. The following table gives details in respect
of percentage of revenues generated from top two and top ten customers:

|                                          |             |  |                     |       |      |  |       |       |   |  |       |       |  
|----------------------------------------- | ----------- |  | ------------------- | ----- | ---- |  | ----- | ----- | - |  | ----- | ----- | -
|                                          |             |  | Year ended March 31
|                                          |             |  |                    
|                                          |             |  | 2001                |       | 2002 |  | 2003 
|                                          |             |  |                     |       |      |  |      
|Revenues generated from top two customers |             |  |                     |       |      |  |       |       |   |  |       |      
|                                          | Customer I  |  |                     | 15.76 | %    |  |       | 18.26 | % |  |       | 16.14 | %
|                                          | Customer II |  |                     | 8.11  | %    |  |       | 6.93  | % |  |       | 8.71  | %
|Total revenues from top ten customers     |             |  | 46.34               | %     |      |  | 48.95 | %     |   |  | 49.78 | %    



|23. |  | Financial Instruments
|--- |  | ---------------------

Forward Contracts

Satyam enters into forward foreign exchange contracts where the counter party
is generally a bank. Satyam considers the risks of non-performance by the
counter party as non-material. The aggregate contracted principal amounts of
Satyams foreign exchange forward contracts (sell) outstanding as of March 31,
2002 and 2003 amounted to US$ Nil and US$4,000 thousand respectively. Gains on
outstanding foreign exchange forward contracts amounted to US$ Nil and US$43
thousand for the years ended March 31, 2002 and 2003 respectively. These
foreign forward exchange contracts mature between one to three months.

Fair value

The carrying amounts reported in the balance sheets for cash and cash
equivalents, trade and other receivables, amounts due to or from related
parties, accounts payable and other liabilities approximate their respective
fair values due to their short maturity. The approximate fair value of
long-term debts, as determined by using current interest rates as of March 31,
2002 and 2003 was US$5,520 thousand and US$4,081 thousand respectively as
compared to the carrying amounts of US$5,499 thousands and US$4,074 thousands
as of March 31, 2002 and 2003 respectively.



|24. |  | Schedules of Balance sheet
|--- |  | --------------------------
|   
|a)  |  | Cash and Cash Equivalents 

The cash and cash equivalents consist of:

|                          |  |                    |         |      |  |   |        | 
|------------------------- |  | ------------------ | ------- | ---- |  | - | ------ | 
|                          |  | (US$ in thousands)
|                          |  |                   
|                          |  | As of March 31    
|                          |  |                   
|                          |  | 2002               |         | 2003
|                          |  |                    |         |     
|Cash and bank balances    |  | $                  | 57,400  |      |  | $ | 53,133 | 
|Cash equivalents          |  |                    | 186,054 |      |  |   | 9,069  | 
|                          |  |                    |         |      |  |   |        | 
|Cash and cash equivalents |  | $                  | 243,454 |      |  | $ | 62,202 | 
|                          |  |                    |         |      |  |   |        | 

Cash equivalents include restricted cash deposits of US$448 thousand and
US$ Nil as of March 31, 2002 and 2003 respectively, placed in
No-charge-no-lien accounts as security towards performance guarantees issued
by Satyams bankers on Satyams behalf. Cash equivalents also include
restricted cash of US$2,048 thousand and US$ Nil as of March 31, 2002 and
2003 respectively, under lien with Satyams bankers against guarantees issued
by the bank on behalf of Satyam. Satyam cannot utilize these amounts until the
guarantees are discharged or revoked.



|b) |  | Accounts Receivable
|-- |  | -------------------

Accounts receivable consist of:

|                                   |  |                    |        |      |  |   |         |  
|---------------------------------- |  | ------------------ | ------ | ---- |  | - | ------- | -
|                                   |  | (US$ in thousands)
|                                   |  |                   
|                                   |  | As of March 31    
|                                   |  |                   
|                                   |  | 2002               |        | 2003
|                                   |  |                    |        |     
|Customers (trade)                  |  | $                  | 97,564 |      |  | $ | 105,477 |  
|Related parties                    |  |                    | 140    |      |  |   | 467     |  
|Less: allowance for doubtful debts |  |                    | (9,495 | )    |  |   | (9,180  | )
|                                   |  |                    |        |      |  |   |         |  
|Accounts receivable                |  | $                  | 88,209 |      |  | $ | 96,764  |  
|                                   |  |                    |        |      |  |   |         |  

The allowance for doubtful debts is established at amounts considered to be
appropriate based primarily upon Satyams past credit loss experience and an
evaluation of potential losses on the outstanding receivable balances.

F-34



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##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|c) |  | Inventory
|-- |  | ---------

Inventory pertained to Infoway and consisted of:

|                          |  |                    |     |      |  |  |   | 
|------------------------- |  | ------------------ | --- | ---- |  |  | - | 
|                          |  | (US$ in thousands)
|                          |  |                   
|                          |  | As of March 31    
|                          |  |                   
|                          |  | 2002               |     | 2003
|                          |  |                    |     |     
|CD-ROMs                   |  | $                  | 82  |      |  |  |  | 
|Communication hardware    |  |                    | 459 |      |  |  |  | 
|Application software      |  |                    | 96  |      |  |  |  | 
|Others                    |  |                    | 96  |      |  |  |  | 
|Less: Valuation Allowance |  |                    | (8  | )    |  |  |  | 
|                          |  |                    |     |      |  |  |   | 
|Inventory                 |  | $                  | 725 |      |  |  |  | 
|                          |  |                    |     |      |  |  |   | 



|d) |  | Prepaid Expenses and Other Receivables
|-- |  | --------------------------------------

Prepaid expenses and other receivables consist of:

|                                       |  |                    |        |      |  |   |        |  
|-------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                       |  | (US$ in thousands)
|                                       |  |                   
|                                       |  | As of March 31    
|                                       |  |                   
|                                       |  | 2002               |        | 2003
|                                       |  |                    |        |     
|Prepaid expenses                       |  | $                  | 4,208  |      |  | $ | 2,725  |  
|Directors liability insurance          |  |                    |       |      |  |   | 608    |  
|Advance for expenses                   |  |                    | 5,589  |      |  |   | 9,856  |  
|Loans and advance to employees         |  |                    | 2,238  |      |  |   | 2,183  |  
|Other advances and receivables         |  |                    | 1,404  |      |  |   | 5,422  |  
|Less: Allowance for doubtful deposits  |  |                    |       |      |  |   | (713   | )
|                                       |  |                    |        |      |  |   |        |  
|Prepaid expenses and other receivables |  | $                  | 13,439 |      |  | $ | 20,081 |  
|                                       |  |                    |        |      |  |   |        |  

Prepaid expenses principally include the un-expired portion of annual rentals
paid to the Department of Telecommunications, Ministry of Communications, and
the Government of India for use of leased telecommunication lines, Satellite
link charges, and insurance premiums.



|e) |  | Other Assets
|-- |  | ------------

Other assets consist of:

|                                                   |  |                    |        |      |  |   |        |  
|-------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                   |  | (US$ in thousands)
|                                                   |  |                   
|                                                   |  | As of March 31    
|                                                   |  |                   
|                                                   |  | 2002               |        | 2003
|                                                   |  |                    |        |     
|Rent and maintenance deposits                      |  | $                  | 3,899  |      |  | $ | 3,825  |  
|Telephone and other deposits                       |  |                    | 1,335  |      |  |   | 571    |  
|Loans and advances to employees due after one year |  |                    | 673    |      |  |   | 866    |  
|Deferred taxes on income                           |  |                    | 1,640  |      |  |   | 2,696  |  
|Others                                             |  |                    | 4,151  |      |  |   | 1,239  |  
|Less: Allowance for doubtful deposits              |  |                    | (1,396 | )    |  |   | (1,922 | )
|                                                   |  |                    |        |      |  |   |        |  
|Other Assets                                       |  | $                  | 10,302 |      |  | $ | 7,275  |  
|                                                   |  |                    |        |      |  |   |        |  

Others include the non-current portion of the restricted cash in the form of
deposits placed with banks to obtain bank guarantees amounted to US$158
thousand and US$81 thousand as of March 31, 2002 and 2003 respectively.
Telephone and other deposits are primarily attributable to deposits with
government organizations principally to obtain leased telephone lines and
electricity supplies and advance payments to vendors for the supply of goods
and rendering of services.

F-35



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##### 



Satyam Computer Services Limited

Notes to the Consolidated Financial Statements



|f) |  | Accrued Expenses and Other Current Liabilities
|-- |  | ----------------------------------------------

Accrued expenses and other current liabilities consist of:

|                                               |  |                    |        |      |  |   |        | 
|---------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                               |  | (US$ in thousands)
|                                               |  |                   
|                                               |  | As of March 31    
|                                               |  |                   
|                                               |  | 2002               |        | 2003
|                                               |  |                    |        |     
|Accrued expenses                               |  | $                  | 24,148 |      |  | $ | 24,330 | 
|Unclaimed dividend                             |  |                    | 424    |      |  |   | 567    | 
|Provision for taxation                         |  |                    | 6,770  |      |  |   | 16,086 | 
|Provision for gratuity and leave encashment    |  |                    | 1,502  |      |  |   | 2,737  | 
|Deferred taxes on income                       |  |                    | 1,165  |      |  |   | 1,685  | 
|Advance from Customers                         |  |                    | 1,557  |      |  |   | 4,563  | 
|Others                                         |  |                    | 4,174  |      |  |   | 1,225  | 
|                                               |  |                    |        |      |  |   |        | 
|Accrued expenses and other current liabilities |  | $                  | 39,740 |      |  | $ | 51,193 | 
|                                               |  |                    |        |      |  |   |        | 

F-36