<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              ---------------------

                                    FORM 20-F

(Mark One)

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934 or

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934. For the fiscal year ended March 31, 2001.

                                       or

[ ]  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)

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

                                Republic of India
                 (Jurisdiction of incorporation or organization)

                            Satyam Technology Center
                              Bahadurpally Village
                               Qutbullapur Mandal,
                              R.R.District - 500855
                            Hyderabad, Andra Pradesh
                                      India
                                (91) 40-309-7505
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
American Depositary Shares, each represented by two Equity Shares, par value
Rs.2 per share.

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

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.

     270,005,430 Equity Shares were issued and outstanding as of March 31, 2001.

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  [ ]             No  [X]
Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17  [ ]        Item 18  [X]

================================================================================
<PAGE>

                                Table of Contents

<TABLE>
<CAPTION>
Item                                                                                                           Page
----                                                                                                           ----
<S>                                                                                                              <C>
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............................................................................6
Item 5.     Operating and Financial Review and Prospects.........................................................31
Item 6.     Directors and Officers of Registrant.................................................................50
Item 7.     Major Shareholders and Related Party Transactions....................................................58
Item 8.     Financial Information................................................................................59
Item 9.     The Offer and Listing................................................................................60
Item 10.    Additional Information...............................................................................61
Item 11.    Quantitative and Qualitative Disclosures About Market Risk...........................................73
Item 12.    Description of Securities Other Than Equity Securities...............................................74

PART II..........................................................................................................74

Item 13.    Defaults, Dividend Arrearages and Delinquencies......................................................74
Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds.........................74
Item 15.    Reserved.............................................................................................74
Item 16.    Reserved.............................................................................................74

PART III.........................................................................................................74

Item 17.    Financial Statements.................................................................................74
Item 18.    Financial Statements.................................................................................75
Item 19.    Exhibits.............................................................................................75
</TABLE>
<PAGE>

               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. 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" and "satyamonline.com" are
trademarks used by our majority-owned subsidiary, Satyam Infoway Limited
("Infoway") for which we have registration applications pending in India. All
other trademarks or tradenames used in this Annual Report on Form 20-F ("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, 2001 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, 2001 was Rs.46.85 per $1.00.

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

     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 (THE "SEC") FROM TIME TO TIME. OUR
FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE, WWW.SEC.GOV.


                                        1
<PAGE>

                                     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 and 2001 and the balance sheet data as of March 31, 1999,
2000 and 2001 are derived from our consolidated audited financial statements
which have been audited by Price Waterhouse, India, independent accountants. Our
financial statements are prepared in accordance with U.S. GAAP for the fiscal
years ended March 31, 1999, 2000 and 2001. Selected consolidated historical
financial data for the fiscal years ended March 31, 1997 and 1998 have been
omitted as our financial statements were not prepared in accordance with U.S.
GAAP for these periods and this data cannot be provided without unreasonable
effort and expense.

                                        2
<PAGE>

<TABLE>
<CAPTION>
                                                                       Year ended March 31,
                                                              --------------------------------------
                                                                1999          2000            2001
                                                                ----          ----            ----
<S>                                                           <C>           <C>            <C>
Statement of Operations Data:
Revenues:
     Information technology services....................      $  95,573     $ 149,257      $ 271,367
     Internet services .................................          2,222        15,198         36,840
     Software products..................................            --            --             --
                                                              ---------     ---------      ---------
         Total revenues.................................         97,795       164,455        308,207
Cost of revenues/(1)/...................................         49,559        90,449        208,121
                                                              ---------     ---------      ---------
Gross profit............................................         48,236        74,006        100,086
Operating expenses:
     Selling, general and administrative expenses(2)....         31,898        69,592        122,000
     Amortization of goodwill...........................            130         5,043         24,728
                                                              ---------     ---------      ---------
         Total operating expenses.......................         32,028        74,635        146,728
                                                              ---------     ---------      ---------
Operating income (loss).................................         16,208          (629)       (46,642)
Interest income.........................................             43         2,625          5,732
Interest expense........................................         (6,905)      (11,290)        (9,632)
Other income............................................            990         1,471          6,806
Other expenses..........................................            (28)         (418)          (344)
                                                              ---------     ---------      ---------
Income (loss) before income taxes, minority interest
  and equity in earnings (losses) of associated
  companies, net........................................         10,308        (8,241)       (44,080)
Provision for income taxes..............................         (1,105)       (1,619)        (4,137)
Minority interest.......................................           (171)        2,785         25,772
Equity in earnings (losses) of associated
  companies, net of taxes...............................            (18)          135         (5,467)
                                                              ---------     ---------      ---------
Net income (loss).......................................      $   9,014     $  (6,940)     $ (27,912)

Earnings (loss)  per equity share :
     Basic..............................................      $    0.03     $   (0.03)     $   (0.10)
     Diluted............................................           0.03         (0.03)         (0.10)
Earnings (loss)  per ADS:
     Basic..............................................      $    0.07     $   (0.05)     $   (0.21)
     Diluted............................................           0.07         (0.05)         (0.21)

Weighted average equity shares used in computing
  earnings per equity share:
     Basic..............................................        260,190       264,720        269,943
     Diluted............................................        260,260       264,720        269,943

Weighted average ADS used in computing earnings per
  ADS:
     Basic..............................................        130,095       132,360        134,972
     Diluted............................................        130,130       132,360        134,972

Cash dividend per equity share .........................      $    0.01     $    0.01      $    0.02
Cash dividend per  ADS..................................      $    0.03     $    0.03      $    0.03

Other Data:
Net cash provided by (used in):
     Operating activities...............................      $  14,245     $  14,115      $   5,986
     Investing activities...............................        (36,089)      (83,619)      (137,775)
     Financing activities...............................         35,849       251,664         14,164
Capital expenditures....................................         39,071        42,909         85,156
Number of information technology services technical
  associates............................................          3,513         4,473          7,798
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                   As at March 31,       As at March 31,
                                                                ----------------------   ---------------
                                                                 1999          2000           2001
                                                                 ----          ----           ----
                                                                          (in thousands)
<S>                                                           <C>           <C>            <C>
Balance Sheet Data:
Cash and cash equivalents...............................      $  13,215     $ 192,304      $  66,068
Total assets............................................        116,319       412,559        481,099
Total long-term debt (excluding current portion)........         47,967        50,050          9,625
Total shareholders' equity..............................         35,892       168,474        194,695
Capital stock (excluding long term debt and redeemed
preferred stock.........................................         35,159       205,234        269,135
</TABLE>

(1)  Inclusive of deferred stock compensation expenses of $3,137 in fiscal 1999,
     $13,356 in fiscal 2000 and $31,336 in fiscal 2001.

(2)  Inclusive of deferred stock compensation expenses of $180 in fiscal 1999,
     $3,575 in fiscal 2000 and $14,782 in fiscal 2001.

                                       4
<PAGE>

               SELECTED FINANCIAL INFORMATION UNDER INDIAN GAAP
               ------------------------------------------------

Indian GAAP does not require the consolidation of the financial statements of
subsidiaries and equity investees with the financial statements of the parent
company. Financial statements of all separate legal entities are prepared on a
stand-alone basis. The unaudited selected unconsolidated financial and other
data for fiscal 1997, 1998, 1999, 2000 and 2001 presented below has been derived
from Satyam Computer Services' unconsolidated financial statements, prepared in
accordance with Indian GAAP. We report our financial information in this manner
to shareholders that hold our equity shares listed on the Indian stock
exchanges. These financial statements are not included in this document.

<TABLE>
<CAPTION>
                                                                                 Year ended March 31
                                                                   -------------------------------------------------
                                                                   1997       1998       1999       2000        2001
                                                                   ----       ----       ----       ----        ----
                                                                     (in thousands, except per equity share data)
<S>                                                               <C>        <C>        <C>       <C>         <C>
Statement of Operations Data:
Income:
Sales - export..................................................  $25,095    $47,882    $89,395   $152,749    $261,026
Sales - Domestic................................................        -         99        358      3,257       6,105
Other Income....................................................      144       3129         75        448       4,749
                                                                  -------    -------    -------   --------    --------
Total...........................................................   25,239     51,110     89,828    156,454     271,880

Expenditures:
Personnel expenses..............................................    9,240     19,560     33,901     58,463     106,517
Operating and administration expenses...........................    5,551      9,229     17,743     33,064      58,285
Marketing expenses..............................................      414      1,207      3,366      6,688       4,885
Financial expenses..............................................    1,593      3,221      6,274      9,418       7,558
Depreciation....................................................    1,764      6,152     10,196     16,364      21,121
Preliminary and deferred revenue expenses written off...........      178          -          -          -           -
                                                                  -------    -------    -------   --------    --------
Total...........................................................   18,740     39,369     71,480    123,997     198,366

Profit before taxation..........................................    6,499     11,741     18,348     32,457      73,514
Provision for taxation..........................................      618      1,237      1,068      1,383       4,039
Profit after  taxation..........................................    5,881     10,504     17,280     31,074      69,475
Extraordinary items:
Merger related extraordinary items..............................        -          -          -      1,124           -
Income tax for earlier periods..................................      481        123          -          -         247
Miscellaneous expenses written off..............................        -        673          -          -           -
Profit on sale of shares in subsidiary company (net of tax).....        -          -          -          -      37,251
Depreciation for earlier years..................................        -      4,544          -          -           -
Gratuity for earlier years......................................       93          -          -          -           -
                                                                  -------    -------    -------   --------    --------
Profit after tax and extraordinary items........................  $ 5,307    $ 5,164    $17,280   $ 29,950    $106,479
                                                                  =======    =======    =======   ========    ========

Earnings per equity share (adjusted)(2)(3)......................    $0.02      $0.04      $0.07      $0.15       $0.25
Earnings per equity share.......................................     0.24       0.40       0.66       0.73        1.23

Equity shares used in computing earnings per
 equity share (adjusted)(3).....................................  245,464    260,190    260,190    212,440     281,190
Equity shares used in computing earnings per equity share.......   24,546     26,019     26,019     42,488      56,238

Cash dividend per equity share (adjusted)(3)....................    $0.01      $0.01      $0.01      $0.01       $0.02
Cash dividend per equity share..................................     0.05       0.05       0.07       0.07        0.09

Other Data:
Net Cash provided by (used in):
Operating Activities............................................ $  3,574   $  5,552   $ 23,219   $ 37,282    $ 48,798
Investing Activities............................................  (13,797)   (23,275)   (39,341)   (33,914)       (594)
Financing Activities............................................    6,959     20,630     22,079     10,850     (38,283)
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                                   1997       1998       1999       2000        2001
                                                                   ----       ----       ----       ----        ----
<S>                                                               <C>        <C>        <C>       <C>         <C>
EBITDA(4)......................................................     9,681     21,051     34,516     58,033     101,810
Capital Expenditures...........................................    12,853     23,742     34,812     21,847      42,261
Balance Sheet Data:
Cash and Cash equivalents......................................   $   665    $ 3,543   $  9,085   $ 24,523    $ 33,225
Total Assets(5)................................................    40,059     66,068    107,928    166,060     251,046
Total long-term debt (excluding current portion)...............     5,905     20,405     43,043     43,084      30,110
Total Shareholders' equity(6)..................................    24,377     27,607     39,619     80,659     177,995
</TABLE>

(1)  Figures for fiscal 2000 are not comparable with those of previous fiscal
     years due to the merger of Satyam Enterprise Solutions Limited, Satyam
     Renaissance Consulting Limited, and Satyam Spark Solutions Limited with
     Satyam Computer Services which was completed in September 1999. The
     following yearly average exchange rates were used for conversion from
     rupees into U.S. dollars for each fiscal year indicated: 1997 - Rs.35.57,
     1998 - Rs.37.20, 1999 - Rs.42.13, 2000 - Rs.43.40 and 2001 Rs.45.67.

(2)  Extraordinary items were not considered for computing earnings per share.

(3)  Indian GAAP does not require retrospective presentation of earnings per
     share data in the event of a stock split. However, for the purposes of
     presenting comparable data, the September 1, 1999 and August 7, 2000 stock
     splits have been retrospectively effected for computation of adjusted
     earnings per share and cash dividend per equity share.

(4)  EBITDA represents earnings (loss) before depreciation, amortization of
     intangible assets, interest income and expense, income tax expense
     (benefit) and extraordinary items. EBITDA is presented because we believe
     some investors find it to be a useful tool for measuring a company's
     ability to fund capital expenditures or to service future debts. EBITDA is
     not determined in accordance with generally accepted accounting principles
     and should not be considered in isolation or as an alternative to net
     income as an indicator of operating performance or as an alternative to
     cash flow as a measure of liquidity. Our EBITDA is not comparable to that
     of other companies which may determine EBITDA differently.

The following table shows the reconciliation from profit after taxation to
EBITDA:

<TABLE>
<CAPTION>
                                                                                 Year ended March 31,
                                                                   -------------------------------------------------
                                                                   1997       1998       1999       2000        2001
                                                                   ----       ----       ----       ----        ----
<S>                                                               <C>        <C>        <C>       <C>         <C>
Profit after taxation..........................................    $5,881    $10,504    $17,280    $31,074    $ 69,228
Add:
Provision for taxation.........................................       618      1,237      1,068      1,383       4,286
Depreciation...................................................     1,764      6,152     10,196     16,364      21,121
Interest expense...............................................     1,525      3,215      6,008      9,341       7,392
Less:
Interest on deposits...........................................       107         57         36        129         217
                                                                   ------    -------    -------    -------    --------
EBITDA.........................................................    $9,681    $21,051    $34,516    $58,033    $101,810
                                                                   ======    =======    =======    =======    ========
</TABLE>

(5)  Total assets represent fixed assets (net of depreciation), investments and
     gross current assets.

(6)  Total shareholders' equity comprises share capital, reserves and surplus
     less miscellaneous expenditures.

                                       6
<PAGE>

           SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND U.S. GAAP

Significant differences exist between Indian GAAP and U.S. GAAP. Investors are
urged to carefully review the following summary of the significant differences
between Indian GAAP and U.S. GAAP:

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
Consolidation                  There is no requirement to prepare               The parent company consolidate all entities
                               consolidated financial statements.               in which they have, directly or indirectly,
                               Investment in subsidiaries are accounted for     a controlling financial interest, except
                               as investments, at cost, by the parent           where control is temporary or there is
                               company.                                         significant doubt concerning the parent's
                                                                                ability to control the subsidiary. The usual
                               Recently, the Institute of Chartered             condition for control is ownership of a
                               accountants of India ("ICAI") has issued an      majority voting interest in another company.
                               accounting standard on "Consolidated             However, legal control may also exist in
                               Financial Statements", which lays down the       some less-than-majority owned entities.
                               principles and procedures of consolidated
                               financial statements, which is effective for     Entities where the minority has substantive
                               accounting years commencing on or after          participating rights result in an inability
                               April 1, 2001. The standard is applicable to     to consolidate such entities; in such cases,
                               companies that opt for presenting financial      equity accounting applies.
                               statements on a consolidated basis. The
                               Securities and Exchange Board of India
                               ("SEBI"), has made it mandatory for listed
                               companies to present the financial
                               statements on a consolidated basis along
                               with their standalone financial statements.
                               The condition for control is ownership of a
                               majority voting interest in another company
                               or control of the composition of board of
                               directors in case of a company or
                               equivalents in case of other governing body.

Equity method                  Associated companies (investments between        Associated companies are accounted for using
                               20.0% to 50.0%) are carried at cost and          the equity method. The investor (a) presents
                               shown as investments. Equity method of           its share of the profits or losses in the
                               accounting is not adopted.                       income statement for the current period; (b)
                               Recently, the ICAI has also issued an            carries such investments in the balance
                               accounting standard on "Accounting for           sheet at its share of underlying net asset
                               Investments in Associates in Consolidated        of the associated company, including any
                               Financial Statements". This standard is          unamortized goodwill from the acquisition of
                               effective for accounting years commencing        such entity - with adjustments for its share
                               on or after April 1, 2002.                       of reported profits and losses and dividend
                                                                                distributions

                                                                                This method is also followed for
                                                                                unconsolidated subsidiaries, and joint
                                                                                ventures.
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
Business combinations          An amalgamation in the nature of a merger is     Business combinations are accounted in
                               accounted for under the pooling-of-interest      accordance with Accounting Principles Board
                               method, and an amalgamation in the nature of     Opinion No. 16, Business Combinations. The
                               a purchase is accounted for under the            Opinion specifies the criteria for
                               purchase method. An amalgamation in the          permitting the pooling-of-interests approach
                               nature of a merger occurs when a number of       when the shareholder groups neither withdraw
                               conditions similar to the U.S. criteria for      nor invest assets, but in effect exchange
                               a pooling are satisfied. There are no            voting common stock in a ratio that
                               specific rules for transfers under common        determines their respective interest in the
                               control. However, such transfers are             combined corporation. Purchase accounting is
                               normally treated as a purchase. Unlike U.S.      required to be followed in all situations
                               GAAP, under purchase method, assets acquired     where the pooling-of-interests criteria are
                               are either recorded at fair value or book        not met. Transfer of assets under common
                               value at the option of the acquirer.             control are accounted for at historical cost
                                                                                on an "as if" pooling basis and not at fair
                                                                                value.

                                                                                Recently, the Financial Accounting Standards
                                                                                Board ("FASB") issued an accounting standard
                                                                                on accounting for business combinations
                                                                                which is applicable to all business
                                                                                combinations accounted for using the
                                                                                purchase method for which the date of
                                                                                acquisition is July 1, 2001, or later. The
                                                                                new standard eliminates the use of the
                                                                                pooling-of-interests method and requires all
                                                                                business combinations to be accounted for by
                                                                                the purchase method.

Goodwill                       Indian GAAP requires goodwill to be              U.S. GAAP requires goodwill to be recognized
                               recognized and capitalized, in connection        and capitalized, in connection with purchase
                               with purchase method acquisitions, as the        method acquisitions, as the excess of the
                               excess of the purchase price over the fair       purchase price over the fair value of the
                               value/book value of the net assets               net assets acquired. Goodwill is amortized
                               acquired. The amortization period of             over a period not exceeding 40 years and
                               goodwill typically should not exceed five        cannot be immediately written-off against
                               years. Negative goodwill is treated as a         retained earnings or income. Negative
                               non-distributable capital reserve.               goodwill is classified in other liabilities
                                                                                to the extent not offset to non-current
                                                                                assets (except marketable securities).
                                                                                Goodwill should also be periodically
                                                                                evaluated for impairment.

                                                                                Recently, the FASB issued an accounting
                                                                                standard on "Goodwill and Other Intangible
                                                                                Assets" which is applicable with fiscal
                                                                                years beginning after December 15, 2001. The
                                                                                new standard requires goodwill be tested for
                                                                                impairment using a fair-value based approach
                                                                                and goodwill would not be
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                                                                                amortized in any circumstance. The carrying
                                                                                amount of goodwill would be reduced only if
                                                                                it was found to be impaired or was
                                                                                associated with assets to be sold or
                                                                                otherwise disposed of.


Stock-based compensation       Historically, there was no requirement to        U.S. GAAP has two different sets of rules
                               recognize deferred stock compensation.           related to stock based compensation: APB 25,
                               However, under a new SEBI guideline, stock       Accounting for Stock Issued to Employees,
                               compensation plans approved and issued by a      and FAS 123, Accounting for Stock-based
                               company after June 19, 1999, compensation        Compensation. Under APB 25, if both the
                               cost in connection with options granted is       exercise price and the number of shares, are
                               computed based on the market price of the        known at the grant date (fixed plan) the
                               shares at the grant date of the option less      grant date is the measurement date and
                               the issue price to employees. Compensation       expense is the difference between the market
                               cost in connection with shares issued is         price of the stock and the exercise price.
                               computed based on the market price of the        If either the number of shares or the
                               shares at the date of issue less the issue       exercise price is not known at the grant
                               price to employees. The compensation cost is     date (variable plan) expense is recognized
                               amortized over the vesting period.               based on the excess of the stock's market
                                                                                price over the exercise price each period
                                                                                (i.e., at each reporting period or
                                                                                measurement date). The fair value approach
                                                                                of FAS 123 measures expense at the grant
                                                                                date for both fixed and variable plans that
                                                                                are settled in stock.


Other Intangibles              Indian GAAP requires intangible assets such      All intangible assets must be amortized by
                               as patents and trademarks to be written off      systematic charges to income over the period
                               within their period of use or legal term of      estimated to be benefited, not exceeding 40
                               validity, whichever is earlier. Expenditure      years.
                               on technical know-how for manufacturing
                               processes may be required to be written off
                               in the year in which it is incurred or
                               amortized over a three to five years while
                               expenditure on know-how for plans, designs
                               and drawings for plant and machinery is
                               capitalized under respective asset heads and
                               depreciated along with the assets.


Asset revaluation and          Under Indian GAAP, upward revaluation of         U.S. GAAP does not permit the upward
impairment                     fixed assets is permitted and the amount by      revaluation of long-lived assets. Long-lived
                               which the assets are revalued is disclosed       assets and identifiable intangibles to be
                               separately as a revaluation reserve, as a        held and used by an entity are reviewed for
                               separate component of shareholders' equity.      impairment whenever events or changes in
                                                                                circumstance indicate that the carrying
                                                                                amount of an
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                                                                                asset may not be recoverable. If the sum of
                                                                                the expected future cash flows (undiscounted
                                                                                and without interest charges) is less than
                                                                                the carrying amount of the asset, an
                                                                                impairment loss is recognized to the extent
                                                                                the carrying value of the assets exceeds its
                                                                                fair value. Asset write-downs related to
                                                                                impairments are considered to be its new
                                                                                cost and would then be depreciated over it's
                                                                                remaining useful life. Restoration of
                                                                                previously recognized impairment losses is
                                                                                prohibited.


Interest capitalized           Interest actually incurred on borrowings         Under U.S. GAAP, interest is required to be
                               identifiable with acquisition/ construction      capitalized on assets constructed for a
                               of assets is required to be capitalized          company's own use and assets constructed for
                               while the asset is under construction.           sale or lease. The amount capitalized is
                                                                                normally determined by applying a
                               Recently, the ICAI has issued an accounting      capitalization rate (based on the avoidable
                               standard on "Borrowing Costs", which is          cost concept) to the average amount of
                               effective for accounting years commencing        accumulated expenditures during the period.
                               April 1, 2000, provides for capitalisation       The capitalized interest cost is included in
                               of interest.                                     the cost of the relevant asset and is
                                                                                depreciated over the useful life of the
                                                                                asset.


Start-up costs                 Generally, Indian GAAP permits the               Under U.S. GAAP, costs of start-up
                               capitalization of such costs. An example of      activities, including organizational costs
                               such start-up costs is trial run costs.          should be expensed as incurred. Start up
                                                                                costs are defined as one time activities
                                                                                relating to opening a new facility,
                                                                                introducing a new product or service,
                                                                                conducting business in a new territory,
                                                                                conducting business with a new class of
                                                                                customer or beneficiary, initiating a new
                                                                                process in an existing facility, or
                                                                                commencing some new operations.


Depreciation                   Fixed assets are depreciated systematically      Depreciation is based on historical values
                               over their useful lives using rates not less     and acceptable depreciation methods include
                               than those specified by the Companies Act.       straight line, sum-of-the-years'-digits,
                               Acceptable methods of depreciation include       declining balance and units-of-production.
                               straight-line and diminishing balance            Assets are depreciated over their estimated
                               method.                                          economic lives.

                               Depreciation on values arising out of upward
                               valuation is adjusted from revaluation
                               reserve created on such revaluation.
</TABLE>

                                       10
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
Accounting for leases          Assets under finance leases are not required     Capitalization is required of those leases
                               to be capitalized by lessees. These are          in which substantially all of the risks and
                               capitalized and depreciated by the lessors.      benefits of fixed asset ownership are held
                               Recently, the ICAI has issued an accounting      by the lessee. U.S. GAAP provides specific
                               standard on "Leases", which is effective for     criteria to be applied to determine when a
                               accounting years commencing on or after          lease meets those requirements.
                               April 1, 2001, which requires assets under
                               finance leases to be capitalized by the
                               lessee.


Investments in debt & equity   Under Indian GAAP, investments are               Under U.S. GAAP, investments that are not
securities                     classified as long-term and current. Current     consolidated or equity accounted, are
                               investments are readily realizable and not       classified and accounted for as (1)
                               intended to be held for more than one year       held-to-maturity securities, defined as debt
                               from the date of purchase and are carried at     securities that a company has the positive
                               the lower of cost or fair value. Unrealized      intent and ability to hold to maturity, are
                               losses are charged to the income statement,      reported at amortized cost, (2) trading
                               while unrealized gains are not recorded. A       securities, defined as those that are bought
                               long-term investment is an investment other      and held principally for the purpose of
                               than a current investment and is valued at       selling them in the near term, are presented
                               cost, subject to a write-down for impairment     at fair value with unrealized gains and
                               on permanent diminution in value of the          losses included in earnings, and (3)
                               investment.                                      available-for-sale securities which include
                                                                                securities not classified in either of the
                                                                                other two categories, are reported at fair
                                                                                value with unrealized gains and losses
                                                                                excluded from earnings and included as a
                                                                                separate component of shareholders' equity.

                                                                                For held-to-maturity and available-for-sale
                                                                                securities, any "other-than-temporary"
                                                                                diminution in value of investments is
                                                                                recorded as a charge to earnings.

                                                                                Under U.S. GAAP, gains on sales of
                                                                                securities which require the seller to
                                                                                repurchase such securities upon the outcome
                                                                                of an event not completely under the control
                                                                                of the seller are not recognized in the
                                                                                income statement until the outcome of such
                                                                                event is determined.
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
Foreign currency               In respect to foreign currency transactions,     Under U.S. GAAP gains or losses arising from
transactions and               Indian GAAP is similar to U.S. GAAP with the     foreign currency transactions are generally
translations                   exception that exchange rate fluctuations        included in determining net income for the
                               arising from the settlement of foreign           period in which such gains or losses arise.
                               currency borrowings/ liabilities related to
                               fixed assets are added to or deducted from       As a general rule, the current rate
                               the carrying cost of the relevant fixed          translation method is followed for foreign
                               asset.                                           investments when the local currency is the
                                                                                functional currency. Under the current rate
                               In the absence of group reporting                method assets and liabilities are translated
                               requirements per Indian GAAP, translation is     using the current exchange rate at the
                               restricted to the restatement of foreign         balance sheet date. Equity is translated at
                               currency assets/liabilities of the entity        the historical exchange rate. Retained
                               itself. This process is done at the end of a     earnings are translated at the weighted
                               period and requires monetary                     average of the historical rates that were in
                               assets/liabilities to be restated at the         effect for the period during which the
                               rate of exchange prevalent on the balance        income was earned. Amounts in the income
                               sheet date; non-monetary items at their          statements are usually translated using the
                               historical rate. Gains and losses arising on     average rate for the accounting period. The
                               restatement of long term foreign currency        translation differences that arise are shown
                               liabilities at the year end rate, which is       as a separate component of shareholders'
                               incurred to finance the purchase of fixed        equity.
                               assets are adjusted against the carrying
                               cost of the relevant asset.


Income tax                     Under Indian GAAP, there are two methods for     U.S. GAAP requires the use of a
                               accounting for income taxes; the tax payable     comprehensive liability method, which is
                               method and tax effect accounting method.         balance sheet oriented. Deferred tax
                               While the tax effect accounting method is        liabilities/assets are recognized for all
                               similar to U.S. GAAP, it is not mandatory in     future tax effects of temporary differences
                               India. In practice, the tax payable method       that will result in charges/deductible
                               is used, so no deferred taxes are                amounts in future years and carry-forwards.
                               recognized.                                      Computations are based on currently enacted
                                                                                tax laws. Valuation allowances are
                               Recently, the ICAI has issued an accounting      established for deferred tax assets if it is
                               standard on "Accounting for Taxes on Income"     considered "more likely than not" (greater
                               which is effective for accounting years          than 50.0% probability) that some portion or
                               commencing on or after April 1, 2001, which      all of the deferred tax asset will not be
                               provides for accounting of deferred taxes.       realized.



Research & development         Under Indian GAAP, research and development      U.S. GAAP requires research and development
expenses                       costs are expensed in the period incurred        expenditures to be expensed as incurred.
                               except where such costs are permitted to be      Capitalization of the cost of research and
                               deferred. The criteria for                       development facilities, such as
                                                                                laboratories, is not
</TABLE>

                                      12
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                               capitalization are similar to the                permitted if they do not have alternative
                               requirement of International Accounting          future uses. Research and development fixed
                               Standards No. 9, Research and Development        assets that have alternative future uses (in
                               Costs.                                           research and development projects or
                                                                                otherwise) are capitalized. The related
                                                                                depreciation is considered research and
                                                                                development expense.


Restructuring charges          Indian GAAP does not have specific               Under U.S. GAAP, a restructuring provision
                               requirements for restructuring provisions.       is recorded when specified conditions such
                               However, some material expenses incurred are     as committed plan of termination,
                               deferred and amortized over three to five        identification of number of employees to be
                               years.                                           terminated, communication of the benefit
                                                                                arrangement to the employees, etc. are met.


Post retirement benefits       Under Indian GAAP, employment benefits, such     Under U.S. GAAP post retirement benefits,
                               as Provident Fund, Superannuation pensions       such as pension, is calculated based upon
                               and gratuity schemes can be either defined       specified methodologies, including a
                               benefit or defined contribution schemes. In      designated actuarial approach, that reflects
                               respect of defined contribution schemes, the     the concept of accrual accounting with
                               contributions payable by the employer are        amounts reflected in the income statement
                               charged to the profit and loss account for       systematically over the estimated working
                               the year. The charge for the year for            lives of the employees covered by the plan.
                               gratuity and other defined benefit schemes       U.S. GAAP requires allocation to each
                               is normally determined by actuarial              accounting period an appropriate portion of
                               valuation, although there are differences in     the cost of providing post retirement
                               the range of acceptable assumptions compared     benefits that relate to the services
                               to U.S. GAAP.                                    provided by employees during the period.


Revenue recognition            Under Indian GAAP, revenue is generally          Under U.S. GAAP, revenues are not generally
                               recognized when performance is complete and      recognized until they are realized and
                               reasonable assurance exists regarding            earned. They are realized when products,
                               measurement and collectability of the            goods, other assets or services are
                               consideration.                                   exchanged for cash or claims to cash. They
                                                                                are earned when the entity has substantially
                               No specific standard exists on software          accomplished what it must do to be entitled
                               revenue recognition.                             to payment. These conditions are usually met
                                                                                by the time products or merchandise are
                                                                                delivered or services are rendered to
                                                                                customers. Further, revenue may not be
                                                                                recognized if there are significant
                                                                                uncertainties concerning collection for the
                                                                                sale or service.

</TABLE>

                                      13
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                                                                                Detailed guidance exists within SOP 97-2 on
                                                                                software revenue recognition. Key revenue
                                                                                measurement criteria include:

                                                                                   -Delivery of product
                                                                                   -Probability of collection
                                                                                   -Persuasive evidence of an arrangement
                                                                                   -Fixed or determinable vendor fee

                                                                                Additionally, vendor specific objective
                                                                                evidence must exist to permit allocation of
                                                                                the revenue to the various elements of the
                                                                                arrangement, such as software and service
                                                                                elements.


Software development costs     No specific standard exists on software          FAS 86 requires that all costs incurred to
                               development costs. Such costs are generally      establish the technological feasibility of
                               deferred and amortized over a period, not        computer software to be sold, leased, or
                               exceeding five years. Guidance is taken from     otherwise marketed be charged to expense as
                               the accounting standards on the research and     research and development when incurred. Once
                               development expenses.                            technological feasibility has been attained
                                                                                by the detailed program design process,
                                                                                capitalization of production costs should
                                                                                begin and cannot be deferred until a working
                                                                                model has been completed.

                                                                                Under FAS 86, product enhancement costs may
                                                                                qualify for some cost capitalization;
                                                                                maintenance and customer support are to be
                                                                                charged to expense when related revenue is
                                                                                recognized or when those costs are incurred,
                                                                                whichever occurs first.


Extraordinary and              Under Indian GAAP, extraordinary items are       Under U.S. GAAP, an item is considered
exceptional items              sometimes referred to as unusual items and       extraordinary only if it is unusual in
                               are defined as gains or losses which arise       nature and infrequent in occurrence.
                               from events or transactions that are             Extraordinary items are relatively rare and
                               distinct from the ordinary activity of the       are shown net of tax below income from
                               business and which are both material and         continuing operations. Gain or losses on the
                               expected to not to occur frequently or           extinguishment of debt are exceptional
                               regularly. Extraordinary items are disclosed     items.
                               separately in the statement of profit and
                               loss.                                            Exceptional items are those material items
                                                                                that result from events and transactions
                                                                                occurring within ordinary activities and
                                                                                need, by virtue of their size and frequency,
                                                                                to be separately
</TABLE>

                                      14
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                                                                                disclosed in order for there to be a proper
                                                                                understanding of the financial statements



Prior period items and         Prior period items are separately disclosed      Under U.S. GAAP, the cumulative effect (net
change in accounting           in the financial statements of the most          of tax) of a change in accounting principle
policies                       current year, together with their nature and     is generally recorded in the year of change
                               amount in a manner that their impact on          and shown in the income statement between
                               current profit and loss can be perceived.        extraordinary items and net income, without
                               Changes in accounting policies are               restating prior period financial statements.
                               recognized prospectively and are separately      Changes that are not recognized as
                               disclosed in the financial statements.           cumulative effect adjustments are reflected
                                                                                retroactively, (e.g. a change from the
                                                                                last-in-first-out method of accounting for
                                                                                inventory to another method). Correction of
                                                                                an error in previously issued financial
                                                                                statement is recognized by restating
                                                                                previously issued financial statements or
                                                                                are reflected as adjustments to opening
                                                                                balance of retained earnings.



Contingencies                  Under Indian GAAP, the amount of a               Under U.S. GAAP whether a contingency
                               contingent loss is provided for by a charge      results in a provision for loss or only
                               in the statement of profit and loss if: (a)      disclosures is based on an assessment as to
                               it is probable that future events will           the probability of a measurable loss having
                               confirm that, after taking into account any      occurred. A liability for a loss contingency
                               related probable recovery, an asset has been     should be accrued when: (a) it is probable
                               impaired or a liability has been incurred as     that a liability had been incurred at the
                               at the balance sheet date; and (b) a             date of the financial statements; and (b)
                               reasonable estimate of the amount of the         the loss can be reasonably estimated.
                               resulting loss can be made. Contingent gains
                               are not recognized in the financial
                               statements.


Share issue expenses           Under Indian GAAP, these expenses are either     U.S. GAAP requires such expenses to be
                               charged off to expense or adjusted against       written off when incurred against proceeds
                               the proceeds of capital or accounted for as      of capital or expensed if there are no
                               deferred expenses and amortized over a           proceeds to the company.
                               period not exceeding ten years on
                               straight-line basis.


Debt issue expenses            Debt issue expenses are charged to profit        Debt issue expenses are amortized over the
                               and loss account or accounted for as             term of the debt instruments, using the
                               deferred revenue expenses and amortized over     "interest method".
                               a
</TABLE>

                                      15
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
                               reasonable period of time, generally not
                               exceeding five years.


Related party transactions     Indian GAAP requires amounts outstanding at      U.S. GAAP defines a related party as any
                               the end of the financial year and maximum        party with which the reporting entity deals
                               balances outstanding during the year from        and one party controls or can significantly
                               related parties specified in the Companies       influence the management or operating
                               Act to be disclosed. The disclosures             policies of the other. Disclosure of
                               required are typically less extensive than       material related party transactions is
                               those required under U.S. GAAP.                  required, including the nature of the
                                                                                relationship; a description of the
                               Recently, the ICAI has issued an accounting      transaction, including transactions to which
                               standard on "Related Party Disclosures",         no amounts were described, for each income
                               which is effective for accounting years          statement presented; the dollar amount of
                               commencing on or after April 1, 2001.            transactions for each income statement
                                                                                presented; and amounts due from or to
                                                                                related parties as of the date of each
                                                                                balance sheet presented and the terms and
                                                                                manner of settlement.


Dividends                      Under Indian GAAP, dividends declared after      Under U.S. GAAP, proposed final dividends
                               the end of an accounting period "relating"       are not recognized as a reduction of
                               to that accounting period are recorded as a      retained earnings until they are formally
                               reduction of retained earnings during that       declared by the body with the authority to
                               accounting period, not during the period in      execute dividend declarations.
                               which they were declared.


Cash flow statements           Under Indian GAAP, publicly traded companies     A statement of cash flows is required under
                               are required to report on their cash flows       U.S. GAAP. The cash flows should be
                               under the SEBI guidelines. The SEBI              segregated by operating, financing and
                               guidelines are similar to U.S. GAAP,             investing activities. Cash and cash
                               although there are some classification           equivalents generally include cash and
                               differences.                                     investments with original maturities of less
                                                                                than three months. Bank overdrafts are
                                                                                considered as a current liability and are
                                                                                not included in cash. Some non-cash
                                                                                transactions are disclosed in a separate
                                                                                note or schedule.


Statement of changes in        No such statement is required.                   A statement of the changes in shareholders'
shareholders' equity                                                            equity is required under U.S. GAAP.


Comprehensive income           Indian GAAP does not require such                U.S. GAAP requires reporting and display of
                               disclosure.                                      comprehensive income and its components.
</TABLE>

                                      16
<PAGE>

<TABLE>
<CAPTION>
Subject                        Indian GAAP                                      U.S. GAAP
<S>                            <C>                                              <C>
Segment reporting              Indian GAAP does not require the reporting       Disaggregated information is required under
                               of financial information by major industry       U.S. GAAP regarding some of the operating
                               and geographical segments. However,              segments in which the company operates. For
                               disclosure of turnover and inventory for         each reportable segment information required
                               different classes of goods is required.          may include revenue, net income, total
                                                                                assets, revenues from external customers,
                               Recently, the ICAI has issued an accounting      revenues from transactions with other
                               standard on "Segmental Reporting", which is      operating segments of the same enterprise,
                               effective for accounting years commencing on     interest revenue, interest expense, and
                               or after April 1, 2001. The standard lays        income tax expense or benefit. This
                               down principles for reporting financial          information must only be disclosed if it is
                               information about the different types of         used by the chief operating decision maker
                               products and services an enterprise produces     in his/her measure of the company's profit
                               and the different geographical area in which     or loss. A reconciliation to the
                               it operates.                                     consolidated financial statements for all
                                                                                significant items including revenue, profit
                                                                                or loss and total assets is also to be
                                                                                provided.


Earnings per share (EPS)       Only basic EPS data is presented in the          Under U.S. GAAP, companies are required to
                               financial statements.                            make a dual presentation of basic and
                                                                                diluted EPS for each income figure included
                               Recently, the ICAI has issued an accounting      in the income statement.
                               standard on "Earnings Per Share", which is
                               effective for accounting years commencing on
                               or after April 1, 2001, which requires
                               disclosure of EPS.
</TABLE>

                                      17
<PAGE>

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 87.4% in fiscal 2001 as compared to fiscal 2000. As of March
31, 2001, we had 9,700 employees, whom we refer to as associates, worldwide as
compared to 5,752 associates as of March 31, 2000. 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 inability to manage our growth effectively could disrupt our business
and reduce our profitability.

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

     As of July 26, 2001, we owned 52.5% of the equity shares of Infoway and
100.0% of the equity shares of VCI. Since their inception in December 1995 and
January 1999, respectively, our subsidiaries Infoway and VCI have incurred
significant operating losses and negative cash flows. As of March 31, 2001, the
cumulative net losses incurred by Infoway were $71.0 million and by VCI were
$24.9 million. We cannot assure you that the operating losses or negative cash
flows of Infoway and VCI will not continue or increase in the future or that
Infoway and VCI will become profitable.

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 U.S. GAAP, amortized over the vesting period of the warrants or
options. We expect to recognize amortization of deferred stock compensation
expense in respect of our Associate Stock Option Plan, or ASOP, in the
approximate amounts of $11.6 million in fiscal 2002 and $2.8 million in fiscal
2003 based on the price of our equity shares on March 31, 2001 and in connection
with both granted and ungranted warrants and options on that date. In addition,
we expect to recognize amortization of deferred stock compensation expense in
respect of our Associate Stock Option Plan B, or ASOP B, in the approximate
amounts of $87 thousand in fiscal 2002 and $71 thousand in fiscal 2003 in
connection with granted warrants and options. Infoway expects to recognize
amortization of deferred stock compensation expense in respect of its Infoway
Associates Stock Option Plan, or IASOP, in the approximate amounts of $1.5
million in fiscal 2002 and $0.7 million in fiscal 2003 based on the price of
Infoway's ADSs on March 31, 2001 and in connection with both granted and
ungranted warrants and options. Depending on the market value of our equity
shares and Infoway's ADSs on the dates future grants are made, amortization of
deferred stock compensation expense with respect to ungranted warrants may cause
the expected amounts to change. The size 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. For example, we recognized
deferred stock compensation of $38.0 million under our ASOP and ASOP B Plans
during fiscal 2001 and $44.2 million was amortized and charged to earnings.

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
useful lives of goodwill. Changes in such estimates resulting from events many
of which are outside the control of the Company, 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.

<PAGE>

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 2001, our largest customer, General Electric
Company and its affiliates, accounted for 17.8% our information technology, or
IT, services revenues (excluding inter-segment revenues) and 15.5% of our total
revenues. In fiscal 2001, our second largest customer, State Farm Mutual
Automotive Insurance Company accounted for 9.3% of our IT services revenues
(excluding inter-segment revenues) and 8.1% of our total revenues. During fiscal
2000 and fiscal 2001, our five largest customers accounted for 42.4% and 39.0%,
respectively, of our IT services revenues (excluding inter-segment revenues) and
38.4% and 34.0%, 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 new IT
centers in the United States, United Kingdom, Japan and Singapore and 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 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 2000 and fiscal 2001, we
experienced associate attrition at a rate of 12.9% and 15.9%, 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. As of March 31, 2001,
substantially all of our personnel in the United States were working pursuant to
extended H-1B visas (319 persons) or temporary L-1 visas (684 persons). 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. For
example, this limit was reached in March 2000 for the fiscal year ending
September 30, 2000. 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.


                                      19
<PAGE>

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
significant portion of our services on a fixed-price basis, rather than on a
time-and-materials basis. During fiscal 2000 and fiscal 2001, we derived 26.1%
and 22.2%, 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 Infotech Software & Services and Tata Consultancy Services;

     .    U.S. IT services companies, such as Computer Sciences Corporation,
          Electronic Data Systems, Accenture, 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 unable to recoup our investment costs to develop our software
products.

     We may develop and market our own software products, which will require
significant capital expenditures. To date, we have developed only one software
product through our subsidiary VCI, in which we had invested $22.7 million
representing equity and other advances as of March 31, 2001. We expect that the
markets for any software products we develop will be highly competitive. We
cannot assure you that any products developed by us will be commercially
successful or that the costs of developing such new products will be recouped.
Additionally, software product revenues


                                      20
<PAGE>

typically occur in periods after the periods in which the costs are incurred for
development of such products. Delayed revenues may cause periodic fluctuations
of our results of operations.

Our chairman and managing director may continue to control our board and may
have interests which conflict with those of our other shareholders or holders of
our ADSs.

     Mr. B. Ramalinga Raju, our chairman, together with his brother and our
managing director, Mr. B. Rama Raju, and his brother-in-law and our director,
Mr. C. Srinivasa Raju, comprise one-half of our board of directors and as of
July 26, 2001, beneficially own in the aggregate approximately 11.3% of our
outstanding equity shares. As a result, these persons, acting together while
they are board members, have the ability to exercise significant influence over
most matters requiring approval by our board of directors, including the
appointment of directors to fill vacancies until the next shareholders' meeting
and significant corporate transactions. This could delay, defer or prevent a
change in control of our company, impede a merger, consolidation, takeover or
other business combination involving us, or discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of our company.

Our lenders are entitled to appoint directors to our board of directors.

     Our Articles of Association provide lenders the right to appoint their own
nominees to our board of directors as long as their loans are outstanding. A
lender may only exercise this right to the extent permitted under its loan
agreement with us. We do not currently have any lender nominated directors on
our board.

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.

                                      21
<PAGE>

Risks Related to Our Internet Services Business

Because we owned, as of July 26, 2001, 52.5% of the equity shares of Infoway,
which we believe is the largest integrated Internet and electronic commerce
services company in India based on number of customers as of March 31, 2001, we
face risks related to Infoway's business.

Infoway and its subsidiary IndiaWorld Communications are engaged in disputes
which, if resolved unfavorably, could impose costs on Infoway or have other
undesirable effects.

     Infoway and its subsidiary IndiaWorld Communications are involved in
litigation with a party located in the United States which has alleged, among
other things, that the activities of IndiaWorld Communications infringe a United
States trademark for the term "IndiaWorld" and associated logos and trade dress
purportedly owned by this third party and that the third party has an ownership
interest in the underlying technology. Infoway have been advised by the prior
owners of IndiaWorld Communications that no such infringement or
misappropriation has taken place. This matter is currently pending in federal
court in San Diego, California. Infoway's contract with the prior owners of
IndiaWorld Communications includes an indemnity for past infringement or
misappropriation. Infoway and IndiaWorld Communications have also been contacted
by a party that alleges, among other things, that he is entitled to an equity
ownership in IndiaWorld Communications. Infoway believes that this claim is also
covered by the contractual indemnity provided by the prior owners of IndiaWorld
Communications. Nonetheless, any dispute such as those described above creates
uncertainty as to the possible outcome, including whether or not our indemnity
will be effective in protecting Infoway, and also could divert management time
and attention away from its business.

The market price of our equity shares is strongly affected by Infoway's volatile
stock price.

     As of July 26, 2001, we owned 12.2 million equity shares of Infoway, which
represented 52.5% of Infoway's outstanding equity shares. Since its initial
public offering of ADSs in October 1999, the trading price of Infoway's ADSs has
ranged from a low of $1.79 to a high of $113.0 per ADS. As a result, the public
stock price of Infoway's ADSs owned by our company has ranged from a low of
approximately $87.2 million to a high of approximately $5.5 billion.
Fluctuations in the price of Infoway's ADSs have had a significant impact on the
market price of our equity shares and will have a significant impact on the
market price of our ADSs. Furthermore, because Infoway is an Internet service
provider which owns points of access to international bandwidth, foreign
ownership in Infoway, which will include all of Infoway's ADSs, is limited to
74.0% under present Indian law. Further, foreign ownership beyond 49% shall
require prior government approval. This limitation means that, unless Indian law
changes, more than 74.0% of Infoway's equity shares will never be available to
trade in the United States market.

The success of Infoway's business depends on the acceptance of the Internet in
India which may be slowed or halted by high bandwidth costs and other technical
obstacles in India.

     Bandwidth, the measurement of the volume of data capable of being
transported in a communications system in a given amount of time, remains very
expensive in India, especially when compared to bandwidth costs in the United
States. Bandwidth rates are commonly expressed in terms of Kbps (kilobits per
second, or thousands of bits of data per second) or


                                      22
<PAGE>

Mbps (megabits per second, or millions of bits of data per second). Prices for
bandwidth capacity are set by the TRAI and have remained high due to, among
other things, capacity constraints. High bandwidth prices have continued
notwithstanding rapid increases in demand for Internet access and a very
competitive pricing environment for those services which has resulted in
decreasing average selling prices.

The limited installed personal computer base in India limits Infoway's pool of
potential customers and restricts the amount of revenues that Infoway's consumer
Internet access services division may generate.

     The market penetration rates of personal computers and online access in
India are far lower than such rates in the United States. For example, according
to International Data Corporation, in 2000 the Indian market contained
approximately 4.4 million Internet users compared to a total population in India
of 1.0 billion, while the U.S. market contained approximately 135 million
Internet users compared to a total population in the U.S. of 275 million.
Alternate methods of obtaining access to the Internet, such as through set-top
boxes for televisions, are currently not popular in India. There can be no
assurance that the number or penetration rate of personal computers in India
will increase rapidly or at all or that alternate means of accessing the
Internet will develop and become widely available in India. While the personal
computer penetration level in India is relatively low, Infoway is addressing the
demand for public Internet access through the establishment of a retail chain of
public Internet access centers, which Infoway refers to as "cybercafes."
Although this service creates a larger market, it also imposes on the operator
of the cybercafe the considerable costs of providing the consumer access to a
personal computer and related hardware and software.

The high cost of accessing the Internet in India limits Infoway's pool of
potential customers and restricts the amount of revenues that Infoway's consumer
Internet access services division may generate.

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

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

     Many of Infoway's existing and proposed products and services are designed
to facilitate electronic commerce in India, although there is relatively little
electronic commerce currently being conducted in India. Demand and market
acceptance for these products and services by businesses and consumers,
therefore, are highly uncertain. Although the Indian Parliament has passed the
Information Technology Act, 2000, several critical issues concerning the
commercial use of the Internet in India, such as legal recognition of electronic
records, validity of contracts entered into online and the validity of digital
signatures, remain uncertain. In addition, many Indian businesses have deferred
purchasing Internet access and deploying electronic commerce initiatives for a
number of reasons, including the existence or perception of, among other things:

     .    inconsistent quality of service;

     .    need to deal with multiple and frequently incompatible vendors;

     .    inadequate legal infrastructure relating to electronic commerce in
          India;

     .    lack of security of commercial data, such as credit card numbers; and

     .    low number of Indian companies accepting credit card numbers over the
          Internet.

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


                                      23
<PAGE>

Infoway's ability to compete in the Internet service provider market is hindered
by the fact that its principal competitor is a government-controlled provider of
international telecommunications services in India which enjoys significant
competitive advantages over Infoway.

     VSNL is a government-controlled provider of international
telecommunications services in India. VSNL is also the largest Internet service
provider in India and, according to information published on VSNL's website, had
631,000 subscribers as of March 31, 2001. VSNL enjoys significant competitive
advantages over Infoway, including the following:

     .    Longer service history. VSNL has offered Internet service provider
          services since August 1995, whereas Infoway has offered Internet
          service provider services only since November 1998.

     .    Access to network infrastructure. Because VSNL is controlled by the
          Government of India, it has direct access to network infrastructure
          which is owned by the Indian government.

     .    Greater financial resources. VSNL has significantly greater total
          assets and annual revenues than Infoway.

          Recently, VSNL has continued to aggressively reduce consumer Internet
access prices despite the lack of offsetting reductions in prevailing bandwidth
tariffs payable by private competitors, such as Infoway. Infoway believes that
these practices constitute an improper cross-subsidy funded by VSNL's present
monopoly in long distance telephone service. The charges for international
gateways and other services presently being provided by VSNL are the subject of
a dispute pending before the TRAI and the Telecom Disputes Settlement and
Appellate Tribunal between VSNL and private Internet service providers,
including Infoway. Unless there is a change in government policy or favorable
resolution of this dispute, or until Infoway is able to reduce its bandwidth
costs through other means, Infoway will continue to face difficult market
conditions in the consumer access business.

          These competitive issues may prevent Infoway from attracting and
retaining subscribers and generating advertising revenue. This could result in
loss of market share, price reductions, reduced margins or negative cash flow
for Infoway's operations.

Infoway may be required to further lower the rates it charges for its products
and services in response to new pricing models introduced by new and existing
competition in the Internet services market which would significantly decrease
its revenues.

          A significant number of new competitors have recently entered India's
recently liberalized Internet service provider market, and Infoway expects
additional competitors to emerge in the near future. As of December 31, 2000,
approximately 437 companies had obtained Internet service provider licenses in
India, including 79 companies which have obtained licenses to offer Internet
service provider services throughout India. New entrants into the national
Internet service provider market in India may enjoy significant competitive
advantages over Infoway, including greater financial resources, which could
allow them to charge Internet access fees that are lower than Infoway's in order
to attract subscribers. Since May 2000, Infoway has offered unlimited Internet
access to consumers for a fixed price. A number of Infoway's competitors,
including VSNL, Dishnet and Mantra, also offer unlimited Internet access for a
fixed price. In addition, some competitors offer free Internet service. These
factors have resulted in significant reduction in actual average selling prices
for consumer ISP services over the past several quarters. Infoway expects the
market for consumer Internet access to remain extremely price competitive.

          Infoway's corporate and e-consulting services business faces
significant competition from well-established companies, including Global E-
Commerce Limited, Sprint-RPG Limited and WIPRO-CSD. Reliance Infocom, a member
of the Reliance Group, is building a nationwide fiber optic network in India and
has announced plans to provide a range of value-added services, including
corporate connectivity services.

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

                                      24
<PAGE>

          Increased competition may result in reduced operating margins or
operating losses, loss of market share and diminished value in Infoway's
services, as well as different pricing, service or marketing decisions. There
can be no assurance that Infoway will be able to successfully compete against
current and future competitors.

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

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

     .    Infoway's Internet service provider license has a term of 15 years and
          Infoway has no assurance that the license will be renewed. If it is
          unable to renew its Internet service provider license in 2013 for any
          reason, Infoway will be unable to operate as an Internet service
          provider in India and will lose one of its primary sources of revenue.

     .    The Telecom Regulatory Authority of India, or TRAI, a statutory
          authority constituted under the Telecom Regulatory Authority of India
          Act, 1997, maintains the right to regulate the prices Infoway charges
          its subscribers. The success of Infoway's business model depends on
          its ability to price its services at levels it believes is
          appropriate. If the TRAI sets a price floor, Infoway may not be able
          to attract and retain subscribers. Likewise, if the TRAI sets a price
          ceiling, Infoway may not be able to generate sufficient revenues to
          fund its operations. Similarly, an action of the Indian Parliament may
          impact Infoway's ability to set the prices for its services.

     .    The Government of India maintains the right to take over Infoway's
          entire operations or revoke, terminate or suspend its license for
          national security and similar reasons without compensation to Infoway.
          If the Government of India were to take any of these actions, Infoway
          would be prevented from conducting all or part of its business.

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

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

Infoway's business may not be compatible with delivery methods of Internet
access services developed in the future.

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

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 and economic developments affecting
India.


                                      25
<PAGE>

Political instability could seriously harm business and economic conditions in
India generally and our business in particular.

     During the past decade and in particular since 1991, 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. Recent 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.

Economic sanctions imposed on India by the United States could restrict our
access to technology and limit our ability to operate our business.

     In May 1998, the United States imposed economic sanctions against India in
response to India's testing of nuclear devices. Since then, the United States
has waived some of these sanctions after its discussions with the government of
India. These sanctions, or additional sanctions, could restrict our access to
technology that is available only in the United States and that is required to
operate our business. We cannot assure you that any of these sanctions will
continue to be waived, that additional economic sanctions of this nature will
not be imposed, or that these sanctions or any additional sanctions that are
imposed will not disrupt our business or increase our costs or adversely affect
the market for our ADSs in the United States.

Regional conflicts in South Asia could adversely affect the Indian economy and
our company.

     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. Further, in October 1999, the
leadership of Pakistan changed as a result of a coup led by the military. Events
of this nature in the future could adversely affect the Indian economy and the
market for securities of Indian companies, including our ADSs, and the market
for our services.

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 Bombay Stock Exchange, or the BSE, the National Stock Exchange and the
Hyderabad Stock Exchange 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 recent amendments to Indian regulations, the depositary bank is able
to accept deposits of outstanding equity shares and issue ADRs evidencing ADSs
representing such equity shares, but only to the extent, and limited to the
number, of ADSs converted into underlying equity shares.


                                      26
<PAGE>

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, 1998 through March 31, 2001, the
value of the rupee against the U.S. dollar declined by approximately 18.6%. In
fiscal 2000 and fiscal 2001, our U.S. dollar-denominated revenues represented
85.4% and 82.0%, 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. In fiscal 2000 and fiscal
2001, our foreign currency translation losses were approximately $2.4 million
and $12.4 million, respectively. 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 BSE, 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 the 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 from April 1, 2000. All facilities registered
in the program before March 31, 2000, which include all of our existing
facilities in India and registrations for 10 new facilities which have not yet
been constructed, will continue to benefit from this program under present law.
Over time, as we construct 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 executive officers, 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

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<PAGE>

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.

The financial turmoil in other countries could cause our business or the price
of our ADSs to suffer.

     Financial turmoil in several Asian countries, Russia and elsewhere in the
world in 1998 and 1999 has adversely affected market prices in the world's
securities markets, including the United States and Indian markets. Continued or
increased financial downturns in these countries could cause further decreases
in prices for securities of companies located in developing economies, such as
our company.

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. For example, in 1999,
our share price on the BSE ranged from a high of Rs.459.80 ($10.57) in December
1999 to a low of Rs.73.10 ($1.72) in January 1999. In 2000, our share price on
the BSE reached a peak of Rs.1,445.99 ($33.13) and a low of Rs.291.50 ($6.23).
In 2001, up to July 26, 2001, our share price on the BSE reached a peak of Rs.
429.70 ($9.11) and a low of Rs. 145.00 ($3.08). On July 26, 2001, the closing
price of our shares on the BSE was Rs.146.80 ($3.11). 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. 47.15 per $1.00 from July 26, 2001 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.

     The laws of India do not protect intellectual property rights to the same
extent as laws in the United States, and the global nature of our IT services
and the Internet makes it difficult to control the ultimate destination of our
products and services. For example, Indian statutory law does not protect
service marks. 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" and "VisionCompass" as trademarks in India. 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. We cannot assure you that the steps taken by us in
this regard will be adequate to prevent misappropriation of 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.


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<PAGE>

     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 BSE 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 10.6% 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, 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.


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<PAGE>

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.

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 July 26, 2001, we have an aggregate of 309,627,300 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. We and Messrs. B. Ramalinga Raju, B. Rama Raju and C. Srinivasa
Raju who together hold 11.3% of our outstanding equity shares as of July 26,
2001, have agreed not to offer, sell or agree to sell, directly or indirectly,
or otherwise dispose of any equity shares without the prior written consent of
Merrill Lynch for 180 days from May 15, 2001, subject to specified exceptions.

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

     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


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<PAGE>

principal place of business is the Satyam Technology Center located at
Bahadurpally Village, Qutbullapur Mandal, R.R. District 500855, Hyderabad, Andra
Pradesh, India, telephone number (91) 40-309-7505. 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 although a significant majority of our revenues is derived from the
United States.

     We effected a two-for-one stock split 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 1999, 2000 and 2001
were comprised mainly of expansion of infrastructure facilities in India and
abroad. Our capital expenditures amounted to $35.2 million in fiscal 1999, $22.4
million in fiscal 2000 and $42.3 million in fiscal 2001. In fiscal 1999, our
capital expenditures were incurred mainly for expansion of offshore facilities
in Hyderabad, Chennai and Pune and for setting up of offsite development centers
in New Jersey, Atlanta, Chicago and Santa Clara in the United States. In fiscal
2000, our capital expenditures were incurred mainly for expansion of offshore
facilities in Hyderabad, Pune and Bangalore and for a major upgrade in the data
and voice communication network. In fiscal 2001, our capital expenditures were
incurred mainly for expansion of offshore facilities in Hyderabad, Chennai and
acquisition of land in Bangalore.

     Our principal capital expenditures currently in progress are expansion of
facilities in Hyderabad, Bangalore, Chennai and Pune; and in our offsite centers
in Europe and Asia Pacific, and amount to approximately $20.0 million, which
will be financed mainly through the proceeds of our ADS offering in May 2001 and
cash generated from operations.

Business Overview

Background

     We are the fourth largest provider of IT services in India, based on the
amount of export revenues generated during the last fiscal year. 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, 2001 we had 7,798 technical associates servicing over 300 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 Infoway, which we believe
is the largest integrated Internet and electronic commerce services company in
India, based on the number of customers as of March 31, 2001. Infoway's shares
are listed only in the United States and are quoted on the Nasdaq National
Market under the symbol "SIFY". 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.

Our Core Business Segment--IT Services

Industry Overview

     In 2000, the worldwide IT services industry grew to approximately $385.0
billion, an increase of approximately 10% over 1999, and is projected to grow at
a compound annual growth rate of 11% to reach $583.0 billion by the year 2004
according to International Data Corporation. 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.


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     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 estimates that export revenue generated from the
software and service industry in India was approximately $4.0 billion in fiscal
2000 and will reach $14.0 billion by fiscal 2003. 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 122,000 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 2001 NASSCOM
analysis of international quality standards of the top 400 Indian IT services
companies showed that 195 had acquired ISO 9000 and 74 more companies were in
the process of acquiring the same. According to NASSCOM, currently 20 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.


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     Global delivery model. We provide our services through our offshore centers
located in India, our seven offsite centers located in the United States, United
Kingdom, Japan and Singapore 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 allows 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.

     Focus on eBusiness. Our eBusiness services include designing, developing,
integrating and maintaining Internet-based applications, such as eCommerce
websites, and implementing and integrating 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.

     In-depth industry knowledge. We have developed significant industry
expertise in insurance, financial services, 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, 2001, 53.7% of our technical
associates had bachelors degrees in engineering, and 29.3% had masters degrees
in engineering, technology or computer applications. 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. According to
NASSCOM, only 37 companies worldwide have been assessed at level five. 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.

Our Growth 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 2000
and fiscal 2001, we generated 77.1% and 80.6%, 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.

     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. We expect to open additional
sales and marketing offices in Europe and the Asia-Pacific region and


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to establish new offsite centers in other major markets 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.

     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 company's
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 Service Offerings

     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


                                      34
<PAGE>

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.

     eBusiness. As part of our service offerings, we focus on solving the
eBusiness needs of our customers. Our eBusiness services include designing,
developing and maintaining Internet-based applications, such as eCommerce
websites, and integrating them with our customers' existing computer systems and
packaged software applications. For example, we have designed, developed and
deployed business-to-business applications for Intercontinental Steel Singapore
to facilitate on-line trading of steel and for Ford Motor Company to enable
dealer integration and on-line procurement. We have also created
business-to-consumer applications to facilitate remote banking kiosks that offer
automatic teller transactions over the Internet, on-line auctions and on-line
retail sales. We also help our customers assess their eBusiness needs, develop
strategies and formulate implementation plans. Revenues derived from eBusiness
services comprised 0.1%, 20.6% and 27.5% of our IT services revenues (excluding
inter-segment revenues) in fiscal 1999, fiscal 2000 and fiscal 2001.

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 68.1% and 60.5% to our IT services revenues in
fiscal 2000 and fiscal 2001, 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
four offsite centers located in Atlanta, Georgia; Chicago, Illinois; Parsippany,
New Jersey; and Santa Clara, California. Outside of the United States, we have
three offsite centers located in Tokyo, Japan; Basingstoke, U.K.; and Singapore.
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 enables us to compete more effectively with local IT
service providers. As of March 31, 2001, 180 of our technical associates worked
in our offsite centers compared to 101 as of March 31, 2000. Projects completed
at our offsite centers contributed 5.3% to our IT services revenues in fiscal
2000 and 4.8% in fiscal 2001.

     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. As of March 31, 2001, 1194 technical
associates worked at our customers' premises compared to 548 as of March 31,
2000. Projects completed by our onsite teams contributed 26.6% of our IT
services revenues in fiscal 2000 and 34.7% in fiscal 2001.


                                      35
<PAGE>

     Quality and project management. Critical to the success of our delivery
model are well established quality management systems and sophisticated project
management techniques. Accordingly, a strict quality assurance and control
program forms an integral part of our processes. We are certified under ISO 9001
TickIT. In March 1999, our IT engineering process received a level five
assessment under the Capability Maturity Model developed by the SEI-CMM. Our
quality management system involves, among other things, a rigorous review of
software development processes, review and testing of all work products and
regular internal quality audits.

     Maintaining a high level of customer satisfaction requires sophisticated
project management techniques to deliver services seamlessly across multiple
locations. We have developed, and rigorously apply, a sophisticated project
management methodology to help ensure timely, consistent and accurate delivery
of our IT services to our customers. Through this methodology, we provide our
customers with customized status reports and allow our customers to track the
status of projects over the Internet.

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 $78.4 million, $120.4 million and
$218.7 million in IT services revenues in fiscal 1999, fiscal 2000 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 2000 and fiscal 2001, our largest
customer, General Electric Company and its affiliates, accounted for 15.7% and
17.8%, respectively, of our IT services revenues (excluding inter-segment
revenues) and 14.2% and 15.5%, respectively, of our total revenues. During the
same two periods, our second largest customer, State Farm Mutual Automotive
Insurance Company, accounted for 13.1% and 9.3%, respectively, of our IT
services revenues (excluding inter-segment revenues) and 11.9% and 8.1%,
respectively, of our total revenues. In fiscal 1999, our largest customer, State
Farm Mutual Automotive Insurance Company, accounted for 13.7% of our IT services
revenues (excluding inter-segment revenues) and 13.3% of our total revenues. In
fiscal 1999, fiscal 2000 and fiscal 2001, our five largest customers accounted
for 40.2%, 42.4% and 39.0%, respectively, of our IT services revenues (excluding
inter-segment revenues) and 39.2%, 38.4% and 34.0%, respectively, of our total
revenues.

Sales and Marketing

     We sell and market our services through 12 main sales and marketing
offices. In the United States, we have 5 sales and marketing offices located in
Atlanta, Chicago, Parsippany, Santa Clara, and Vienna. We also have sales and
marketing offices in Basingstoke, Sydney, Singapore, Dubai and Tokyo and a
network of business representatives, who work on a commission basis, in several
countries. Our Global Sales and Marketing Group, based in the United States,
coordinates all of our marketing and sales operations. We focus on establishing
and maintaining long-term relationships with our customers.

     Our sales and marketing operations are divided into three sub-groups. One
group consists of sales associates who work solely on acquiring new customers.
Another group consists of account managers who market further services to
existing customers. The third group manages our many marketing alliances. As of
March 31, 2001, we employed 123 sales and marketing associates, of whom 8 were
located in India.

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. We believe our two most
significant joint ventures are:

     GE Affiliate: In December 1998, we entered into a joint venture with an
affiliate of GE Industrial Systems. The joint venture company provides the GE
affiliate with engineering design services, software development and system
maintenance services. The joint venture completed 40 projects in its first year
of operations. It also received ISO 9001 certification in December 1999 and has
applied for 18 U.S. patents. Subject to the joint venture meeting performance
targets and other conditions, this GE affiliate will buy out our interest in the
joint venture in 2001 for a purchase price of $4.0 million. While this joint
venture does not currently provide us with significant revenues, we believe this
joint venture


                                      36
<PAGE>

is significant because it has helped us to strengthen our relationship with one
of our largest customers, General Electric Company and its affiliates.

     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.
Through a company incorporated in Delaware to operate the joint venture, Satyam
Manufacturing Technology, Inc., we own a 76.0% equity interest in the joint
venture and TRW owns a 24.0% interest. We manage this joint venture, which is
largely focused on the automotive sector worldwide. TRW has targeted to
outsource to the joint venture at least $200 million of revenues from
information systems and engineering work through December 31, 2005. TRW may
adjust this initial target revenue amount before December 31, 2001, but the
adjusted target revenue amount cannot be less than $100 million. As part of the
joint venture arrangement with TRW, in August 2000 we issued to ESL Inc., an
affiliate of TRW, warrants to purchase 319,480 of our equity shares in exchange
for a payment of Rs.22.9 million (approximately $0.5 million). Each warrant
entitles its holder to purchase five of our equity shares for Rs.644.40 per
share during an exercise period from January 22, 2002 to February 21, 2002. We
believe this joint venture is significant because of the revenue we expect to
receive from this relationship.

     For additional information regarding the joint venture with TRW Inc. and
the warrants issued to ESL Inc., please see "Item 5. Operating and Financial
Review and Prospects--Overview--Joint Venture with TRW Inc. ".

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 Infotech Software & Services 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
satellite communications network. 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. 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 and Software Technology Park of India which permit data communication
between our facilities in India and between such facilities and our customers'
facilities abroad. All of our Indian satellite links terminate at our
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.

     In December 2000, 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 five 512
kbps international links and one 64 kbps international link. In addition, we
have 256 kbps committed information rate high speed links connecting various
cities in India, and our intra-city links are connected by 2048 kbps lines
expandable up to 8192 kbps. We can add or reduce the number of such links based
on capacity needs.

     During business hours, the average loading of SatyamNet is currently
approximately 50% of total capacity, with sudden bursts in usage reaching
approximately 75%. 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.


                                      37
<PAGE>

     We have not experienced any significant downtime in our communications
network during the last 12 months. 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 also stock spare parts for our network equipment so
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 arrangements with two virus
protection vendors for the automatic identification of viruses and the dispatch
or development of appropriate software countermeasures. We backup our data on a
regular basis to protect against losses. We have also created a secondary site
in New Jersey for contingency and disaster recovery purposes.

Facilities

     Our corporate headquarters, the Satyam Technology Center, is located in
Hyderabad, India. We own this facility, which provides a modern workspace for
approximately 1400 software engineers in two buildings covering an aggregate
area of approximately 173,000 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
approximately 140,000 square foot area.

     We also have additional software technology centers located in Bangalore,
Bhubaneshwar, Chennai, Hyderabad and Pune, with facilities aggregating
approximately 570,000 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 three offsite centers in Tokyo, Japan,
Basingstoke, United Kingdom and Singapore. We lease all of our offsite centers
with terms ranging from two years to seven years.

     We have plans to construct new facilities on our own land in Bangalore,
Pune and Hyderabad and in other locations in India with overall plans to
increase associate capacity by approximately 1,000 in fiscal 2002. We also have
plans construct our facilities in existing as well as in new offsite centers.
The expansion of facilities will improve our ability to to meet growing business
demand. These proposed expansion of facilities primarily include construction of
new facilities and addition of equipment in our own land in Hyderabad and
Bangalore; expansion of facilities in new leased premises in Pune and Chennai.
The investment in these expansions is estimated to be around $ 25 million and
would be financed through proceeds of our ADS offering in May 2001 and cash
generated from operations. These facilities are expected to be completed by
fiscal 2002.

Other Business Segments--Internet Services

Business Overview

     As of July 26, 2001, we owned 52.5% of the equity shares of Infoway. We
believe Infoway is the largest integrated Internet 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.
Infoway's primary businesses include the following:

     .    corporate network/data and e-consulting services;

     .    consumer Internet access services; and


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<PAGE>

     .    online portal and content offerings.

     Infoway's comprehensive range of products and services enables its business
and consumer customers to communicate, transmit and share information, access
online content and conduct business remotely using Infoway's private data
network or the Internet.

     Infoway began providing corporate network/data and e-consulting services to
businesses in April 1998, and as of March 31, 2001 Infoway had more than 650
corporate customers. Infoway launched its Internet service provider business in
November 1998, becoming the first private Internet service provider to begin
service after the Indian government, which controls the largest Internet service
provider in India, opened the market to private competition. Infoway currently
has more than 460,000 subscribers for its SatyamOnline services. Infoway also
operates an online portal, www.sify.com, and related content sites specifically
tailored for Indian interests worldwide. Sify.com is one of India's leading
portals with services in areas such as news, travel, finance, health and
shopping in addition to e-mail, chat and search. During March 2001, Infoway's
websites generated approximately 180 million page views.

     Infoway is seeking to become the premier integrated Internet and electronic
commerce solutions provider to businesses and consumers in India. We believe
that demand for Infoway's services is significant in India and growing rapidly
as businesses and consumers seek alternatives to the communications services
offered by India's government-controlled telecom providers.

Industry Overview

     According to International Data Corporation, the total number of Internet
users worldwide is expected to grow at a compound annual growth rate of 27% from
approximately 196 million in 1999 to 502 million in 2003. We believe that the
large and increasing number of home and office computers linked to the Internet,
advances in network design, increased availability of Internet-based software
and applications, the emergence of useful content and electronic commerce
technologies, and convenient, fast and inexpensive Internet access will continue
to drive Internet growth and usage in the near future. International Data
Corporation estimates that revenue from Internet web hosting services worldwide
will grow at a rate that averages 96.0% annually from $0.8 billion in 1998 to
$11.8 billion in 2002. International Data Corporation also estimates that
revenue from electronic commerce spending worldwide will grow from $111 billion
in 1999 to $1,317 billion in 2003.

     As with many developing nations, the telecommunications infrastructure in
India historically has been controlled by government-controlled telecom
providers. The resulting service has been and remains inferior to service in
developed countries. At the same time, however, the Indian economy continues to
modernize and expand, particularly in sectors such as software development that
are dependent on a reliable communications network. The growth of these
industries is leading to an increasing base of personal computers and wired
homes and businesses in India with a resulting increased demand for Internet
services. We believe these trends, which mirror trends in more mature economies,
will continue to develop in India. Set forth below is a table summarizing
International Data Corporation's projections for Internet use and electronic
commerce revenue in India:

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


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

Growth Strategy

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


                                      39
<PAGE>

     .    Invest in the continued enhancement and expansion of its network
          infrastructure to support customer growth, enter new markets and
          accommodate increased customer usages;

     .    Increase penetration in its existing markets by expanding awareness of
          the "SatyamOnline" brand name to capitalize on its first mover
          advantage in India;

     .    Expand its products and services with new technologies to enable its
          customers to use the Internet more effectively;

     .    Strengthen its Internet portal and other Internet content websites
          with more content tailored to Indian interests worldwide;

     .    Expand its customer distribution channels through strategic alliances
          to take advantage of the sales and marketing capabilities of its
          strategic partners; and

     .    Pursue selective strategic investments, alliances and acquisitions to
          expand its customer base, increase utilization of its network and add
          new technologies to its product mix.

Internet Service Offerings

     Corporate Network/Data and e-Consulting Services. Infoway offers a
comprehensive suite of technology products and network-based services that
provide its corporate customers with comprehensive Internet and private network
access. Infoway's products and services enable its corporate customers to offer
a full range of business-to-business and electronic commerce-related services.
Infoway's corporate network/data and e-consulting services consist of the
following:

     .    Internet access. Infoway offers continuous high-speed Internet access,
          as well as dial-up Internet access, to businesses in India.

     .    Private network services. Infoway offers a wide variety of private
          network services for both small and large corporate customers.

     .    Business-to-business commerce applications. Infoway delivers complete
          data transfer and business-to-business electronic commerce
          applications to its corporate customers through its relationships with
          key vendors of Internet-related hardware, software and services.

     .    Web-based services. Infoway provides comprehensive website design,
          development, implementation and hosting services.

     .    Data Center. Infoway's 20,000 square foot data center in Mumbai
          (Bombay) has been designed to act as a reliable, secure and scalable
          facility to host mission-critical applications with the capacity to
          host 4,000 servers.

     Recent initiatives in Infoway's corporate network and technology services
business include:

     .    International Gateways. Infoway has launched private international
          gateways to the Internet in partnership with Singapore
          Telecommunications Ltd., Loral Cyberstar and New Skies in five
          strategic cities in India. These private international gateways enable
          Internet users to access globally available data faster and provide
          enhanced service to customers.

     .    Northern California Branch. In connection with Infoway's acquisition
          of Indiaplaza.com, Infoway recently determined to open a branch in San
          Jose, California to focus on corporate network and e-consulting
          services opportunities in the United States.

     .    SafeScrypt Limited. In partnership with Verisign, a leading provider
          of Internet trust services, Infoway has formed a wholly-owned
          subsidiary, SafeScrypt Limited, to provide managed digital
          certificate-based authentication services in India.

     Infoway's corporate network/data and e-consulting services division
accounted for approximately 87.1%, 42.5% and 64.6% of Infoway's revenues in
fiscal 1999, 2000 and 2001, respectively. The decrease in corporate network and
e-consulting services division revenues as a percentage of total revenues from
fiscal 1999 to fiscal 2000 was due to


                                      40
<PAGE>

Infoway's introduction of consumer Internet access services in November 1998.
The increase in corporate network and e-consulting services division revenues as
a percentage of total revenues from fiscal 2000 to fiscal 2001 was due to the
growth of Infoway's corporate customer base combined with increased competition
and pricing pressures in the consumer Internet access services division. Recent
trends cause us to believe that corporate services will continue to be the
largest part of Infoway's business for the immediate future.

     Consumer Internet access services. Infoway offers dial-up Internet access,
e-mail and web page hosting to consumers in India through convenient online
registration and user-friendly software. In November 1998 after deregulation of
the Internet service provider market in India, Infoway launched its Internet
service provider business and became the first private Internet service provider
in India. As of March 31, 2001, Infoway had 460,000 consumer Internet
subscribers.

     In addition, Infoway offers public Internet access to consumers through
cybercafes, which it refers to as "iways." Because the personal computer
penetration rate in India is relatively low, iways are designed to provide
public Internet access to the significant portion of the Indian population that
does not own a personal computer. As of March 31, 2001, Infoway operated 301
iways in six cities. Infoway is the second largest national provider, and the
largest private provider, of Internet access and Internet services to consumers
and businesses in India, based on the number of subscribers as of March 31,
2001. Currently, the largest national Internet service provider in India is
VSNL, which is majority-owned by the Indian government.

     Infoway's consumer Internet access services division accounted for
approximately 12.9%, 52.5% and 26.3% of its revenues in fiscal 1999, 2000 and
2001, respectively. The increase in consumer Internet access services division
revenues as a percentage of total revenues from fiscal 1999 to fiscal 2000 was
due to the introduction of Infoway's consumer Internet access services in
November 1998. The decrease in consumer Internet access services division
revenues as a percentage of total revenues from fiscal 2000 to fiscal 2001 was
due to the growth of Infoway's corporate customer base combined with increased
competition and pricing pressures in the consumer Internet access services
division.

     Online portal and content offerings. Infoway operates an online portal,
www.sify.com, that functions as a principal entry point and gateway for
accessing the Internet by providing useful web-related services and links.
Infoway also offers related content sites specifically tailored to Indian
interests worldwide in six local Indian languages. Sify.com generated 180
million page views in March 2001.

     .    IndiaWorld Communications. Infoway completed the acquisition of
          IndiaWorld in June 2000. Prior to its acquisition by Infoway,
          IndiaWorld Communications was a leading provider of Internet content
          and services in India.

     .    Online Trading in Securities. Infoway formed a joint venture with
          Refco Group Ltd. to meet the growing demand among Internet subscribers
          for online investing services in India. The joint venture will offer
          online equity and futures trading for retail customers once online
          trading is implemented by the stock exchanges in India, as well as
          execution and clearing services for financial institutions. Infoway
          has a 40% ownership interest in the joint venture.

     .    Online Travel Services. Infoway entered into a tie-up with AFL
          Indtravels, the Indian affiliate of Carlson Wagonlit Inc., to offer
          online air travel, hotel and car hire services on sify.com.

     .    America Online - AOL Instant Messenger. Infoway has a multi-year
          agreement with AmericaOnline to distribute a co-branded version of the
          AOL Instant Messenger service to Infoway's customers.

     .    CricInfo Limited Investment. In July 2000, Infoway acquired a 25%
          stake in CricInfo Limited. CricInfo Limited operates www.cricinfo.com,
          which is one of the most popular cricket sites in the world. Infoway
          receives a portion of the revenues generated from advertising and
          electronic commerce business generated by www.cricinfo.com's India
          site.

     .    Indiaplaza.com Acquisition. In July 2000, Infoway entered into an
          agreement to acquire all of the outstanding capital stock of
          IndiaPlaza.com, Inc., a private company incorporated in California.
          Infoway completed this acquisition in December 2000. Indiaplaza.com
          operates an online shopping mall catering to Indian interests.

     Prior to fiscal 2000, this division did not constitute a material portion
of Infoway's total revenues. In fiscal 2000 and 2001, Infoway's online portal
and content offerings division accounted for approximately 5.0% and 8.1%,
respectively, of Infoway's total revenues.


                                      41
<PAGE>

Strategic Alliances

     Infoway maintains a number of strategic relationships with key vendors of
Internet-related hardware, software and services. Some of these relationships
are exclusive to Infoway in India, subject in some cases to minimum sales
thresholds. These relationships result in two significant benefits. First, they
provide Infoway with the ability to offer valuable products and services to
Infoway's customers in India. In addition, these relationships help Infoway
market its services by providing it with access to its partners' customer bases.
Infoway's network and related services are focused on meeting the needs of
corporate customers, particularly in manufacturing and service organizations,
which have a need to coordinate their activities with satellite operations such
as dealers, distributors, agents and suppliers. Broadvision, Open Market,
Sterling Commerce and UUNet Technologies are among Infoway's strategic partners.

Technology and Network Infrastructure

     Infoway currently operates India's largest national Internet protocol
private data network with 51 points of presence serving more than 220 cities
across India, representing an estimated 90% of the installed personal computer
base in India. A point of presence is commonly defined as the ability to access
online services in a market through a local telephone call or local leased
lines. Infoway owns and operates its network facilities and customer service
operations which gives it greater control over the utilization and quality of
its network. Infoway has designed and built its network using advanced
technologies and equipment which allows it to continue to expand the geographic
range of its network, integrate improved data processing technologies and
enhance speed and capacity with little or no disruption to its customers.

Competition

     Infoway faces competition in each of its markets and we expect that this
competition will intensify as the market in India for corporate network services
and technology products, Internet service provider services and online content
develops and expands. Infoway competes on the basis of service, reliability and
customer support. Price and ease of use are also competitive factors.

     Corporate network/data and e-consulting services. Infoway's competitors for
many private network services include government services, companies that have
built and operate their own private data networks, satellite communications
agencies, such as Bharti BT, Comsat, HCL Comnet and Hughes, and terrestrial
network providers, such as Global Electronic Commerce Services, Sprint RPG (a
joint venture between Sprint and RPG Group) and WiproNet Ltd.

     Consumer Internet Access Services. Infoway's principal competitor is VSNL,
the government-controlled telecom provider. VSNL currently has significantly
more subscribers than Infoway does because private companies, such as Infoway,
were not permitted to enter the Internet service provider market until November
1998. As of December 15, 2000, approximately 437 companies had obtained Internet
service provider licenses in India. We expect other competitors to emerge in the
future and for prices to continue to fall as more competitors enter the market.

     Since May 2000, Infoway has offered unlimited Internet access to consumers
for a fixed price. A number of Infoway's competitors, including VSNL, Dishnet
and Mantra, also offer unlimited Internet access for a fixed price. In addition,
at least one of Infoway's competitors offers free Internet service. Infoway
expects the market for consumer Internet access to become increasingly price
competitive as late market entrants attempt to acquire customers.

     Recently, VSNL has continued to aggressively reduce consumer Internet
access prices despite the lack of offsetting reductions in prevailing bandwidth
tariffs payable by private competitors, such as Infoway. We believe that these
practices constitute an improper cross-subsidy funded by VSNL's present monopoly
in long distance telephone service. The charges for international gateways and
other services presently being provided by VSNL are the subject of a dispute
pending before the TRAI and the Telecom Disputes Settlement and Appellate
Tribunal between VSNL and private Internet service providers, including Infoway.
Unless there is a change in government policy or favorable resolution of this
dispute, or until Infoway is able to reduce its bandwidth costs through other
means, it will continue to face difficult market conditions in the consumer
access business.

     In addition, Infoway could face competition from companies that develop new
and innovative techniques to access the Internet. Although growing rapidly,
International Data Corporation estimates that India had an installed base of
only approximately 4.2 million personal computers in 2000. Technology permitting
a connection to the Internet through alternative, less capital intensive means
is likely to be attractive to Indian consumers. A number of companies are
planning alternative Internet access devices, such as set-top boxes for
televisions, to create demand for Internet services in excess of that which
could be supported by the installed base of personal computers. The provider who
develops this technology is likely to have a significant advantage in the
marketplace.


                                      42
<PAGE>

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

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

Government Regulation

     Infoway is subject to comprehensive regulation by the Ministry of
Communications through the Telecom Commission and the Department of
Telecommunications, or DOT, pursuant to the provisions of the Indian Telegraph
Act of 1885, or Telegraph Act, the India Wireless Telegraphy Act, 1933, or
Wireless Act, and the terms of the Internet service provider license agreement
Infoway entered into with the DOT under which Infoway operates. Pursuant to the
Telegraph Act, the provision of any telecommunications services in India
requires a license from the Government of India, obtained through the DOT. While
the Telegraph Act sets the legal framework for regulation of the
telecommunications sector and the Wireless Act regulates the possession of
wireless telegraphy equipment, much of the supervision and regulation of Infoway
is implemented more informally through the general administrative powers of the
DOT, including those reserved to the DOT and other governmental agencies under
Infoway's license.

     In March 1997, the Government of India established the TRAI, an independent
regulatory authority, under the provisions of the Telecom Regulatory Authority
of India Act. The TRAI also has the authority to, from time to time, set the
rates at which domestic and international telecommunications services are
provided in India. The TRAI does not have authority to grant licenses to service
providers or renew licenses, functions which remain with the DOT. Failure to
follow TRAI directives may lead to the imposition of fines. Decisions of the
TRAI may be appealed to the Telecom Disputes Settlement and Appellate Tribunal.

     Infoway entered into a license agreement with the Department of
Telecommunications, or DOT, under which it was granted a license to provide
national Internet services on a non-exclusive basis. The term of its license is
15 years, and it can be revoked by the DOT if Infoway breaches the terms and
conditions of the license. The DOT retains the right to take over Infoway's
network and to modify, revoke, terminate or suspend the terms and conditions of
the license at any time if, in its opinion, it is necessary or expedient to do
so in the interest of general public, or for the proper operation of the
telecommunications sector or for security considerations. The DOT also retains
the right to review the terms of Infoway's license based on changes in national
telecommunications policy. Infoway is not allowed to assign or transfer its
rights under the license without the prior written consent of the DOT.

     Until recently, Government of India policies limited the total foreign
equity in an Internet service provider to 49%. Infoway's license currently
provides that the total foreign equity in Infoway may not, at any time, exceed
49% of Infoway's total equity. In May 2001, the Department of Commerce and
Industry increased the limit on foreign direct investment for Internet
companies, such as Infoway, from 49% to 74%. The administrative process to
implement this policy has commenced, and we expect that Infoway will apply to
the DOT to amend its license to increase the total foreign equity restriction
contained therein from 49% to 74%.

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

Facilities

     Infoway's approximately 100,000 square foot corporate headquarters is
located in Chennai (Madras), India. Infoway maintains a network operations
center located in Chennai and a 20,000 square foot data center in Mumbai
(Bombay). Infoway's Chennai facility houses its central network servers as well
as its network staff which monitors network traffic, service quality and
equipment at all its points of presence to ensure a reliable Internet service.
Most of


                                      43
<PAGE>

Infoway's points of presence are staffed 24-hours-a-day, seven-days-a-week.
Infoway has backup power generators and software and hardware systems designed
to prevent network downtime in the event of system failures. In the future,
Infoway may add additional facilities to supplement or add redundancy to its
current network monitoring capability.

Our Other Business Segments--Software Products

     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. VisionCompass software allows
executives to set, analyze and proactively manage strategic business objectives
on an ongoing basis. The software is designed to provide management with a
meaningful view of data, recommend courses of action to achieve specified
strategic objectives and monitor progress towards achieving those objectives.
Using VisionCompass, performance indicators are set, tracked and measured for
both processes and people. VisionCompass tracks specific elements such as staff
utilization, billable hours, recruitment status, pricing and project and service
issues. The system also generates reports alerting management when performance
slips and enables company personnel to collaborate across all levels to
implement a solution.

     The software supports a variety of management methodologies, which define
operational processes and other approaches to keep companies aligned towards
achieving their objectives. VisionCompass also interfaces with enterprise system
software such as enterprise resource planning, customer relationship management,
human resource information system and sales force automation, to assess and
collate data to generate meaningful, cross-organizational business intelligence.

     After an initial version of VisionCompass was released in March 2000, VCI
focused on the development of a web-based version of VisionCompass and
enhancement of the product through the addition of new features. The new
version, VisionCompass 2.35, was released in December 2000 and can be used
across corporate Intranets and Extranets and the public Internet.

     VCI's sales and marketing strategy will target Fortune 1000 companies in
the manufacturing, professional services and telecommunications markets,
utilizing both a direct sales force and select channel partners. VisionCompass
also plans to advertise in business publications and trade journals, as well as
participate in IT trade shows. In April 2001, we decided to restructure VCI by
reducing product development and general administrative expenses. See "Item 5.
Operating and Financial Review and Prospects--Liquidity and Capital Resources."

     VCI competes with vendors who primarily provide organizational performance
software, such as Business Objects S.A., Hyperion Solutions Corp. and
Hummingbird Ltd, who have more resources and are more established than VCI. VCI
believes that it competes based on features such as collaboration and
communication with performance analysis and business intelligence functionality.

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, 2001, we employed 38 associates dedicated to our research and
development activities. In addition, our management and other operational
personnel are also involved in research and development activities. We have
applied for one patent in the United States related to VisionCompass. We expect
to continue to invest some of our resources in research and development. We
estimate that we have spent approximately $1.6 million in fiscal 1999, $5.7
million in fiscal 2000 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 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"


                                      44
<PAGE>

as a trademark in India and the registration of "VisionCompass" as trademarks in
the United States and India. 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. Assertion of such claims against
us could result in litigation, and there is no assurance 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
cannot assure you that we will be able to protect such licenses from
infringement or misuse, or prevent infringement claims against us in connection
with our licensing efforts. 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. Any infringement claim or litigation against us
could, therefore, result in substantial costs and diversion of resources.

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 the fourth largest provider of IT services in India, based on the
amount of export revenues generated during our fiscal year ended March 31, 2001.
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 also have two main subsidiaries, Infoway, which
provides Internet services in India, and VCI, which has developed and markets
our software product, VisionCompass. Our total revenues increased by 68.2% to
$164.5 million in fiscal 2000 from $97.8 million in fiscal 1999 and by 87.4% to
$308.2 million in fiscal 2001 from $164.5 million in fiscal 2000.

     Our reportable operating segments consist of the following three
businesses:

     .    IT services. In our IT services business, 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 Internet
          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 our subsidiary, Infoway, we offer consumer
          Internet access services, including dial-up Internet access, e-mail
          and web page hosting services, while our corporate network and
          technology services include dial-up and dedicated Internet access,
          private network services, business-to-business eCommerce and website
          development and hosting services. We also operate an on-line portal,
          sify.com (formerly satyamonline.com), and 33 related content sites
          specifically tailored to Indian interests worldwide for news, personal
          finance, movies, music and automobiles. As of July 26, 2001, we owned
          52.5% of the equity shares of Infoway. Infoway's ADSs trade on the
          Nasdaq National Market under the symbol "SIFY".

     .    Software products. 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. VCI's sales and marketing strategy will target Fortune
          1000 companies in the manufacturing, professional services and
          telecommunications markets, utilizing both a direct sales force and
          select channel partners. Excluding inter-segment revenues, VCI has not
          generated any revenues to date.

Revenues


                                      45
<PAGE>

     Our IT services revenues (excluding inter-segment revenues, which are
revenues generated from services provided by Satyam Computer Services to its
subsidiaries and vice-versa) represented 90.8% and 88.0% of our total revenues
in fiscal 2000 and fiscal 2001, respectively. These revenues increased by 56.2%
to $149.3 million in fiscal 2000 from $95.6 million in fiscal 1999 and by 81.8%
to $271.4 million in fiscal 2001 from $149.3 million in fiscal 2000. Our
revenues are generated principally from IT services provided on either a
time-and-materials or a fixed-price basis. Revenues from IT services provided on
a time-and-materials basis are recognized in the month 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 and under the completed contract method of
accounting when the work to complete cannot 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 represented 72.9% and 77.5% of our IT services revenues
in fiscal 2000 and fiscal 2001, respectively. Revenues from IT services
(excluding inter-segment revenues) provided on a fixed-price basis represented
27.1% and 22.5% of our IT services revenues in fiscal 2000 and fiscal 2001,
respectively.

     The following table represents our IT services revenues (excluding
inter-segment revenues) by type of IT service offering for the periods
indicated:

<TABLE>
<CAPTION>
        Type of IT service offering              Fiscal 1999          Fiscal 2000             Fiscal 2001
        ---------------------------              -----------          -----------             -----------
                                                             (in millions, except percentages)
<S>                                           <C>        <C>      <C>            <C>      <C>            <C>
Software development ......................   $  37.6    39.4%    $   79.7       53.4%    $  174.1       64.2%
System maintenance ........................      51.9    54.3         41.4       27.7         55.0       20.2
Packaged software integration .............       3.1     3.3         14.8        9.9         22.5        8.3
Engineering design services ...............       3.0     3.1         13.4        9.0         19.8        7.3
                                              --------  ------    ---------    -------    ---------     ------
     Total ................................   $  95.6   100.0%    $  149.3      100.0%    $  271.4      100.0%
                                              ========  ======    =========    =======    =========    =======
</TABLE>

     We provide our IT services through our offshore centers located in India,
through offsite centers which we have established in our major markets and
through onsite teams operating on our customers' premises. 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. Offshore IT services revenues (excluding
inter-segment revenues) represented 67.4% and 60.5% of our IT services revenues
in fiscal 2000 and fiscal 2001, respectively. Offsite and onsite IT services
revenues (excluding inter-segment revenues) represented 32.6% and 39.5% of our
IT services revenues in fiscal 2000 and fiscal 2001, respectively.

     IT services revenues and gross profits are affected by the rate at which
associates are utilized. We calculate utilization rates monthly, 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 77.5% and 73.0% in fiscal 2000 and fiscal
2001, respectively. These utilization rates do not include training time for our
associates.

     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. Infoway's
consumer Internet access revenues are derived primarily from prepaid dial-up
subscriptions and corporate private network access revenues from one-year
arrangements that provide for an initial installation fee and recurring service
fees. Revenue from Internet services are recognized upon actual usage of such
services by customers and is based on either the time for which the network is
used or the volume of data transferred or both. Our Internet services revenues
(excluding inter-segment revenues) represented 9.2% and 12.0% of our total
revenues in fiscal 2000 and fiscal 2001, respectively. These revenues increased
by 584.0% to $15.2 million in fiscal 2000 from $2.2 million in fiscal 1999 and
by 142.4% to $36.8 million in fiscal 2001 from $15.2 million in fiscal 2000.

     Revenues from software products will be recognized when persuasive evidence
of an arrangement exists, the fee is fixed and determinable and collection of
resulting receivable is probable, and the arrangement does not require
significant customization of the software.

Expenses


                                      46
<PAGE>

     Cost of revenues for IT services consists primarily of salary and other
compensation and benefits, deferred stock compensation expense, depreciation,
data communications expenses, Rents, computer maintenance, cost of software for
internal use, expenses to open new onsite, offsite and offshore centers and
foreign travel expenses. Cost of revenues for Internet services consists
primarily of recurring telecommunication costs necessary to provide Internet
access to consumer and corporate network subscribers, personnel and operating
expenses associated with customer support and network operations and third party
software and hardware purchased for resale to corporate customers.

     Selling, general and administrative expenses consist primarily of salary
and other compensation and benefits, deferred stock compensation expense,
depreciation, sales and marketing expenses, telecommunications expenses, rent,
repairs and maintenance, travelling expenses, power and fuel, professional
charges, training and development and administrative expenses. Costs associated
with the development of software products are classified under selling, general
and administrative expenses and primarily consist of research and development
expenditures and compensation and benefit expenses. We expect sales and
marketing expenses to increase on a relative basis as we introduce our products
commercially.

     Amortization expenses primarily relate to goodwill arising from the
acquisitions of IndiaWorld and IndiaPlaza.com by Infoway and our acquisition of
the minority interest in Satyam Enterprise Solutions Limited, or SES.

Merger of Our Subsidiaries

     To integrate all of our IT services into one entity, in April 1999 we
agreed to merge our 81.0% owned subsidiary, SES, and our 100.0% owned
subsidiaries, Satyam Renaissance Consulting Limited, or SRC, and Satyam Spark
Solutions Limited, or Spark, into Satyam Computer Services. Before the merger,
SES provided systems integration services and enterprise resource planning
package implementation services, SRC provided management consulting services,
with a focus on use of IT systems and Spark developed and marketed proprietary
software products. We consummated the merger in September 1999. We engaged an
independent appraiser to value the equity shares of SES on a stand alone basis.
Based upon the valuation of SES by the appraiser, we used an exchange ratio of
10 shares of Satyam Computer Services (adjusted for the September 1, 1999
two-for-one stock split and the August 25, 2000 five-for-one stock split) for
one share of SES to issue 8,000,000 of our equity shares to Mr. Srinivasa Raju,
one of our directors, in exchange for the 19.0% of the equity shares of SES he
owned. The excess of the increase in total capital over the underlying net
equity of SES has been recognized as goodwill. The goodwill amounted to $23.6
million, which is being amortized over a period of five years resulting in
annual amortization charges of $4.7 million. The results of these three
subsidiaries have been consolidated in our U.S. GAAP financial statements for
fiscal 1999. The elimination of minority interest and recording of goodwill were
effective as of September 20, 1999, resulting in an amortization of goodwill
expense of $2.4 million in fiscal 2000 and $4.5 million in fiscal 2001.

Consolidation of Subsidiaries

     As of March 31, 2001, we had invested $6.7 million representing equity and
other advances in Infoway, $22.7 million in VCI and $7.9 million in four of our
other subsidiaries. Since their inception in December 1995 and January 1999,
respectively, our subsidiaries Infoway and VCI have incurred significant
operating losses and negative cash flows. As of March 31, 2001, the cumulative
net losses incurred were $71.0 million by Infoway, $24.9 million by VCI and $5.2
million by our other subsidiaries.

     The results of Infoway and VCI are reflected in our financial statements
under U.S. GAAP whereas the unconsolidated audited financial statements prepared
under Indian GAAP for Satyam Computer Services do not reflect the results of our
subsidiaries. Infoway's and VCI's combined losses reduced our consolidated net
income (loss) U.S. GAAP by $42.6 million in fiscal 2001, $16.7 million in fiscal
2000 and $6.2 million in fiscal 1999.

     In November 1999, Infoway purchased 24.5% of the outstanding shares of
IndiaWorld for a cash purchase price of $28.3 million, and made an $11.8 million
non-refundable deposit towards an option to purchase the remaining 75.5% of the
outstanding shares in IndiaWorld for a purchase price of $85.0 million. Infoway
exercised the option to acquire the remaining outstanding shares of IndiaWorld
in June 2000 by paying $48.7 million in cash and the balance in 268,500 equity
shares of Infoway valued at $24.6 million. For U.S. GAAP reporting purposes, the
financial statements of IndiaWorld have been consolidated with Infoway's
financial statements from and after December 1, 1999. The acquisition has been
accounted for as a purchase, and Infoway is amortizing the goodwill on a
straight-line basis over a period of five years. Most of the purchase price
represented goodwill. The total goodwill from this acquisition amounted to
$112.8 million, of which $2.7 million and $5.8 million has been amortized and
charged to earnings in fiscal 2000 and fiscal 2001, respectively.


                                      47
<PAGE>

Equity in Earnings (Losses) of Associated Companies

     Associated companies are accounted for using the equity method. In July
2000, Infoway acquired a 25% stake in CricInfo Limited for a consideration of
$37.5 million worth of Infoway's ADSs. The total goodwill from this acquisition
amounted to $37.4 million, of which $4.3 million has been amortized and charged
to equity in earnings (losses) of associated companies net of taxes in fiscal
2001.

Deferred Stock Compensation Expense

     In May 1998, Satyam Computer Services established its ASOP. Aspects of the
ASOP differ significantly from typical U.S. stock option plans. We subsequently
established the Trust to administer the ASOP, and issued to the Trust warrants
to purchase 13,000,000 equity shares. To give our associates the benefit of our
stock split 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
($10.31), 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 1999,
2000 and 2001, we recognized deferred stock compensation of $14.5 million, $23.3
million and $38.0 million, and $3.3 million, $16.5 million and $44.2 million was
amortized and charged to earnings, respectively. As of March 31, 2001, warrants
to purchase 11,284,070 equity shares have been granted to associates pursuant to
ASOP, and warrants to purchase 1,829,930 equity shares have been exercised. As
of March 31, 2001, the Trust held warrants to purchase 1,715,930 equity shares
which had not yet been granted to associates pursuant to the ASOP but are
expected to be granted in the future. We expect to recognize amortization of
deferred stock compensation expense in respect of our ASOP in the approximate
amounts of $11.6 million in fiscal 2002 and $2.8 million in fiscal 2003 based on
the price of our equity shares on March 31, 2001 and in connection with both
granted 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 compensation expense with respect to ungranted warrants may cause the
expected amounts to change.

     In May 1999, the shareholders at our annual general meeting approved the
Associate Stock Option Plan B, or ASOP B for the grant of 13.0 mn. Equity
shares. In June, 2001 the Shareholders at our Annual General Meeting approved
for the grant of further 15.7 mn equity shares. The ASOP B is substantially
similar to the ASOP and will be administered by a committee of our board of
directors. As of March 31, 2001, options to purchase 5,759,209 equity shares
have been granted to associates under this plan. We expect to recognize
amortization of deferred stock compensation expense in respect of these granted
options in the approximate amounts of $87,000 in fiscal 2002 and $71,000 in
fiscal 2003. 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. We also account for the ASOP B as a fixed
option plan.

     In May 1999, the shareholders at our annual general meeting approved the
Associate Stock Option Plan ADR, or ASOP ADR, pursuant to which we expect to
periodically issue grants to eligible associates to purchase ADRs. As of the
date of this document, 1,162,100 options for ADRs have been granted to
associates under the ASOP ADR. We account for the ASOP ADR 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 ADRs and
therefore we do not expect to incur compensation expense with respect to those
future grants.

     In fiscal 1999, Infoway established the IASOP. The IASOP is substantially
similar to the ASOP and is administered by an employee welfare trust called the
Infoway Trust. Infoway issued to the Infoway Trust warrants to purchase 825,000
equity shares of Rs.1 each in Infoway. In turn, the Infoway Trust from time to
time grants to eligible associates warrants to purchase equity shares held by or
reserved for issuance by the Infoway Trust. An associate must pay


                                      48
<PAGE>

consideration of Rs.1 per warrant to the Infoway Trust and each warrant entitles
the associate-holder to purchase one equity share of Infoway at an exercise
price decided by the board of directors. The board of directors has determined
that in no event will the exercise price for warrants granted in the future 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 warrants allotted and the
underlying shares are not subject to any repurchase obligations by Infoway. We
account for the IASOP as a fixed option plan.

     Under U.S. GAAP, in fiscal 2000 and fiscal 2001, Infoway recognized
deferred stock compensation of $3.2 million and $2.2 million, of which $0.5
million and $1.9 million was amortized and charged to earnings, respectively. In
fiscal 1999, Infoway recognized insignificant amounts of deferred stock
compensation expense. As of March 31, 2001, warrants to purchase 565,220 equity
shares of Infoway have been granted to associates pursuant to its IASOP, and 200
warrants have been exercised. As of March 31, 2001, the Infoway Trust held
warrants to purchase 259,780 equity shares of Infoway which had not yet been
granted by the Infoway Trust to associates pursuant to its IASOP but are
expected to be granted in the future. 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
significant compensation expense with respect to those future grants. We expect
to recognize amortization of deferred stock compensation expense in connection
with Infoway's IASOP in the approximate amounts of $1.5 million in fiscal 2002
and $0.7 million in fiscal 2003 based on the price of Infoway's ADSs on March
31, 2001 and in connection with both granted and ungranted warrants. Depending
on the market value of Infoway's ADSs on the dates future grants are made,
amortization of deferred stock compensation expense with respect to ungranted
warrants may cause the expected amounts to change.

     In April 2000, VCI established the VCI 2000 Stock Option Plan or VCI Plan.
As of March 31, 2001, options to purchase 919,400 shares in VCI have been
granted to associates pursuant to the VCI Plan, and no options have been
exercised. As of March 31, 2001, 24,080,600 shares in VCI are reserved for
issuance upon the exercise of options which had not been granted pursuant to the
VCI Plan but are expected to be granted in the future. We account for the VCI
Plan as a fixed option plan. The exercise prices of the prior options grants
have been at fair value of the underlying shares. We expect that the exercise
prices of options granted in the future under the plan will be equal to the fair
value of the underlying shares and therefore we do not expect to incur
compensation expense with respect to those future grants.

     The Trust recognized interest expense of $1.1 million in fiscal 2000 and
$1.8 million in fiscal 2001. The figure is reflected in our U.S. GAAP
consolidated financial statements whereas the audited financial statements of
Satyam Computer Services prepared under Indian GAAP do not reflect this figure.

Joint Venture with 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 own
a 76.0% interest in the joint venture and TRW owns a 24.0% interest. We manage
this joint venture, which is largely focused on the automotive sector worldwide.
TRW generated revenues of $3.9 million for the joint venture in fiscal 2001.

     After December 31, 2003, TRW has the option to require us to purchase its
24.0% interest. Under the joint venture agreement, TRW is not legally obligated
to provide any business to the joint venture. However, the buyout price of TRW's
interest in the joint venture depends on the aggregate amount of revenue which
TRW will provide to the joint venture through December 31, 2005. TRW has
initially targeted to outsource to the joint venture at least $200 million of
revenues from information systems and engineering work by December 31, 2005. TRW
may adjust this initial target revenue amount before December 31, 2001, but the
adjusted target revenue amount cannot be less than $100 million. If the amount
of revenues outsourced by TRW to the joint venture by December 31, 2003 does not
meet specified minimum levels, we have the right to buy out TRW's 24.0% interest
in the joint venture for no or nominal consideration. If TRW exercises its
option to sell the shares to us after December 31, 2003, the purchase price of
TRW's 24.0% stake will be determined by the higher of an independent valuation
of the 24.0% interest and a formula based on the amount of revenues provided to
the joint venture by TRW but in any event no more than 2.0% of our total market
capitalization on December 31, 2003. We may, at our discretion, use either cash
or our equity securities valued at the then prevailing market price as
consideration for TRW's stake. If TRW divests its stake after December 31, 2003,
the terms of the joint venture's supply agreement with TRW will continue until
December 31, 2007 if the joint venture remains able to perform the supply
agreement. Under these circumstances, TRW is required to use its best attempts
to provide the same levels of business to the joint venture from January 1, 2006
through December 31, 2007 as it had provided to the joint venture during the
preceding two years. If we undergo a change in control or bankruptcy, TRW may
terminate the joint venture agreement on or before December 31, 2003 and require
us to purchase its shares in the joint venture and all of our securities issued
to TRW or its affiliates in connection with the joint venture agreement at a
price equal to $1.0 million plus the total

                                      49
<PAGE>

consideration TRW has invested in the shares of the joint venture (but excluding
the initial amount paid for its 24.0% interest) and our securities, net of any
amount received by TRW for any sale of such shares or securities.

     As part of the joint venture arrangement with TRW, on August 22, 2000, we
issued to ESL Inc., an affiliate of TRW, 63,896 warrants (each warrant
exercisable to purchase five equity shares) for an upfront payment of Rs.22.9
million (approximately $0.5 million). These warrants are convertible into
319,480 of our equity shares for Rs.644.40 ($14.1) per share, totaling
approximately $4.5 million, during an exercise period from January 22, 2002 to
February 21, 2002. The upfront payment made by ESL Inc. for these warrants, plus
the aggregate exercise price for the 319,480 equity shares underlying these
warrants, will equal approximately $5.0 million. 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., amounts to approximately $1.2 million. This amount
will be amortized ratably over the period of five years and three months,
starting from the date of signing of the joint venture agreement, which was
September 26, 2000, until December 31, 2005. The amortization will be classified
as a reduction of the revenue recognized under the agreement. However, if the
amortization exceeds the amount of revenue recognized in any period, the excess
amortization will be recorded as an expense.

     The exercise price and the fair market value of the warrants issued to ESL
Inc. were not determined based on the revenue TRW has targeted to provide to the
joint venture. The exercise price of the warrants was determined based on the
average closing prices of the underlying shares on the Indian stock exchanges in
accordance with the Securities and Exchange Board of India guidelines. The fair
value of the warrants at the date of grant was determined by reference to the
prevailing market price of our equity shares on the Indian exchanges, using the
Black Scholes model with an assumed volatility of 90% and a risk free interest
rate of 10.672%.

Principles of Currency Translation

     In fiscal 2000 and fiscal 2001, 85.4% and 82.0%, respectively, of our total
revenues were generated in U.S. dollars. A majority of our expenses were
incurred in Indian rupees and the balance was 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
currency 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.

     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
against the U.S. dollar.


                                      50
<PAGE>

Results of Operations

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


                                      51
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Fiscal 2001
                                                               ------------------------------------------------------------
                                                                 IT          Internet      Software    Consoli-
                                                               services      services      products    dation        Total
                                                               --------      --------      --------    --------      -----
<S>                                                            <C>           <C>           <C>        <C>         <C>
Statement of Operations Data:
Revenues - external customers...............................   $271,367      $ 36,840            --         --     $308,207
Inter-segment revenue.......................................      3,547         2,148          $213   $ (5,908)          --
                                                               --------      --------      --------   --------     --------
      Total revenues........................................    274,914        38,988           213     (5,908)     308,207
Cost of revenues(1).........................................    181,326        27,892           142     (1,239)     208,121
                                                               --------      --------      --------   --------     --------
Gross profit................................................     93,588        11,096            71     (4,669)     100,086
Operating expenses:
   Selling, general and administrative expenses(2)..........     64,858        47,862        13,949     (4,669)     122,000
   Amortization of goodwill.................................      4,500        20,228            --         --       24,728
                                                               --------      --------      --------   --------     --------
      Total operating expenses..............................     69,358        68,090        13,949     (4,669)     146,728
                                                               --------      --------      --------   --------     --------
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,
 net of taxes...............................................     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.........        890        (6,357)           --         --       (5,467)
                                                               --------      --------      --------   --------     --------
Net income (loss)...........................................   $ 14,765      $(28,804)     $(13,873)        --     $(27,912)
                                                               ========      ========      ========   ========     ========
Depreciation................................................     19,874         9,340           424         --       29,638
Deferred stock compensation.................................     44,219         1,899            --         --       46,118
</TABLE>
<TABLE>
<CAPTION>
                                                            Year ended March 31,
                          ------------------------------------------------------------------------------------------------
                                             1999                                             2000
                          ----------------------------------------------  ------------------------------------------------
                             IT     Internet  Software  Consoli-             IT     Internet  Software  Consoli-
                          services  services  products   dation   Total   services  services  products   dation    Total
                          --------  --------  --------  -------- -------  --------  --------  --------  --------  --------
                                                               (in thousands)
<S>                       <C>       <C>       <C>       <C>      <C>      <C>       <C>       <C>       <C>       <C>
Statement of Operations
 Data:
Revenues-- external
 customers..............  $95,573    $2,222       --       --    $97,795  $149,257  $15,198        --       --    $164,455
Inter-segment revenue...      374       226       --     $(600)      --      5,768      208        --   $(5,976)       --
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
 Total revenues.........   95,947     2,448       --      (600)   97,795   155,025   15,406        --    (5,976)   164,455
Cost of revenues(/1/)...   48,646     1,513       --      (600)   49,559    89,387    6,935        --    (5,873)    90,449
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
Gross profit............   47,301       935       --       --     48,236    65,638    8,471        --      (103)    74,006
Operating expenses:
 Selling, general and
  administrative
  expenses(/2/).........   25,287     4,771     1,840      --     31,898    44,912   16,428     10,802   (2,550)    69,592
 Amortization of
  goodwill..............      130       --        --       --        130     2,370    2,673        --       --       5,043
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
 Total operating
  expenses..............   25,417     4,771     1,840      --     32,028    47,282   19,101     10,802   (2,550)    74,635
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
Operating income
 (loss).................   21,884    (3,836)   (1,840)     --     16,208    18,356  (10,630)   (10,802)   2,447       (629)
Interest income.........       43       --        --       --         43       182    2,443        --       --       2,625
Interest expense........   (6,246)     (659)      --       --     (6,905)  (10,548)    (742)       --       --     (11,290)
Other income............      967        23       --       --        990     3,838       80              (2,447)     1,471
Other expenses..........      (28)      --        --       --        (28)     (206)     --        (212)     --        (418)
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
Income (loss) before
 income taxes, minority
 interest and equity in
 earnings (losses) of
 associated companies,
 net of taxes...........   16,620    (4,472)   (1,840)     --     10,308    11,622   (8,849)   (11,014)             (8,241)
Income taxes............   (1,105)      --        --       --     (1,105)   (1,653)      34        --       --      (1,619)
Minority interest.......     (256)       85       --       --       (171)     (317)   3,102        --       --       2,785
Equity in earnings
 (losses) of associated
 companies..............      (18)      --        --       --        (18)      135      --         --       --         135
                          -------   -------   -------    -----   -------  --------  -------   --------  -------   --------
Net income (loss).......  $15,241   $(4,387)  $(1,840)     --     $9,014    $9,787  $(5,713)  $(11,014)     --     $(6,940)
                          =======   =======   =======    =====   =======  ========  =======   ========  =======   ========
Depreciation............  $10,231    $1,108        $2      --    $11,341   $17,246   $2,872        $52      --     $20,170
Deferred stock
 compensation...........    3,315         2       --       --      3,317    16,457      474        --       --      16,931
</TABLE>

---------
(1)  Inclusive of deferred stock compensation expenses of $3,135 for IT services
     and $2 for Internet services in fiscal 1999, $13,190 for IT services and
     $166 for Internet services, in fiscal 2000 and $30,862 for IT services and
     $474 for Internet services, in fiscal 2001.

(2)  Inclusive of deferred stock compensation expenses of $180 for IT services
     in fiscal 1999, $3,267 for IT services and $308 for Internet services in
     fiscal 2000, and $13,357 for IT services and $1,425 for Internet services
     in fiscal 2001.

                                      52
<PAGE>

<TABLE>
<CAPTION>
                                                                               Fiscal 2001
                                                              -------------------------------------------
                                                                 IT       Internet    Software
                                                              services    services    products      Total
                                                              --------    --------    --------      -----
<S>                                                            <C>        <C>          <C>        <C>
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).........................................      66.0       71.5         66.7       67.5
                                                               -------    -------      -------     ------
Gross profit................................................      34.0       28.5         33.3       32.5
Operating expenses:
  Selling, general and administrative expenses(2)...........      23.6      122.8       6548.8       39.6
  Amortization of goodwill..................................       1.6       51.9         --          8.0
                                                               -------    -------      -------     ------
     Total operating expenses...............................      25.2      174.6       6548.8       47.6
                                                               -------    -------      -------     ------
Operating income (loss).....................................       8.8     (146.2)     (6515.5)     (15.1)
Interest income.............................................       0.1       14.0         --          1.9
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,
net of taxes................................................       6.5     (123.4)     (6513.1)     (14.3)
Income taxes................................................      (1.5)      (0.1)        --         (1.3)
Minority interest...........................................       --        65.9         --          8.4
                                                               -------    -------      -------     ------
Equity in earnings (losses) of associated companies.........       0.3      (16.3)        --         (1.8)
                                                               -------    -------      -------     ------
Net income (loss)...........................................       5.4%     (73.9)%    (6513.1)      (9.1)%
                                                               =======    =======      =======     ======
Depreciation................................................       7.2%      24.0%       199.1%       9.6%
Deferred stock compensation.................................      15.9%       4.6%        --         15.0%
</TABLE>

<TABLE>
<CAPTION>
                                                Year ended March 31,
                          --------------------------------------------------------------------
                                        1999                               2000
                          ---------------------------------  ---------------------------------
                             IT    Internet  Software           IT    Internet  Software
                          services services  products Total  services services  products Total
                          -------- --------  -------- -----  -------- --------  -------- -----
<S>                       <C>      <C>       <C>      <C>    <C>      <C>       <C>      <C>
Statement of Operations
 Data:
Revenues -- external
 customers..............    99.6%     90.8%    --     100.0%   96.3%    98.6%     --     100.0%
Inter-segment revenue...     0.4       9.2     --       --      3.7      1.4      --       --
                           -----    ------     ---    -----   -----    -----      ---    -----
 Total revenues.........   100.0     100.0     --     100.0   100.0    100.0      --     100.0
Cost of revenues(/1/)...    50.7      61.8     --      50.7    57.7     45.0      --      55.0
                           -----    ------     ---    -----   -----    -----      ---    -----
Gross profit............    49.3      38.2     --      49.3    42.3     55.0      --      45.0
Operating expenses:
 Selling, general and
  administrative
  expenses(/2/).........    26.4     194.9     --      32.6    29.0    106.6      --      42.3
 Amortization of
  goodwill..............     0.1       --      --       0.1     1.5     17.4      --       3.1
                           -----    ------     ---    -----   -----    -----      ---    -----
 Total operating
  expenses..............    26.5     194.9     --      32.8    30.5    124.0      --      45.4
Operating income
 (loss).................    22.8    (156.7)    --      16.6    11.8    (69.0)     --      (0.4)
Interest income.........     --        --      --       --      0.1     15.9      --       1.6
Interest expense........    (6.5)    (26.9)            (7.1)   (6.8)    (4.8)     --      (6.9)
Other income............     1.0       0.9     --       1.0     2.5      0.5      --       0.9
Other expense...........     --        --      --       --     (0.1)     --       --      (0.3)
                           -----    ------     ---    -----   -----    -----      ---    -----
Income (loss) before
 income taxes, minority
 interest and equity in
 earnings (losses) of
 associated companies,
 net of taxes...........    17.3    (182.6)    --      10.5     7.5    (57.4)     --      (5.0)
Income taxes............    (1.2)      --      --      (1.1)   (1.1)     0.2      --      (1.0)
Minority interest.......    (0.3)      3.5     --      (0.2)   (0.2)    20.1      --       1.7
Equity in earnings
 (losses) of associated
 companies..............     --        --      --       --      0.1      --       --       0.1
                           -----    ------     ---    -----   -----    -----      ---    -----
Net income (loss).......    15.9%   (179.2)%   --       9.2%    6.3%   (37.1)%    --     (4.2)%
                           =====    ======     ===    =====   =====    =====      ===    =====
Depreciation............    10.7%     45.3%    --      11.6%   11.1%    18.6%     --      12.3%
Deferred stock
 compensation...........     3.5       0.1     --       3.4    10.6      3.1      --      10.3
</TABLE>

(1)  Inclusive of deferred stock compensation expenses of $3,135 for IT services
     and $2 for Internet services in fiscal 1999, $13,190 for IT services and
     $166 for Internet services, in fiscal 2000 and $30,862 for IT services and
     $474 for Internet services, in fiscal 2001.

(2)  Inclusive of deferred stock compensation expenses of $180 for IT services
     in fiscal 1999, $3,267 for IT services and $308 for Internet services in
     fiscal 2000, and $13,357 for IT services and $1,425 for Internet services
     in fiscal 2001.

                                      53
<PAGE>

Comparison of fiscal 2001 and 2000

     Revenues. Revenues increased by 87.4% to $308.2 million in fiscal 2001 from
$164.5 million in fiscal 2000. The revenue growth was primarily a result of
increases in revenues from IT services, which represented $271.4 million of
revenues in fiscal 2001 as compared to $149.3 million in fiscal 2000, and to a
lesser extent increases in revenues from Internet services. In fiscal 2001, we
derived approximately 88.0% of our total revenues from IT services,
approximately 12.0% of our total revenues from Internet services and 0% of our
total revenues from software products.

     During fiscal 2001, we derived 72.2% of our revenues from the United
States, 10.2% from India, 2.4% from Japan, 6.7% from Europe and the remaining
8.5% from other countries. During fiscal 2000, we derived 74.9% of our revenues
from the United States, 10.0% from India, 6.3% from Japan, 5.2% from Europe, and
the remaining 3.6% from other countries.

     Cost of revenues. Cost of revenues increased 130.1% to $208.1 million in
fiscal 2001 from $90.4 million in fiscal 2000. This increase was attributable
primarily to increases in associate compensation and benefits expenses, deferred
stock compensation expense, costs of international travel, communication
expenses and an increase in other expenses. Associate compensation and benefits
expenses increased 118.5% to $103.3 million, or 33.5% of revenues, in fiscal
2001 from $47.3 million, or 28.8% of revenues, in fiscal 2000. Deferred stock
compensation expense increased 134.6% to $31.3 million, or 10.2% of revenues, in
fiscal 2001 from $13.4 million, or 8.1% of revenues, in fiscal 2000 due to
higher prevailing prices of our equity shares and those of Infoway on the dates
we granted options. Travel expenses increased 94.3% to $19.9 million, or 6.5% of
revenues, in fiscal 2001 from $10.3 million, or 6.2% of revenues, in fiscal
2000. Communication expenses increased 248% to $19.3 million, or 6.2% of
revenues, in fiscal 2001 from $5.5 million, or 3.4% of revenues, in fiscal 2000.
Depreciation expense increased 94.0% to $15.4 million, or 5.0% of revenues, in
fiscal 2001 from $8.0 million, or 4.8% of revenues, in fiscal 2000. Other
expenses increased 211% to $18.8 million, or 6.1% of revenues, in fiscal 2001
from $6.1 million, or 3.7% of revenues, in fiscal 2000. Inter-segment cost of
revenues were $1.2 million in fiscal 2001 as compared to $5.9 million in fiscal
2000 and have not been allocated to the individual components that make up cost
of revenues. Cost of revenues represented 67.5% of revenues in fiscal 2001 and
55.0% in fiscal 2000.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 75.3% to $122.0 million in fiscal 2001 from
$69.6 million in fiscal 2000. This increase was a result primarily of increases
in associate compensation and benefits, deferred stock compensation expense,
Marketing expenses and other expenses. Compensation and benefits expenses
increased 139.3% to $26.3 million, or 8.5% of revenues, in fiscal 2001 from
$11.0 million, or 6.7% of revenues, in fiscal 2000. Deferred stock compensation
expense increased 314% to $14.8 million, or 4.8% of revenues, in fiscal 2001
from $3.6 million, or 2.2% of revenues, in fiscal 2000. Marketing expenses
increased 124.5% to $15.0 million, or 4.9% of revenues, in fiscal 2001 from $9.0
million, or 5.5% of revenues, in fiscal 2000. Other expenses increased 103.5% to
$22.3 million, or 7.4% of revenues, in fiscal 2001 from $11.2 million, or 6.8%
of revenues, in fiscal 2000. Inter-segment selling, general and administrative
expenses were $4.7 million in fiscal 2001 as compared to $2.6 million in fiscal
2000 and have not been allocated to the individual components that make up
selling, general and administrative expenses. Selling, general and
administrative expenses represented 39.6% of revenues in fiscal 2001 as compared
to 42.3% of revenues in fiscal 2000.

     Amortization of goodwill. Amortization of goodwill was $24.7 million in
fiscal 2001 as compared to $5.0 million in fiscal 2000. The goodwill expense in
fiscal 2001 reflects the amortization of goodwill associated with the
acquisition of the minority interest in SES in September 1999, the acquisition
of IndiaWorld and IndiaPlaza.com by Infoway.

     Operating income (loss). As a result of the foregoing, we incurred an
operating loss of $46.7 million in fiscal 2001 as compared to $0.6 million in
fiscal 2000. Excluding the amortization of goodwill and deferred stock
compensation expense, operating income would have been $24.2 million in fiscal
2001 and $21.3 million in fiscal 2000 and operating margin would have been 7.8%
and 13.0% of total revenues in fiscal 2001 and 2000, respectively.

     Interest income. Interest income increased to $5.7 million in fiscal 2001
from $2.6 million in fiscal 2000. This increase was attributable primarily to
interest earned on deposits placed with banks from Infoway's public offerings
proceeds.

     Interest expense. Interest expense decreased by 14.7% to $9.6 million in
fiscal 2001 from $11.3 million in fiscal 2000.

     Other income. Other income increased to $6.8 million in fiscal 2001 from
$1.5 million in fiscal 2000. The increase is primarily on account of foreign
currency translation gains.


                                      54
<PAGE>

     Other expense. Other expenses were $0.3 million in fiscal 2001 and $0.4
million in fiscal 2000.

     Income taxes. Income taxes were $4.1 million in fiscal 2001 as compared to
$1.6 million in fiscal 2000. The increase in income taxes is mainly on account
of provision for foreign taxes payable overseas by offsite and onsite centers,
principally in United States.

     Equity in earnings (losses) of associated companies. Equity losses of
associated companies were $5.5 million in fiscal 2001 as compared to $0.1
million in fiscal 2000 which was primarily due to proportionate losses
associated with our investment in Satyam Venture Engineering Services Limited,
and amortization of goodwill associated with our investment in CricInfo Limited.

     Net income (loss). As a result of the foregoing, net loss was $27.9 million
in fiscal 2001 as compared to a net loss of $6.9 million in fiscal 2000.
Excluding the amortization of goodwill expense and deferred stock compensation
expense, net income would have been $42.9 million in fiscal 2001 and $15.0
million in fiscal 2000 and net margin would have been 13.9% and 9.1% in fiscal
2001 and 2000, respectively.

IT Services

     Revenues. IT services revenues (including inter-segment revenues) increased
77.3% to $274.9 million in fiscal 2001 from $155.0 million in fiscal 2000, of
which $3.5 million and $5.8 million represented inter-segment revenues in fiscal
2001 and 2000, respectively. All revenues discussed in this sub-section
"Revenues" 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 continued to increase in all aspects of our services, except for
system maintenance. Our revenue growth primarily reflected the higher proportion
of our service offerings that address the software design and development,
packaged software integration and eBusiness requirements of our customers as
well as an increase in engineering design services. In particular, revenues from
eBusiness projects were $74.7 million, or 27.5%, of our revenues in fiscal 2001
as compared to $30.8 million, or 20.6%, of our revenues in fiscal 2000. The
decline in revenues from system maintenance resulted from a reduction in Year
2000 conversion projects. We derived 0% of our revenues from Year 2000
conversion projects in fiscal 2001 as compared to 5.5% of our revenues in fiscal
2000.

     During fiscal 2001, we derived 78.5% of our revenues from the United
States, 7.0% from Europe, 2.7% from Japan, 2.3% from India and the remaining
9.5% from the Middle East, Africa, Singapore and Australia. During fiscal 2000,
we derived 81.4% of our revenues from the United States, 5.7% from Europe, 6.9%
from Japan, 2.1% from India and the remaining 3.9% from the Middle East, Africa,
Singapore and Australia.

     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 102.9% to $181.3 million in
fiscal 2001 from $89.4 million in fiscal 2000. Cost of revenues represented
66.0% of revenues in fiscal 2001 as compared to 57.7% in fiscal 2000. The
increase in cost of revenues as a percentage of revenues was attributable
primarily to an increase in associate compensation and benefits; travel
expenses; depreciation expenses and other expenses. Deferred stock compensation
expense increased 134.0% to $30.9 million, or 11.2% of revenues, in fiscal 2001
from $13.2 million, or 8.5% of revenues, in fiscal 2000 primarily due to higher
market prices of our equity shares on the dates we granted options and reduced
vesting periods for our options. Compensation and benefit expenses increased
95.1% to $100.2 million, or 36.4% of revenues in fiscal 2001 from $51.4 million,
or 33.1% of revenues, in fiscal 2000 respectively, resulting primarily from a
larger number of technical associates, which increased 74.4% from 4,478 to
7,798, and an increase in salaries. Travel expenses increased 94.3% to $19.9
million, or 7.2% of revenues, in fiscal 2001 from $10.3 million, or 6.6% of
revenues, in fiscal 2000. Depreciation expense increased 94.0% to $15.4 million,
or 5.6% of revenues, in fiscal 2001 from $8.0 million, or 5.1% of revenues, in
fiscal 2000. Other expenses increased 165.0% to $11.1 million, or 4.0% of
revenues, in fiscal 2001 from $4.2 million, or 2.7% of revenues, in fiscal 2000.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 44.4% to $64.9 million in fiscal 2001 from
$44.9 million in fiscal 2000. Selling, general and administrative expenses
represented 23.6% of revenues in fiscal 2001 as compared to 29.0% in fiscal
2000. The decrease in selling, general and administrative expenses as a
percentage of revenues was attributable primarily to a decrease in marketing
expenses resulting from an increase in our direct marketing efforts, as well as
decreased depreciation expenses, rent expense and compensation and


                                      55
<PAGE>

benefit expenses as a percentage of revenues. Depreciation expenses decreased to
1.6% of revenues, or $4.4 million, in fiscal 2001 from 5.3% of revenues, or $8.2
million, in fiscal 2000. Marketing expenses decreased to 1.8% of revenues, or
$5.1 million, in fiscal 2001 from 4.3% of revenues, or $6.7 million, in fiscal
2000. Rental expenses decreased to 0.7% of revenues, or $1.8 million, in fiscal
2001 from 2.2% of revenues, or $3.4 million, in fiscal 2000. Compensation and
benefit expenses decreased to 4.2% of revenues, or $11.6 million, in fiscal 2001
from 5.1% of revenues, or $7.9 million, in fiscal 2000. These decreases were
partially offset by an increase in deferred stock compensation expense and other
expenses as a percentage of revenues. Deferred stock compensation expense
increased to 4.9% of revenues, or $13.4 million, in fiscal 2001 from 2.1% of
revenues, or $3.3 million, in fiscal 2000. Other expenses increased to 4.9% of
revenues, or $13.4 million in fiscal 2001 from 4.2% of revenues, or $6.4 million
in fiscal 2000.

     Amortization of goodwill. Amortization of goodwill was $4.5 million in
fiscal 2001 as compared to $2.4 million in fiscal 2000. 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
$24.2 million in fiscal 2001 as compared to an operating income of $18.4 million
in fiscal 2000. Excluding the amortization of goodwill expense and deferred
stock compensation expense, operating income would have been $72.9 million in
fiscal 2001 and $37.2 million in fiscal 2000 and operating margin would have
been 26.5% and 24.0% of revenues in fiscal 2001 and 2000, respectively.

     Interest income. Interest income increased to $0.3 million in fiscal 2001
from $0.2 million in fiscal 2000.

     Interest expense. Interest expense was $9.4 million in fiscal 2001 and
$10.5 million in fiscal 2000.

     Other income. Other income decreased to $3.1 million in fiscal 2001 from
$3.8 million in fiscal 2000. The other income was primarily on account of
foreign currency translation gains.

     Other expense. Other expenses were $0.3 million in fiscal 2001 and $0.2
million in fiscal 2000.

Income taxes. Income taxes were $4.1 million in fiscal 2001 and $1.7 million in
fiscal 2000. The increase in income taxes is mainly on account of provision for
foreign taxes payable overseas by offsite and onsite centers, principally in
United States.

     Equity earnings (losses) of associated companies. Equity losses of
associated companies were $0.9 million in fiscal 2001 as compared to $0.1
million in fiscal 2000 primarily due to proportionate losses associated with our
investment in Satyam Venture Engineering Services Limited.

     Net income (loss). As a result of the foregoing, net income was $14.8
million in fiscal 2001 as compared to net income of $9.8 million in fiscal 2000.
Excluding the amortization of goodwill expense and deferred stock compensation
expense, net income would have been $63.5 million in fiscal 2001 and $28.6
million in fiscal 2000 and net margin would have been 23.1% and 18.5% in fiscal
2001 and 2000, respectively.

Internet Services

     Revenues. Internet services revenues (including inter-segment revenues)
increased 153.1% to $39.0 million in fiscal 2001 from $15.4 million in fiscal
2000, of which inter-segment revenues were $2.1 million in fiscal 2001 and $0.2
million in fiscal 2000. This increase was attributable primarily to a
significant increase in the corporate services businesses and a significant
number of new orders from prominent customers throughout India. The number of
Internet access subscribers grew from more than 151,000 as of March 31, 2000 to
over 460,000 as of March 31, 2001. Corporate customers grew from more than 500
as of March 31, 2000 to more than 650 as of March 31, 2001.

     Cost of revenues. Cost of revenues increased 302% to $27.9 million in
fiscal 2001 from $6.9 million in fiscal 2000. Cost of revenues represented 71.5%
of Internet services revenues in fiscal 2001 as compared to 45.0% in fiscal
2000. The higher level of cost of revenues as a percentage of revenues was
attributable primarily to increases in the cost of hardware and software
purchased from strategic partners for resale, leased line costs resulting
primarily from increased requirement for international bandwidth and last mile
connectivity. The cost of hardware and software purchased for resale was $6.0
million, or 15.4% of revenues, in fiscal 2001 from $1.6 million, or 10.3% of
revenues in fiscal 2000. Leased line costs increased 399% to $15.5 million, or
39.7% of revenues, in fiscal 2001 from $3.1 million, or 20.1% of revenues, in
fiscal 2000. These increases were partially offset by a decrease in direct
personnel costs for web development and customer technical support as a
percentage of revenues. Direct personnel costs for web development and customer
technical support decreased to 9.7% of revenues or $3.8 million, in fiscal 2001
from 11.8% of revenues, or $1.8 million, in fiscal 2000.


                                      56
<PAGE>

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 191.3% to $47.9 million in fiscal 2001 from
$16.4 million in fiscal 2000. Selling, general and administrative expense
represented 122.8% of Internet services revenues in fiscal 2001 as compared to
106.6% in fiscal 2000. This increase was attributable to an increase in indirect
personnel costs, depreciation expenses and marketing expenses. Indirect
personnel costs increased 349% to $9.6 million, or 24.6% of revenues, in fiscal
2001 from $2.1 million, or 11.8% of revenues, in fiscal 2000 primarily due to a
growth in staff from 622 as of March 31, 2000 to 1,044 as of March 31, 2001.
Marketing expenses increased 306% to $9.6 million, or 24.5% of revenues, in
fiscal 2001 from $2.4 million, or 15.3% of revenues, in fiscal 2000 primarily
due to the launch of our consumer Internet Access Services Division and Portals
Division.

     Amortization of goodwill expense. Amortization of goodwill was $20.2
million in fiscal 2001 as compared to $2.7 million in fiscal 2000. The goodwill
expense in fiscal 2001 reflects the amortization of goodwill associated with the
acquisition of IndiaWorld, IndiaPlaza and investment in CricInfo Limited.

     Operating income (loss). As a result of the foregoing, operating loss
increased to $57.0 million in fiscal 2001 from $10.6 million in fiscal 2000.
Excluding the amortization of goodwill expense and deferred stock compensation
expense, operating loss would have been $34.9 million in fiscal 2001 and $7.5
million in fiscal 2000.

     Interest income. Interest income increased to $5.5 million in fiscal 2001
as compared to $2.4 million in fiscal 2000. This increase was attributable
primarily to interest earned from short term deposits.

     Interest expense. Interest expense decreased to $0.3 million in fiscal 2001
from $0.6 million in fiscal 2000.

     Other Income. Other income increased to $3.7 million in fiscal 2001 from
$80 thousand in fiscal 2000.

     Minority Interest. Minority interest increased to $25.7 million in fiscal
2001 from $3.1 million in fiscal 2000.

     Equity earnings (losses) of associated companies. Equity losses of
associated companies were $6.4 million in fiscal 2001 primarily due to
amortization of goodwill associated with our investment in Refco Sify,
Placements.com and CricInfo Limited.

     Net income (loss). As a result of the foregoing, net loss increased to
$28.8 million in fiscal 2001 from $5.7 million in fiscal 2000. Excluding the
amortization of goodwill expense and deferred stock compensation expense, net
loss would have been $6.7 million in fiscal 2001 and $2.6 million in fiscal
2000.

Software Products

     VCI is currently building its sales and marketing team and generated no
revenues in fiscal 2001. VCI incurred a $13.9 million net loss in fiscal 2001 as
compared to a $11.0 million net loss in fiscal 2000.

     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. The net loss of $11.0 million in
fiscal 2000 was attributable primarily to professional charges and software
product research and development expenses of $8.7 million, most of which were
costs paid to Satyam for development work undertaken on the product.

Comparisons of fiscal 2000 and 1999.

     Revenues. Revenues increased by 68.2% to $164.5 million in fiscal 2000 from
$97.8 million in fiscal 1999. The revenue growth was primarily a result of
increases in revenues from IT services, which represented $149.3 million of
revenues in fiscal 2000 as compared to $95.6 million in fiscal 1999, and to a
lesser extent increases in revenues from Internet services. In fiscal 2000, we
derived approximately 90.8% of our total revenues from IT services,
approximately 9.2% of our total revenues from Internet services and 0% of our
revenues from software products.

     During fiscal 2000, we derived 74.9% of our revenues from the United
States, 10.0% from India, 6.3% from Japan, 5.2% from Europe and the remaining
3.6% from other countries. During fiscal 1999, we derived 78.2% of our revenues
from the United States, 7.2% from Europe, 4.2% from Japan, 3.6% from India, and
the remaining 6.8% from other countries. The increased proportion of sales in
India in fiscal 2000 primarily represents the higher contribution to revenues
from Internet services.


                                      57
<PAGE>

     Cost of revenues. Cost of revenues increased 82.5% to $90.4 million in
fiscal 2000 from $49.6 million in fiscal 1999. This increase was attributable
primarily to increases in associate compensation and benefits expenses, an
increase in the costs of international travel, as well as an increase in
depreciation expense due to higher infrastructure costs associated with our
larger employee base. Associate compensation and benefits expenses increased
64.1% to $53.2 million, or 32.3% of revenues, in fiscal 2000 from $32.4 million,
or 33.1% of revenues, in fiscal 1999. Travel expenses increased 123.1% to $10.3
million, or 6.2% of revenues, in fiscal 2000 from $4.6 million, or 4.7% of
revenues, in fiscal 1999. Depreciation expense increased 79.1% to $9.0 million,
or 5.5% of revenues, in fiscal 2000 from $5.0 million, or 5.1% of revenues, in
fiscal 1999. Deferred stock compensation expense increased 326.0% to $13.4
million, or 8.1% of revenues, in fiscal 2000 from $3.1 million, or 3.2% of
revenues, in fiscal 1999. Cost of revenues represented 55.0% of revenues in
fiscal 2000 as compared to 50.7% in fiscal 1999. Inter-segment cost of revenues
were $5.9 million in fiscal 2000 as compared to $0.6 million in fiscal 1999 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 increased 118.2% to $69.6 million in fiscal 2000 from
$31.9 million in fiscal 1999. This increase was a result primarily of increases
in marketing, depreciation and associate compensation and benefits costs.
Marketing expenses increased 211% to $12.4 million, or 7.5% of revenues, in
fiscal 2000 from $4.0 million, or 4.1% of revenues, in fiscal 1999. Depreciation
expense increased 76.8% to $11.2 million, or 6.8% of revenues, in fiscal 2000
from $6.3 million, or 6.5% of revenues, in fiscal 1999. Associate compensation
and benefits expenses increased 71.6% to $11.0 million, or 6.7% of revenues, in
fiscal 2000 from $6.4 million, or 6.5% of revenues, in fiscal 1999. Selling,
general and administrative expenses represented 32.6% of revenues in fiscal 1999
as compared to 42.3% of revenues in fiscal 2000. Inter-segment selling, general
and administrative expenses were $2.6 million in fiscal 2000 as compared to $0
in the fiscal 1999 and have not been allocated to the individual components that
make up cost of revenues. The higher percentage of expenses resulted primarily
from higher selling, general and administrative expenses of Infoway and software
development expenses incurred by VCI.

     Amortization of goodwill. Amortization of goodwill was $5.0 million in
fiscal 2000 as compared to $0.1 million in fiscal 1999. Goodwill increased
because of the acquisition of the minority interest in SES in September 1999 and
the initial investment in IndiaWorld made by Infoway in November 1999.

     Operating income (loss). As a result of the foregoing, we incurred an
operating loss of $0.6 million in fiscal 2000 as compared to an operating income
of $16.2 million in fiscal 1999. Excluding the amortization of goodwill expense
and deferred stock compensation expense, operating income would have been $19.7
million in fiscal 1999 and $21.3 million in fiscal 2000 and operating margin
would have been 20.1% of total revenues in fiscal 1999 and 13.0% in fiscal 2000.

     Interest income. Interest income increased to $2.6 million in fiscal 2000
from $43 thousand in fiscal 1999. This increase was attributable primarily to
interest earned on the proceeds of Infoway's ADS offerings.

     Interest expense. Interest expense increased 63.5% to $11.3 million in
fiscal 2000 from $6.9 million in fiscal 1999. This increase was attributable
primarily to an increase in short-term borrowings for working capital purposes
and interest on the additional loan to fund the acquisition of shares by the
Trust in connection with the ASOP.

     Other income. Other income increased 48.6% to $1.5 million in fiscal 2000
from $1.0 million in fiscal 1999. This other income arose from foreign currency
gains primarily relating to timing differences between revenue recognition and
the realization of the underlying accounts receivable.

     Other expense. Other expenses were $0.4 million in fiscal 2000 and $28
thousand in fiscal 1999.

     Income taxes. Income taxes were $1.6 million in fiscal 2000 as compared to
$1.1 million in fiscal 1999, representing an effective tax rate of 10.5% of
income before taxes in fiscal 1999. This increase in our net effective tax was
attributable to an increase in the profits of our overseas branches during this
period which are subject to taxation in the countries where the branches are
operating.

     Net income (loss). As a result of the foregoing, we incurred a net loss of
$6.9 million in fiscal 2000 compared to a net income of $9.0 million for fiscal
1999. This net loss was attributable primarily to increases in the amortization
of goodwill and deferred stock compensation expense and selling, general and
administrative expense. Excluding the amortization of goodwill expense and
deferred stock compensation expense, net income would have been $13.7 million in
fiscal 2000 and $12.5 million in fiscal 1999 and net margin would have been 8.3%
and 12.7% in fiscal 2000 and 1999, respectively.

IT Services


                                      58
<PAGE>

     Revenues. IT services revenues (including inter-segment revenues) increased
61.6% to $155.0 million in fiscal 2000 from $95.9 million in fiscal 1999, of
which $5.8 million and $0.4 million represented inter-segment revenues in fiscal
2000 and 1999, respectively. All revenues discussed in this sub-section
"Revenues" 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 continued to increase in all aspects of our services, except for
system maintenance. Our revenue growth primarily reflected the higher proportion
of our service offerings that address the software development, packaged
software integration and eBusiness requirements of our customers as well as an
increase in engineering design services. In particular, revenues from eBusiness
projects were $30.8 million, or 20.6% of our revenues, in fiscal 2000 as
compared to $0.08 million, or 0.1% of our revenues in fiscal 1999. The decline
in revenues from system maintenance resulted from a reduction in Year 2000
conversion projects. Net sales from Year 2000 conversion projects represented
5.5% of our revenues in fiscal 2000 as compared to 25.4% in fiscal 1999.

     During fiscal 2000, we derived 81.4% of our revenues from the United
States, 6.9% from Japan, 5.7% from Europe, 2.1% from India and the remaining
3.9% from the Middle East, Africa, Singapore and Australia. During fiscal 1999,
we derived 78.9% of our revenues from the United States, 7.4% from Europe, 4.3%
from Japan, 2.4% from India and the remaining 7.0% from the Middle East, Africa,
Singapore and Australia.

     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 83.7% to $89.4 million in
fiscal 2000 from $48.6 million in fiscal 1999. Cost of revenues represented
57.7% of revenues in fiscal 2000 as compared to 50.7% in fiscal 1999. The higher
level of cost of revenues as a percentage of revenues was attributable primarily
to an increase in international travel expenses as we expanded our global
operations, and in depreciation expense due to higher infrastructure costs
associated with our larger employee base. Travel expenses increased 123.1% to
$10.3 million, or 6.6% of revenues, in fiscal 2000 from $4.6 million, or 4.8% of
revenues, in fiscal 1999. Depreciation expense increased 79.1% to $9.0 million,
or 5.8% of revenues, in fiscal 2000 from $5.0 million, or 5.2% of revenues, in
fiscal 1999. Compensation and benefits expenses increased 61.3% to $51.4 million
in fiscal 2000 from $31.8 million in fiscal 1999, representing 33.1% and 33.2%
of revenues in fiscal 2000 and 1999, respectively, resulting primarily from a
larger number of technical associates, which increased 27.3% from 3,513 to
4,473, higher levels of compensation and increased hiring of foreign nationals
for our offsite centers. Deferred stock compensation expense increased 321% to
$13.2 million, or 8.5% of revenues in fiscal 2000 from $3.1 million, or 3.3% of
revenues in fiscal 1999.

     Our gross margins are affected by our utilization rates and the mix of our
IT services provided on a time-and-materials or a fixed-price basis and through
our offshore centers, off-site centers or on-site teams. During fiscal 1999 and
2000 we did not experience any significant variance in our overall gross margins
as a result of these factors.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 77.6% to $44.9 million in fiscal 2000 from
$25.3 million in fiscal 1999. Selling, general and administrative expenses
represented 29.0% of revenues in fiscal 2000 as compared to 26.4% in fiscal
1999. The higher level of selling, general and administrative expenses as a
percentage of revenues was attributable primarily to an increase in marketing
expenses due to an increase in the number of sales conferences and meetings
attended and increased marketing efforts in new areas and countries;
professional charges due to the use of consultants to establish foreign
subsidiaries, to open offshore branches and for marketing services; and
compensation and benefits expenses due to additional non-technical associates,
higher compensation levels and additional foreign marketing and human resource
associates. Marketing expenses increased 98.0% to $6.7 million, or 4.3% of
revenues, in fiscal 2000 from $3.4 million, or 3.5% of revenues, in fiscal 1999.
Professional charges increased 210% to $2.3 million, or 1.5% of revenues, in
fiscal 2000 from $0.7 million, or 0.8% of revenues, in fiscal 1999. Compensation
and benefits expenses increased 73.8% to $7.9 million, or 5.1% of revenues, in
fiscal 2000 from $4.5 million, or 4.7% of revenues, in fiscal 1999. These
increases were partially offset by a decrease in travel expenses and rental
expenses as a percentage of revenue. Travel expenses increased 9.3% to $1.9
million, or 1.2% of revenues, in fiscal 2000 from $1.7 million, or 1.8% of
revenues, in fiscal 1999. Rental expenses increased 37.8% to $3.4 million, or
2.2% of revenues, in fiscal 2000 from $2.5 million, or 2.6% of revenues, in
fiscal 1999.

     Amortization of goodwill. Amortization of goodwill was $2.4 million in
fiscal 2000 as compared to $0.1 million in fiscal 1999. The goodwill expense in
fiscal 2000 reflects the part-year amortization of goodwill associated with the
acquisition of the minority interest in SES.


                                      59
<PAGE>

     Operating income (loss). As a result of the foregoing, operating income
decreased 16.1% to $18.4 million in fiscal 2000 from $21.9 million in fiscal
1999. As a percentage of revenues, operating income decreased to 11.8% in fiscal
2000 from 22.8% in fiscal 1999. Excluding the amortization of goodwill expense
and deferred stock compensation expense, operating income would have been $37.2
million in fiscal 2000 and $25.3 million in fiscal 1999 and the operating margin
would have been 24.0% and 26.4% in fiscal 2000 and 1999, respectively.

     Interest income. Interest income increased to $0.2 million in fiscal 2000
from $43 thousand in fiscal 1999. This increase was attributable primarily to
interest earned from equity funds received from the Trust under the ASOP and
interest earned by the Trust from associates under the ASOP.

     Interest expense. Interest expense increased 68.9% to $10.5 million in
fiscal 2000 from $6.2 million in fiscal 1999. This increase was attributable
primarily to an increase in short-term borrowings for working capital purposes
as well an additional loan from Citibank and ICICI Bank to the Trust to fund the
acquisition of shares by the Trust in connection with the ASOP.

     Other income. Other income increased 297% to $3.8 million in fiscal 2000
from $1.0 million in fiscal 1999, of which $2.5 million in fiscal 2000 arose
from the sale of intellectual property rights to VCI. Other income of $1.1
million in fiscal 2000 and $0.9 million in fiscal 1999 arose from foreign
currency gains primarily relating to timing differences between revenue
recognition and the realization of the underlying accounts receivable.

     Other expense. Other expenses were $0.2 million in fiscal 2000 and $28
thousand in fiscal 1999.

     Income taxes. Income taxes were $1.7 million in fiscal 2000 and $1.1
million in fiscal 1999, representing an effective tax rate of 14.2% and 6.6% of
income before taxes in fiscal 2000 and 1999, respectively.

     Net income (loss). As a result of the foregoing, net income decreased 35.8%
to $9.8 million in fiscal 2000 from $15.2 million in fiscal 1999. Net income
represented 6.3% of revenues in fiscal 2000 as compared to 15.9% in fiscal 1999.
Excluding the amortization of goodwill expense and deferred stock compensation
expense, net income would have been $28.6 million in fiscal 2000 and $18.7
million in fiscal 1999 and net income margin would have been 18.5% and 19.5% in
fiscal 2000 and 1999, respectively.

Internet Services

     Revenues. Internet services revenues (including inter-segment revenues)
increased 529% to $15.4 million in fiscal 2000 from $2.4 million in fiscal 1999,
of which $0.2 million represented inter-segment revenues in each of fiscal 2000
and 1999. Infoway commenced its Internet access services in November 1998 and
the increased revenues in fiscal 2000 reflects a full year of Internet services
operations and a growing consumer subscriber base, which grew from over 29,000
as of March 31, 1999 to over 151,000 as of March 31, 2000. This increase was
also attributable to the increase in revenues from corporate network services
resulting primarily from an increase in the number of corporate customers from
more than 350 as of March 31, 1999 to more than 500 as of March 31, 2000 from
the sale of hardware and software, from increased revenues relating to Infoway's
partnership with UUNet Technologies and from new service offerings.

     Cost of revenues. Cost of revenues increased 358% to $6.9 million in fiscal
2000 from $1.5 million in fiscal 1999. This increase was attributable primarily
to increases in the cost of hardware and software purchased for resale to
Infoway's corporate network and technology services customers and leased line
costs resulting primarily from increasing the capacity of Infoway's network and
direct personnel costs for web development and customer technical support. The
cost of hardware and software purchased for resale increased 433% to $1.6
million, or 10.4% of revenues, in fiscal 2000 from $0.3 million, or 13.6% of
revenues, in fiscal 1999. Leased line costs increased 448% to $3.1 million, or
20.1% of revenues, in fiscal 2000 from $0.6 million, or 23.1% of revenues, in
fiscal 1999. Direct personnel costs for web development and customer technical
support increased 219% to $1.8 million, or 11.8% of revenues, in fiscal 2000
from $0.6 million, or 23.2% of revenues, in fiscal 1999. As a percentage of
Internet services revenues, cost of revenues was 45.0% of revenues in fiscal
2000 as compared to 61.8% in fiscal 1999, which reflects the increased
proportion of revenues derived from consumer Internet access services which have
a relatively lower cost of revenues as compared to the corporate network and
technology services.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 244% to $16.4 million in fiscal 2000 from $4.8
million in fiscal 1999. This increase was attributable primarily to a growth in
staff from 340 as of March 31, 1999 to 622 as of March 31, 2000 resulting in an
increase in indirect personnel costs, increases in selling and marketing
expenses resulting from additional expenditure in connection with marketing
Infoway's Internet


                                      60
<PAGE>

access business, travel expenditures, telecommunication charges, consultant fees
and rental expense. Indirect personnel costs increased 154.6% to $2.1 million,
or 13.9% of revenues, in fiscal 2000 from $0.8 million, or 34.3% of revenues, in
fiscal 1999. Selling and marketing expenses increased 1,015% to $5.7 million, or
36.9% of revenues, in fiscal 2000 from $0.5 million, or 20.8% of revenues, in
fiscal 1999. Telecommunication charges increased 125.4% to $0.8 million, or 5.1%
of revenues, in fiscal 2000 from $0.4 million, or 14.3% of revenues, in fiscal
1999. Professional consultant fees increased 82.1% to $0.6 million, or 3.8% of
revenues, in fiscal 2000 from $0.3 million, or 13.2% of revenues, in fiscal
1999. Rental expense increased 121.2% to $0.6 million, or 3.6% of revenues, in
fiscal 2000 from $0.3 million, or 10.2% of revenues, in fiscal 1999. These
expenses represented 106.6% of Internet services revenues in fiscal 2000 as
compared to 194.9% in fiscal 1999.

     Amortization of goodwill expense. Amortization of goodwill was $2.7 million
in fiscal 2000 as compared to $0 in fiscal 1999. The goodwill expense in fiscal
2000 primarily reflects the part-year amortization of goodwill associated with
the first phase of the acquisition of IndiaWorld in November 1999.

     Operating income (loss). As a result of the foregoing, operating loss
increased to $10.6 million in fiscal 2000 from $3.8 million in fiscal 1999.
Excluding the amortization of goodwill expense and deferred stock compensation
expense, operating loss would have been $7.5 million in fiscal 2000 and $3.8
million in fiscal 1999.

     Interest income. Interest income was $2.4 million in fiscal 2000 as
compared to $0 in fiscal 1999. The interest income in fiscal 2000 was
attributable primarily to interest earned on the proceeds of Infoway's ADS
offerings.

     Interest expense. Interest expense was $0.7 million in each of fiscal 2000
and fiscal 1999.

     Other income. Other income was $23 thousand in fiscal 1999 and $80 thousand
in fiscal 2000.

     Other expense. Other expense was $0 in each of fiscal 2000 and fiscal 1999.

     Net income (loss). As a result of the foregoing, net loss increased 30.2%
to $5.7 million in fiscal 2000 from $4.4 million in fiscal 1999. Excluding the
amortization of goodwill expense and deferred stock compensation expense, the
net losses would have been $2.6 million in fiscal 2000 and $4.4 million in
fiscal 1999.

Software Products

     VCI generated no revenues in fiscal 2000. VCI incurred a $11.0 million net
loss in fiscal 2000. In fiscal 2000, a significant proportion of these losses
related to $5.9 million of software development expenses for services performed
by Satyam Computer Services. In addition, in fiscal 2000 operating expenses of
$2.5 million related to an inter-segment transaction arising from VCI's purchase
of intellectual property rights from Satyam Computer Services for VisionCompass.
In fiscal 2000, the remaining $2.6 million of operating expenses arose from
compensation and benefits, travel and other expenses. In fiscal 1999, all $1.8
million of software product development operating expenses related to expenses
incurred by Spark before its merger with Satyam Computer Services.

Liquidity and Capital Resources

     Net cash provided by (used in) operating activities. Net cash provided by
operating activities was $5.9 million, $14.1 million and $14.2 million in fiscal
2001, 2000 and 1999, respectively.

     In fiscal 1999, non-cash adjustments to reconcile the $9.0 million net
income to net cash provided by operating activities consisted primarily of
depreciation and amortization of $11.5 million. These adjustments were partially
offset by an increase in net accounts receivable and unbilled revenues of $15.5
million.

     In fiscal 2000, non-cash adjustments to reconcile the $6.9 million net loss
to net cash provided by operating activities consisted primarily of depreciation
and amortization of $25.3 million and deferred stock compensation expenses of
$16.9 million. These adjustments were partially offset by an increase in working
capital, consisting mainly of an increase in net accounts receivable and
unbilled revenues of $23.2 million, and an increase in pre-paid expenses, other
receivables and inventory of $10.3 million. Net accounts receivable and unbilled
revenues increased primarily as a result of a significant increase in our
revenues. Pre-paid expenses, other receivables and inventory increased primarily
as a result of increased prepayments relating to Infoway's use of leased
telecommunications lines, satellite link charges and insurance premiums.


                                      61
<PAGE>

     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 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
accounts receivable and unbilled revenues increased primarily as a result of a
significant increase in our revenues.

     Net cash used in investing activities. Net cash used in investing
activities was $137.8 million, $83.6 million and $36.1 million in fiscal 2001,
2000 and 1999, respectively. Net cash used in investing activities was primarily
related to purchases of premises and equipment of $35.8 million in fiscal 1999;
and was primarily related to purchases of premises and equipment of $40.8
million and acquisitions and investments in associated companies of $40.2
million in fiscal 2000. Net cash used in investing activities in fiscal 2001 was
primarily related to acquisitions and investments in associated companies of
$52.5 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.

     On November 29, 1999 Infoway purchased 24.5% of the outstanding shares of
IndiaWorld for a cash purchase price of $28.3 million, together with a $11.8
million non-refundable deposit towards an option to purchase the remaining 75.5%
of the outstanding shares in IndiaWorld for a purchase price of $85.0 million.
Infoway exercised the option to acquire the remaining outstanding shares of
IndiaWorld in June 2000 by paying $48.7 million in cash and the balance in
268,500 equity shares of Infoway valued at $24.6 million.

     Net cash provided by financing activities. Net cash provided by financing
activities was $14.2 million, $251.7 million and $35.8 million in fiscal 2001,
2000 and 1999, respectively. In addition to using cash generated from
operations, we financed our continuing expansion primarily through borrowings in
fiscal 1999; through capital raising activities in fiscal 2000 and through sale
of investments in fiscal 2001.

     As of March 31, 2001, we had $66.1 million in cash and cash equivalents (of
which $30.8 million was held by Infoway and therefore may not be accessible to
us), $7.3 million in working capital loans, $41.3 million of outstanding secured
and unsecured bank term loans and $1.6 million in other outstanding loans. Of
these $41.3 million in loans, we had rupee term loans aggregating $37.5 million
at a weighted average annual interest rate of 14.0% and U.S. dollar term loans
of $3.7 million at a weighted average annual interest rate of 8.9%. Our rupee
denominated loans are either fixed rate or variable rate at a margin over a
minimum lending rate; our U.S. dollar loans bear interest at LIBOR plus a
margin. Most of our term loans are repayable in installments. Approximately
$33.2 million of long-term debt is due for repayment on or before March 31,
2002. As of March 31, 2001, we had borrowed approximately $1.1 million of our
available credit under our existing long-term credit facilities. In some of our
loan agreements, we have agreed to customary restrictive covenants, including
covenants restricting Satyam Computer Services from paying dividends other than
from its profits of the then current fiscal year after making the necessary
provisions, from incurring further indebtedness other than for its working
capital or in the ordinary course of business, from entering into any merger or
amalgamation or consolidation, from effecting any material change in composition
of its board of directors or management or ownership, and from amending its
Memorandum and Articles of Association or altering its capital structure or
shareholding pattern, in each case without prior lender consent. Under our term
loan agreements, we are entitled to prepay our term loans but we must also pay
an additional early repayment fee determined by the relevant lender.


                                      62
<PAGE>

         The following table describes our outstanding credit facilities as at
March 31, 2001 :
<TABLE>
<CAPTION>
                                                        Amount             Interest Rate            Computation
                                                        ------             -------------            -----------
Loan Type                  Lenders                    Outstanding           (per annum)               Method
---------                  -------                    -----------           -----------               ------
                                                    (in thousands)
                                                    --------------
<S>                     <C>                             <C>                         <C>               <C>
Foreign                 IDBI and Exim Bank              $3,730         Ranging from                   1.75% to
Currency                                                               8.63%                          3.50% over
Term Loans                                                             to 10.26%                      LIBOR


Rupee Term              IDBI                            14,728         Ranging from                   1.50% to 2.00%
Loans                                                                  15.44%(P)                      over
                                                                       to 15.92%                      MLR


Rupee Term Loans        IDBI                             9,605         12.50%                         Fixed


Working Capital         Global Trust Bank and            7,358         Ranging from 10.00%            PLR
Loans                   Vijaya Bank                                    to 15.50%


Rupee Loan of           Citibank and ICICI Bank         13,196         14.03%                         Fixed
Satyam Associates
Trust


Other loans             Various parties                                Variable interest              Variable
                                                         1,583         rates
                                                         -----
     Total..........                                   $50,200
</TABLE>


     In June 2000, we completed the sale of 347,200 equity shares in Infoway,
representing 1.6% of Infoway's outstanding equity shares, at a price of $144.00
per equity share ($36.00 per ADS equivalent) to Government of Singapore
Investment Corporation Pte. Ltd. We received approximately $49.0 million, net of
the transaction costs but before payment of capital gains taxes of approximately
22.0%. The Government of Singapore Investment Corporation Pte. Ltd. has a put
option to sell the shares back to us at a price equal to the Indian Rupee
equivalent to the average Nasdaq National Market closing price during the three
days before exercise of the put option, discounted by 41%, if Infoway does not
complete an initial public offering on a recognized stock exchange in India by
September 2001.

     In October 1999, Infoway completed its U.S. initial public offering and
issued 19,205,000 ADSs, adjusted for a 4-for-1 ADS split effected in January
2000, (representing 4,801,250 equity shares) at a price of $4.50 per ADS.
Infoway received approximately $79.2 million, net of underwriting discounts,
commissions and other offering costs. In February 2000, Infoway completed a
follow-on offering and issued an additional 1,868,700 ADSs (representing 467,175
equity shares) at a price of $80.00 per ADS. Infoway received approximately
$141.7 million, net of underwriting discounts, commissions and other offering
costs.

     We expect Infoway to continue incurring losses in the near future. Based
upon Infoway's present business and funding plans and a May 2001 government
policy change that increased the permissible foreign ownership in certain
internet service providers, including Infoway, from 49.0% to 74.0%, we believe
that Infoway's cash and cash equivalents of $30.8 million as of March 31, 2001
and, if necessary, other resources believed to be available, are sufficient to
meet its currently known requirements through March 31, 2002, and we do not
expect to have to provide it with any funds. In light of the highly dynamic
nature of Infoway's business, however, we cannot assure you that its capital
requirements and sources will not change significantly in the future or whether
or not it may seek future financial support from us.

     During 2002, we anticipate capital expenditures of approximately $40.0
million, principally to finance the establishment of offsite centers in the
United States and elsewhere and to continue the expected expansion of our
offshore centers in India to meet continuing high demand for our services. We
believe that existing cash and cash equivalents, net proceeds from our May 2001
ADS offering and funds generated from operations will be sufficient to meet
these requirements. However, we

                                      63
<PAGE>

may significantly alter our proposed capital expenditures plans and accordingly,
may require additional financing to meet our requirements. After fiscal 2002, 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.

     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, Dr.
Robert Bismuth, were terminated.

     Consequent to restructuring, VCI has put in place an aggressive business
development plan that has begun to show results. The second quarter in fiscal
2002 is expected to generate revenues of $400,000, of which firm orders for
nearly $75,000 were received within first ten days of the quarter. Revenues for
fiscal 2002 are expected to be approximately $2.5 million. The restructuring has
substantially reduced VCI's expenditures and we expect that we will contribute
approximately $2.4 million to fund VCI during fiscal 2002.

Income Tax Matters

     As of March 31, 2001, we had an operating loss carry forward of
approximately $25.0 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.

     The statutory corporate income tax rate in India is currently 35.0%. This
tax rate is presently subject to a 2.0% surcharge resulting in an effective tax
rate of 35.7%. However, we cannot assure you that additional surcharges will not
be implemented by the government of India. Dividends declared, distributed or
paid by an Indian corporation are subject to a dividend tax of 10.2%, including
the presently applicable surcharge, of the total amount of the dividend
declared, distributed or paid. This tax is not paid by shareholders nor is it a
withholding requirement, but rather it is a direct tax payable by the
corporation.

     Satyam Computer Services benefits from the significant tax incentives
provided to IT service firms under Indian tax law. The two principal 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 the 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 effective Indian statutory
income tax rate of 35.7%. The Software Technology Park tax exemption scheme was
modified effective April 1, 2000. All facilities registered in the program on or
before March 31, 2000, which include all of our existing facilities in India and
registrations for 10 new facilities which have not yet been constructed, will
continue to benefit from this program under present law. However, any new
facilities that did not commence operation before April 1, 2000 will no longer
be entitled to the benefits of the tax exemption scheme. This means that we will
benefit less from the scheme as we develop additional facilities and our
effective tax rate will increase in the future.

Effects of Inflation

     Inflation has not had a significant effect on our results of operations and
financial condition to date. However, India has experienced relatively high
rates of inflation in the recent past. According to the Economist Intelligence
Unit, the rates of inflation in India for 1997, 1998, 1999 and 2000 were 7.2%,
13.2%, 4.7% and 5.1%, respectively, and the projected rate of inflation in India
for 2001 is 5.3%.

     Under Infoway's Internet service provider license, Infoway is given the
right to establish the prices it charges to its subscribers, as determined by
market forces. However, under the conditions of Infoway's license, the TRAI may
review and fix the prices Infoway charges its subscribers at any time. If the
TRAI were to fix prices for the Internet service provider services Infoway
provides, Infoway might not be able to increase the prices it charges its
subscribers to mitigate the impact of inflation, which could seriously harm
Infoway's business.

Exchange Rates


                                      64
<PAGE>

     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:

<TABLE>
<CAPTION>
           Month                                            Month End       Average          High           Low
-----------------------------                              -------------  -------------  -------------  -------------

<S>                                                             <C>            <C>            <C>            <C>
December 2000.........................................     Rs.  46.69     Rs.  46.79     Rs.  46.87     Rs.  46.55
January 2001..........................................          46.46          46.59          46.77          46.28
February 2001.........................................          46.66          46.55          46.67          46.25
March 2001............................................          46.85          46.64          46.85          46.43
April 2001............................................          46.86          46.80          47.05          46.48
May 2001..............................................          47.00          46.94          47.05          46.74
</TABLE>



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

<TABLE>
<CAPTION>
Fiscal Year Ended March 31,                                 Period End      Average          High           Low
-----------------------------                              -------------  -------------  -------------  -------------
<S>                                                              <C>            <C>            <C>            <C>
1996 (from December 12, 1995).........................     Rs.  34.22     Rs.  35.49     Rs.  38.35     Rs.  33.65
1997 .................................................          35.94          35.52          35.98          33.75
1998 .................................................          39.50          37.18          40.40          35.33
1999 .................................................          42.44          42.08          43.68          39.25
2000 .................................................          43.63          43.34          43.82          42.20
2001 .................................................          46.85          45.70          46.91          43.56
</TABLE>

Impact of Recently Issued Accounting Pronouncements

In June 1998, the Financials Accounting Standards Board (FASB) issued SFAS 133,
"Accounting for Derivative Financial Instruments and for Hedging Activities".
SFAS 133 provides a comprehensive and consistent standard for the recognition
and measurement of derivatives and hedging activities. SFAS 133 was amended by
SFAS 137 and SFAS 138. SFAS 133, as amended is effective for Satyam's fiscal
year 2002. The adoption of this standard does not have any material impact on
Satyams' results of operations or financial position.

In September 2000, the FASB issued SFAS 140 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 140
replaces SFAS 125, revising the standards governing accounting for
securitizations and other transfers of financial assets and collateral. Adoption
of SFAS 140 is required for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The adoption of
this standard does not have any material impact on Satyams' results of
operations or financial position.

In July 2001, the FASB issued SFAS 141, "Business Combinations". SFAS 141
addresses financial accounting and reporting for business combinations and
supersedes APB 16, "Business Combinations", and SFAS 38, "Accounting for
Pre-acquisition Contingencies of Purchased Enterprises". This statement requires
all business combinations in its scope to be accounted for using the purchase
method. This statement is applicable to all business combinations initiated
after June 30, 2001 and to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later.
Satyam is in the process of assessing the impact of the adoption of this
standard.

In July 2001, the FASB also issued SFAS 142, "Goodwill and Other Intangible
Assets". SFAS 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB 17, "Intangible Assets".
This statement discontinues amortisation of goodwill and requires periodic
assessment for goodwill impairment and a charge to income statement, if
required. This statement is required to be applied starting with fiscal years
beginning after December 15 2001. Early application is permitted with fiscal
years beginning after March 15, 2001, provided that the first interim financial
statements have not previously been issued. Satyam is in the process of
assessing the impact of the adoption of this standard.


                                      65
<PAGE>

Item 6. DIRECTORS, AND OFFICERS OF REGISTRANT

Directors and Officers

         The following table sets forth the name, age, and position of each
director and executive officer of Satyam Computer Services, as of July 26, 2001:

<TABLE>
<CAPTION>
  Name                             Age    Position Held
  ----                             ---    -------------
Directors

<S>                                 <C>   <C>
B. Ramalinga Raju.............      45    Chairman
B. Rama Raju..................      42    Managing Director and Chief Executive Officer (3)
C. Srinivasa Raju.............      40    Director
V. P. Rama Rao................      67    Director (1) (2) (3)
C. Satyanarayana..............      72    Director  (1) (2) (3)
Dr. Mangalam Srinivasan.......      63    Director  (1) (2)

Executive Officers

T.R. Anand....................      45    Senior Vice President--Vertical Business Unit--Telecom
Anil Kekre....................      50    Executive Vice President--Regional Business Unit--Europe
Joseph Abraham................      49    Director & Senior Vice President--Vertical Business Unit--US Federal
                                          Government
Kalyan Rao K. ................      48    Executive Vice President & Chief Technical Officer--Vertical
                                          Business Unit--Telecom
Manish Mehta..................      44    Senior Vice President--Vertical Business Unit--Manufacturing
Mohan Eddy F. S. .............      51    Director--Horizontal Business Unit--Collaborative Enterprise Solutions
Murty A. S. ..................      42    Director & Senior Vice President--Global Human Resources
Prabhat G. B. ................      35    Director--Horizontal Business Unit--Enterprise Business Solutions
Rakesh Bhatia.................      45    Senior Vice President--Horizontal Business Unit--IT Outsourcing
Ram Mynampati.................      43    Executive Vice President & Chief Operating Officer--Vertical Business
                                          Unit--Insurance, Banking & Financial Services, Healthcare
Sinha P. K. ..................      52    Senior Vice President--Quality
Srinivas V. ..................      41    Senior Vice President & Chief Financial Officer
Thiagarajan K.................      48    Director & Senior Vice President--Corporate Planning and Strategy
</TABLE>


(1)  Member of the Audit Committee
(2)  Member of the Compensation Committee
(3)  Member of the Investors Grievance Committee

     B. Ramalinga Raju has 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 Satyam Infoway 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 Raju has 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 Dr. Millennium Inc., 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.

     C. Srinivasa Raju has been on our board of directors since 1990. He became
the Executive Director of our company in 1993. Effective September 1, 2000, Mr.
Srinivasa Raju relinquished his full time position as Executive Director to
devote his time to other independent projects. Mr. Srinivasa Raju will continue
to serve on the board of directors as a non-Executive director. Mr. Srinivasa
Raju also sits on the board of directors of Infoway. He has served as the Chief
Executive Officer of Dun & Bradstreet Satyam Software (Pvt) Limited, formerly a
joint venture company of Dun & Bradstreet and our company. He has also served as
Director of SES. Before this, he worked for Aqua Terra Consultants


                                      66
<PAGE>

in Palo Alto, California, as a consultant. Mr. Srinivasa Raju holds a master of
engineering degree and a master of science degree from Utah State University.
Mr. Srinivasa Raju is related by marriage to Mr. B. Ramalinga Raju, the Chairman
of our company.

     V. P. Rama Rao has 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.

     C. Satyanarayana has been on our board of directors since July 1991. Before
this, he was with the Indian Revenue Service as the Assistant Commissioner of
Income Tax. Mr. Satyanarayana also sits on the boards of several leading
companies in India. Mr. Satyanarayana holds a bachelor degree in engineering
from the University of Madras.

     Dr. Mangalam Srinivasan has 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.

     T. R. Anand has been our Senior Vice President--Vertical Business
Unit--Telecom since November 2000. Prior to this, he was our Senior Vice
President, Strategic Business Unit 3 from 1999. Before this, he was with IBM
Global Services India (formerly Tata Information Systems Ltd.) as General
Manager. Mr. Anand holds a bachelor of engineering degree from U.V.C.E.,
Bangalore and a post-graduate diploma in management (specialization in
information systems) from Indian Institute of Management, Ahmedabad.

     Anil Kekre has been our Executive Vice President--Regional Business
Unit--Europe since November 2000. Prior to this, 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.

     Joseph Abraham has been our Director & Senior Vice President--Vertical
Business Unit--US Federal Government 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 Executive Vice President & Chief Technical
Officer--Vertical Business Unit--Telecom since November 2000. Prior to this, he
was our Director and Chief Technical Officer from 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.

     Manish Mehta has been our Senior Vice President--Vertical Business
Unit--Manufacturing since November 2000. Prior to this, he was our Vice
President, Strategic Business Unit 6 from 1997. Before this, he was with
Datamatics Limited as Vice President and before that with Tata Consultancy
Services for 14 years. Mr. Mehta holds a master of engineering (industrial
development) degree from Birla Institute of Technology and Sciences, Pilani.

     C Mohan Eddy F. S. has been our Director--Horizontal Business
Unit--Collaborative Enterprise Solutions since November 2000. Prior to this, he
was a Director, Strategic Business Unit--Satyam Renaissance Consulting from
1995. Before this, he was with Advent Computer Services Limited as its Chief
Executive Officer. 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


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<PAGE>

company, Mr. Murty worked for Tata Consulting Services for over 12 years. Mr.
Murty holds a master of engineering 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.

     Rakesh Bhatia has been our Senior Vice President--Horizontal Business
Unit--IT Outsourcing since November 2000. Prior to this, he was one of our Vice
Presidents from 1988 to 1991 and has been our Vice President--Strategic Business
Unit 8 from 1998. Before this, Mr. Bhatia worked for Inspirations in Computing
PL, AMP Insurance and EDS Australia from 1991 to 1998. Mr. Bhatia holds a
bachelor of computer science degree from Harrow College of Technology, London.

     Ram Mynampati has been our Executive Vice President & Chief Operating
Officer--Vertical Business Unit--Insurance, Banking & Financial Services,
Healthcare since November 2000. Prior to this, he was our Executive Vice
President, Strategic Business Units 1, 2 & 4 from 1999. Before this, he was with
Metamor Global Solutions, USA as Senior Vice President, Operations. Mr.
Mynampati holds a master of computer science degree from California State
University.

     Sinha P. K. has been our Senior Vice President--Quality since 1999. Before
this, he was our Vice President, Quality. Mr. Sinha holds a bachelor of
engineering degree from Ranchi University and a master of business
administration degree from Jamnalal Bajaj Institute, Mumbai.

     Srinivas V. has been our Senior Vice President & Chief Financial Officer
since November 2000. Prior to this, he was our Vice President and Chief
Financial Officer from 1998. Before this, he was our General Manager, Finance.
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 Satyam--GE Software Services Private Limited. In addition, he holds
a bachelor of law degree and a master of commerce degree from Osmania
University.

     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.

     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 2001 for services rendered in all capacities to us. Mr. Raju was
appointed managing director and chief executive officer of our company in 1991.
With the exception of three 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 three
overseas executive officers, 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. In accordance with the rules of the
Securities Exchange Commission, other compensation in the form of perquisites
and other personal benefits has been omitted because the aggregate amount of
such perquisites and personal benefits constituted less than the lesser of
$50,000 or 10.0% of the total of annual salary and bonuses in fiscal 2000. The
total remuneration received by our executive officers



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<PAGE>

and directors for their services to us for the fiscal year ended March 31, 2001
was $1.1 million. The total renumeration and the amounts in the following table
are in dollars based on the noon buying rate of Rs.46.85 per dollar on March 31,
2001.

<TABLE>
<CAPTION>
                                                                          Annual Compensation
                                                                          -------------------
Name and Principal Position                                             Salary    Bonus  Other(1)
---------------------------                                             ------    -----  --------
<S>                                                                     <C>         <C>  <C>
B. Rama Raju, Managing Director and Chief Executive Officer........     $35,859     --   $46,808
</TABLE>

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

Option Grants In Last Year

     As of March 31, 2000, we had granted to our executive officers warrants to
purchase 2,078,100 equity shares. As of March 31, 2001, the aggregate number of
shares underlying warrants granted to our executive officers was 2,259,300 and
no warrants have been granted to our directors.

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. As of March
31, 2001, warrants to purchase 11,284,070 shares in Satyam Computer Services
have been granted to associates pursuant to our ASOP, of which warrants to
purchase 1,829,930 shares have been exercised. As of March 31, 2001, the Trust
held 1,715,930 equity shares in Satyam Computer Services reserved for issuance
upon the exercise of warrants which had not yet been granted by the Trust
pursuant to our ASOP.

     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 $9.66 per share (translated at the noon buying rate of
Rs.46.59 per $1.00 on February 28, 2001). 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


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<PAGE>

               (ii) 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 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. As of March 31, 2001, options to purchase
5,759,209 of our equity shares have been granted to associates under this plan.

     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 ADR. Our ASOP ADR 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 ADRs 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
ADR 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 ADR. 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 ADR will be exercisable for ADSs represented by ADRs.

     Our ASOP ADR 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 ADR, provided that no such action may affect any ADS
previously issued and sold or any option previously granted under our ASOP ADR.

     Options granted under our ASOP ADR 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 ADR 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 ADR 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 ADR 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 ADR may not exceed 10 years.

     Our ASOP ADR 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 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.


                                      70
<PAGE>

     IASOP. In fiscal 1999, Infoway established the IASOP which provides for the
issuance of warrants to purchase Infoway shares to eligible associates of
Infoway. The IASOP is substantially similar to the ASOP and is administered by
an employee welfare trust, the Infoway Trust. Infoway issued to the Infoway
Trust 825,000 warrants of Rs.1 each to purchase equity shares in Infoway. In
turn, the Infoway Trust from time to time grants to eligible associates warrants
to purchase equity shares held by or reserved for issuance to the Infoway Trust.
As of March 31, 2001, warrants to purchase 565,220 shares have been granted to
associates, and 200 warrants have been exercised. As of March 31, 2001, the
Infoway Trust held warrants to purchase 259,780 equity shares of Infoway which
had not yet been granted by the Infoway Trust to associates pursuant to its
IASOP but are expected to be granted in the future. An associate must pay
consideration of Rs.1 per warrant to the Infoway Trust and each warrant entitles
the associate-holder to purchase one share of Infoway 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 Infoway. 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. The VCI Plan 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 shares of common stock of VCI to VCI employees,
directors and consultants as well as to employees, directors and consultants of
VCI's parent or subsidiary entities, including our employees, directors and
consultants. The option price is determined by the board of directors at the
time the option is granted, and, in the case of incentive stock options, in no
event is less than the fair market value of the shares at the date of grant as
determined by the board of directors. The shares acquired through the exercise
of options are subject to the restrictions specified in the VCI Plan. Options
generally vest over a four-year period and expire ten years from the date of
grant.

     The VCI board of directors or a committee of the VCI board may administer
the VCI Plan. Options granted under the VCI Plan are not generally transferable
by the optionee, and each option is exercisable during the lifetime of the
optionee only by such optionee. The exercise price of options granted under the
VCI Plan is determined by the administrator of the VCI Plan; provided that the
exercise price of incentive stock options granted under the VCI Plan must be at
least equal to the fair market value of VCI shares on the date of grant. With
respect to any participant who owns stock possessing more than 10.0% of the
voting power of all classes of VCI's outstanding stock, the exercise price of
any incentive stock option granted must equal at least 110.0% of the fair market
value of VCI's shares on the grant date. The term of options granted under the
VCI Plan is determined by the administrator of the VCI Plan; provided that the
term of any incentive stock option may not exceed 10 years, and may not exceed
five years if granted to any participant owning more than 10.0% of the voting
power of all classes of VCI 's outstanding stock.

     The VCI Plan provides that in the event of a merger of VCI with or into
another corporation, a sale of substantially all of VCI's assets or a like
transaction involving VCI, each option shall be assumed or an 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. A total of 25,000,000
shares of VCI common stock are currently reserved for issuance and as of March
31, 2001, options to purchase 919,400 shares in VCI have been granted to
associates and 0 options have been exercised. The exercise prices of the prior
options grants have been at fair value of the underlying shares. We expect that
the exercise prices of all options granted under the VCI Plan will be equal to
the fair market value of the underlying shares and therefore we do not expect to
incur compensation expense with respect to those future grants.

     The SEBI guidelines, effective starting 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


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<PAGE>

     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.

Messrs. B. Ramalinga Raju and B. Rama Raju are permanent directors and are not
subject to retirement by rotation. The term of Mr. C. Srinivasa Raju expired and
he was re-elected to an additional 4 year term at our AGM in June, 2001. The
terms of Messrs. C. Satyanarayana, V.P. Rama Rao and Dr. Managalam Srinivasan
will expire, and each of them is up for re-election to an additional 4 year term
at our Annual General Meetings to be held in 2002, 2003 and 2004 respectively.

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 Mr. V.P. Rama Rao,
Mr. C. Satyanaryana and Dr. Mangalam Srinivasan, each of whom is an independent
director.

     The compensation committee of the board of directors determines the
salaries and benefits for our executive directors and some of our executive
officers and the stock options for all associates. The members of the
compensation committee are Mr. V.P. Rama Rao, Mr. C. Satyanaryana and Dr.
Mangalam Srinivasan, each of whom is an independent director.

     The investors grievance committee of the board of directors formed in
January 2001 focuses on strengthening investor relations and addressing
investors' concerns. The members of the committee are Mr. V.P. Rama Rao and Mr.
C. Satyanarayana, each of whom is an independent director, and Mr. B. Rama Raju,
Managing Director and CEO of the Company.

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. 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. Executive officers are appointed by the
management. There are no severance and other agreements.

Employees


                                      72
<PAGE>

     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, 2001, we had 8,593 employees whom we refer to as
"associates," including 7,798 technical associates. We had 3,583 and 5,107
associates as of March 31, 1999 and 2000, 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 2000, we received approximately 32,000
job applications, from both recent graduates and those with previous experience,
tested and/or interviewed approximately 2,400 and extended job offers to 1,336,
of whom 1,073 joined our company. 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.

     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, some of our technical associates are currently
undergoing training in new and emerging technologies, such as Visual Basic,
Visual C++, Java, COM/DCOM, IIS, MTS, SQL-Server 2000 and Oracle 8i. 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 1999, fiscal 2000 and fiscal
2001, we experienced associate attrition at a rate of 15.4%, 12.9% and 15.1%,
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 rates of
turnover will continue.

     At any given time, approximately 15% of 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 12.1%, 14.5% and 17.6% of our technical associates worked
overseas, primarily in the United States, in fiscal 1999, fiscal 2000 and fiscal
2001, respectively. As at March 31, 2001, we employed 180 technical and 24
support staff in our seven offsite centers in the United States, Japan, the
United Kingdom and Singapore. 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 July 26, 2001 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 July
26, 2001 upon the exercise of all options and other


                                      73
<PAGE>

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.

<TABLE>
<CAPTION>
                                                                                           Equity
                                                                                           ------
                                                                                           Shares
                                                                                           ------
                                                                                        Beneficially
                                                                                        ------------
                                                                                            Owned
                                                                                            -----
  Beneficial Owner                                                    Number               Percent
  ----------------                                                    ------               -------
<S>                                                                  <C>                       <C>
B. Rama Raju...................................................      15,102,000/(1)/           4.9
B. Ramalinga Raju..............................................      13,746,000/(2)/           4.4
C. Srinivasa Raju..............................................       6,050,000/(3)/           2.0
V.P. Rama Rao..................................................            --                 --
C. Satyanarayana...............................................         20,000                 *
Dr. Mangalam Srinivasan........................................            --                 --
All directors and executive officers as a group (19 persons)          36,614,145             11.8
</TABLE>

(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.
(3)  Includes 17,500 equity shares held by Chintalapati Holdings Private Limited
     in which C. Srinivasa Raju owns 50% holding. C. Srinivasa Raju disclaims
     beneficial-ownership of any equity shares held by Chintalapati Holdings
     Private Limited.
*    Less than 0.1% of total

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Share Ownership

     The only person or group of affiliated persons who is know to us to
beneficially own 5% or more of our equity shares as of July 26, 2001 is Unit
Trust of India which holds 6.8%. United Trust of India has the same voting
rights as our other shareholders.

     As of August 3, 2001, 295,260 of our equity shares, representing 0.10% of
our outstanding shares, were held by a total of 97 holders of record with
addresses in the United States. As of July 31, 2001, 16,675,000 of our ADSs
(representing 33,350,000 equity shares), representing 10.8% of our outstanding
equity shares, were held by a total of 2,101 record holders with addresses in
the United States . Since certain of these equity shares and ADSs were held by
brokers and other nominees, the number of record holders in theUnited States.
may not be representative of the number of beneficial holders or where the
beneficial holders are resident.

Related Party Transactions

Satyam Enterprise Solutions Limited

     We formed SES with Mr. C. Srinivasa Raju pursuant to a shareholders'
agreement entered into on April 11, 1996. Under this agreement, we agreed to
contribute 80.0% of the equity capital of SES and Mr. C. Srinivasa Raju agreed
to contribute equity in the remaining 20.0%. On March 31, 1999, the paid-up
share capital of SES was 4.2 million shares, of which 800,000, or 19.0%, was
owned by Mr. C. Srinivasa Raju. In April 1999, the board of directors of both
companies agreed to merge SES into Satyam Computer Services. In our
extraordinary general meeting of shareholders on May 28, 1999, our shareholders
approved the merger of SES with our company. In August 1999, the High Court of
Andhra Pradesh gave final approval for the merger.

     We consummated the merger in September 1999. We engaged an independent
appraiser to value the equity shares of SES on a stand alone basis. Based upon
the valuation of SES by the appraiser, we used an exchange ratio of 10 shares
(adjusted for the September 1, 1999 two-for-one stock split and the August 25,
2000 five-for-one stock split) of Satyam Computer Services to one share of SES
to issue 8,000,000 shares of our equity shares to Mr. Srinivasa Raju, one of our
directors, in exchange for the 19.0% of the equity shares of SES he owned.


                                      74
<PAGE>

Joint Ventures

     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, provides 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, GE Pacific will buy
out our interest in the joint venture in 2001 for a purchase price of $4.0
million.

     For fiscal 2000 and fiscal 2001, we provided infrastructure and other
services to Satyam-GE, which amounted to $539 thousand and $461 thousand
respectively. Software services provided by Satyam-GE to us amounted to $48
thousand in fiscal 1999, $182 thousand in fiscal 2000 and 0 in fiscal 2001. As
of March 31, 2001, Satyam-GE owes $631 thousand to us.

Director and Executive Officer Loan Guarantees

     We have entered into loan agreements with the Industrial Development Bank
of India, Export-Import Bank of India, The Global Trust Bank Limited and Vijaya
Bank. As of March 31, 2001, our loans range in amount from Rs.15 million ($0.4
million) to Rs.624 million ($14.7 million), totaling $25.4 million in the
aggregate, with interest rates ranging from 8.6% to 15.9% per annum, with a
weighted average interest rate of 13.7%. These loans have been repaid mainly out
of funds from our ADS offering in May 2001 and out of funds generated from
operations. Our directors, Mr. B. Rama Raju, managing director and chief
executive officer, and Mr. B. Ramalinga Raju, chairman of the board of
directors, have each provided personal guarantees for the repayment of such
loans at no cost to our company.

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 ($4.1
million) and 123.7 million ($ 2.7 million.) in fiscal 1998, fiscal 1999, fiscal
2000, fiscal 2001 and fiscal 2002 (in July) 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 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. Some of our loan
documents restrict us from paying dividends other than from profits generated
from the then current fiscal year.

     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,


                                      75
<PAGE>

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 one-fourth of one equity share. The
ADRs evidencing ADSs were issued by our depositary, Citibank, N.A., pursuant to
a Deposit Agreement.

     The number of outstanding equity shares (including the underlying shares
for ADSs) in our company as of July 26, 2001 was 309,627,300. As of July 26,
2001, 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.

<TABLE>
<CAPTION>
                                                     Rupee Price per               U.S. Dollar Price
                                                     ---------------               -----------------
                                                    Equity Share/(1)//(2)/         Per Equity Share
                                                    ----------------------         ----------------
Annual high and low market prices Fiscal            High            Low           High            Low
-----------------------------------------       --------------  -------------  -----------     ---------
Year Ended March 31,
--------------------
<S>                                                  <C>              <C>          <C>             <C>
1999                                               Rs.169.50      Rs. 34.58        $3.94           $0.58
2000                                                1,445.99          99.20        33.13            2.28
2001                                                  901.98         291.50        20.18            3.84


Quarterly high and low market prices

2000

   First Quarter............................          175.18          99.20         4.03            2.28
   Second Quarter...........................          228.59         117.31         5.24            2.69
   Third Quarter............................          459.80         221.00        10.57            5.08
   Fourth Quarter...........................        1,445.99         453.95        33.13           10.40


2001

   First Quarter............................          901.98         383.96        20.18            8.59
   Second Quarter...........................          680.00         420.15        14.76            9.12
   Third Quarter............................          511.00         291.50        10.93            6.23
   Fourth Quarter...........................          429.70         179.00         9.22            3.84


2002

   First Quarter............................          271.95         148.60         5.77            3.15
</TABLE>



                                                            Price Range
                                                   -----------------------------
Month high and low market prices                       High             Low
--------------------------------                   -------------    ------------
January 2001...................................       Rs. 429.70       Rs310.25
February 2001..................................       424.50           294.00
March 2001.....................................       353.00           179.00
April 2001.....................................       271.95           160.00
May 2001.......................................       254.25           201.60
June 2001......................................       222.35           148.60
July 2001......................................       198.80           145.00


                                      76
<PAGE>

June 2001......................................       222.35           148.60

(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)  The BSE does not adjust historical price quotations for stock dividends and
     stock splits. However, 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 ADSs:

                                                                Price Range
                                                        -----------------------
     Fiscal Year ended March 31, 2002                       High       Low
     --------------------------------                   -----------  ----------
     First Quarter (beginning May 15).................  $    12.57      $7.90
     May (beginning May 15)...........................       12.57      10.26
     June ............................................       10.98       7.90
     July ............................................        9.80       7.02
     August (to August 3) ............................        8.20       7.24

     The last reported price of our ADSs on the New York Stock Exchange on
August 3, 2001 was $8.10 per ADS.

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 clause III(A) of 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

  .  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 Company's 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 director.

Managerial Remuneration


                                      77
<PAGE>

     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 ournet 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 unpaid 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) in fiscal 1998,
Rs.91.6 million ($2.2 million) in fiscal 1999, Rs.120.0 million ($2.8 million)
in fiscal 2000 and Rs. 187.8 million ($ 4.1 million) in fiscal 2001.

     Under the Companies Act, unless our board of directors recommends the
payment of a dividend, we may not declare a dividend. Similarly, under our
Articles of Association, although the shareholders may, at the annual general
meeting, approve a dividend in an amount less than that recommended by the
board, they cannot increase the amount of the dividend. In India, dividends
generally are declared as a percentage of the par value of a company's equity
shares. The dividend recommended by the board, if any, and subject to the
limitations described above, is distributed and paid to shareholders in
proportion to the paid up value of their shares within 30 days of the approval
by the shareholders at the annual general meeting. Pursuant to our Articles 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 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:


                                      78
<PAGE>

     .    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 - Dividends." A tax of 10.2%, including the presently
applicable surcharge, of the total dividend declared, distributed or paid for a
relevant period is payable by our company. For additional information regarding
this tax, please see "Item 5. Operating and Financial Review and Prospects -
Income Tax Matters."

Bonus Shares

     In addition to permitting dividends to be paid out of current or retained
earnings as described above, the Companies Act permits us to distribute an
amount transferred from the general reserve or surplus in our profit and loss
account to our shareholders in the form of bonus shares, which are similar to a
stock dividend. The Companies Act also permits the issuance of bonus shares from
a share premium account. Bonus shares are distributed to shareholders in the
proportion recommended by the board. Shareholders of record on a fixed record
date are entitled to receive such bonus shares. 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 shareholdings unless otherwise
determined by a special resolution passed by a general meeting of the
shareholders. For approval, a special resolution must be approved by a number of
votes which is not less than three times the number of votes against the special
resolution. 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.

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


                                      79
<PAGE>

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' prior notice 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.

     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.


                                      80
<PAGE>

     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 BSE, 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.

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 Andra 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 shareholdings.

Takeover Code

     Disclosure and mandatory bid obligations under Indian law are governed by
the Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997, the Takeover Code, which prescribes the
thresholds or trigger points that give rise to these obligations. The Takeover
Code is under constant review by the Securities and Exchange Board of India and
was recently amended.

     The most important features of the Takeover Code, as amended, are as
follows:


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     Any acquirer (meaning a person who, directly or indirectly, acquires or
agrees to acquire shares or voting rights in a company, either by himself or
with any person acting in concert) who acquires shares or voting rights that
would entitle him to more than 5.0% of the shares or voting rights in a company
is required to disclose the aggregate of his shareholding or voting rights in
that company to the company (which in turn is required to disclose the same to
each of the stock exchanges on which the company's shares are listed) within
four working days of (a) the receipt of allotment information, or (b) the
acquisitions of shares or voting rights, as the case may be.

     .    A person who holds more than 15.0% of the shares or voting rights in
          any company is required to make annual disclosure of his holdings to
          that company (which in turn is required to disclose the same to each
          of the stock exchanges on which the company's shares are listed).

     .    Promoters or persons in control of a company are also required to make
          annual disclosure of their holdings in the same manner.

     .    An acquirer cannot acquire shares or voting rights which (taken
          together with existing shares or voting rights, if any, held by him or
          by persons acting in concert with him) would entitle such acquirer to
          exercise 15.0% or more of the voting rights in a company, unless such
          acquirer makes a public announcement offering to acquire a further
          20.0% of the shares of the company.

     .    An acquirer who, together with persons acting in concert with him,
          holds between 15.0% and 75.0% of the shares cannot acquire additional
          shares or voting rights that would entitle him to exercise a further
          5.0% of the voting rights in any period of 12 months unless such
          acquirer makes a public announcement offering to acquire a further
          20.0% of the shares of the company.

     .    Any further acquisition of shares or voting rights by an acquirer who
          holds 75.0% of the shares or voting rights in a company triggers the
          same public announcement requirements.

     .    In addition, regardless of whether there has been any acquisition of
          shares or voting rights in a company, an acquirer acting in concert
          cannot directly or indirectly acquire control over a company (for
          example, by way of acquiring the right to appoint a majority of the
          directors or to control the management or the policy decisions of the
          company) unless such acquirer makes a public announcement offering to
          acquire a minimum of 20.0% of the shares of the company.

     The Takeover Code sets out the contents of the required public
announcements as well as the minimum offer price.

     The Takeover Code permits conditional offers as well as the acquisition and
subsequent delisting of all shares of a company and provides specific guidelines
for the gradual acquisition of shares or voting rights. Specific obligations of
the acquirer and the board of directors of the target company in the offer
process have also been set out. Acquirers making a public offer are also
required to deposit in an escrow account a percentage of the total consideration
which amount will be forfeited if the acquirer does not fulfill his obligations.
In addition, the Takeover Code introduces the "chain principle" by which the
acquisition of a holding company will obligate the acquirer to make a public
offer to the shareholders of each subsidiary company which is listed.

     The general requirements to make such a public announcement do not,
however, apply entirely to bail-out takeovers when a promoter (i.e., a person or
persons in control of the company, persons named in any offer document as
promoters and specified corporate bodies and individuals) is taking over a
financially weak company but not a "sick industrial company" pursuant to a
rehabilitation scheme approved by a public financial institution or a scheduled
bank. A "financially weak company" is a company which has at the end of the
previous financial year accumulated losses, which have resulted in erosion of
more than 50.0% but less than 100.0% of the total sum of its paid up capital and
free reserves at the end of the previous financial year. A "sick industrial
company" is a company registered for more than five years which has at the end
of any financial year accumulated losses equal to or exceeding its entire net
worth.

     The Takeover Code does not apply to acquisitions involving the acquisition
of shares (i) by allotment in a public, rights and preferential issue, (ii)
pursuant to an underwriting agreement, (iii) by registered stockbrokers in the
ordinary course of business on behalf of customers, (iv) in unlisted companies,
(v) pursuant to a scheme of reconstruction or amalgamation or (vi) pursuant to a
scheme under Section 18 of the Sick Industrial Companies (Special Provisions)
Act, 1985. The Takeover Code does not apply to acquisitions in the ordinary
course of business by


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public financial institutions either on their own account or as a pledgee. In
addition, the Takeover Code does not apply to the acquisition of ADSs so long as
they are not converted into equity shares.

Material Contracts

     Except as described herein, we have not entered into any material
contracts, other than contracts entered into in the ordinary course of business.
For a description of Satyam's material joint venture agreement with TRW Inc.,
please see "Item 5.-Operating and Financial Review and Prospects-Joint Venture
with TRW Inc.".

Exchange Controls

     General

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

     As of June 1, 2000, the Indian Foreign Exchange Regulation Act, 1973 was
replaced by the Indian Foreign Exchange Management Act, 1999. 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.
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


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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 foreign direct investment limit.

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

     Notwithstanding the foregoing, the terms of Infoway's Internet service
provider license provide that the maximum total foreign equity investment in our
company is 49%.

  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 ("OCBs"), at least 60% owned by such persons. These facilities permit
non-resident Indians and overseas corporate bodies to make portfolio investments
in shares and other securities of Indian companies on a basis not generally
available to other foreign investors. These facilities are different and
distinct from investments by foreign direct investors described above.

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

  Investment by Foreign Institutional Investors

     In September 1992, the Government of India issued guidelines which enable
foreign institutional investors, including institutions such as pension funds,
investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers, to make portfolio investments in
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.


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

  Ownership Restrictions

     The Securities and Exchange Board of India and Reserve Bank of India
regulations restrict portfolio investments in Indian companies by foreign
institutional investors, non-resident Indians and overseas corporate bodies, all
of which we refer to as foreign portfolio investors. The Reserve Bank of India
issued a circular in August 1998 stating that foreign institutional investors in
aggregate may hold no more than 30% of the equity shares of an Indian company
and non-resident Indians and overseas corporate bodies in aggregate may hold no
more than 10% of the shares of an Indian company through portfolio investments.
Under current Indian law, foreign institutional investors in the aggregate may
hold no more than 24% of the equity shares of an Indian company, and
non-resident Indians and overseas corporate bodies in aggregate may hold no more
than 10% of the shares of an Indian company through portfolio investments. The
24% limit referred to above may be increased to 40% 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.

     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) Resolutions, 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.


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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
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 10.2%, including the presently applicable surcharge of 2.0%,
on the total amount it distributes, declares or pays as a dividend. This
dividend distribution tax is in addition to the normal corporate tax of 35.7%,
including the presently applicable surcharge of 2.0%.

     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


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

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

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

     Stamp Duty and Transfer Tax. Upon issuance of the equity shares underlying
our ADSs, we are required to pay a stamp duty of 0.1% of the aggregate value of
the shares issued, provided that the issue of dematerialized shares is not
subject to Indian stamp duty. A transfer of ADSs is not subject to Indian stamp
duty. However, upon the acquisition of equity shares from the depositary in
exchange for ADSs, the non-resident holder will be liable for Indian stamp duty
at the rate of 0.5% of the market value of the equity shares on the redemption
date. Similarly upon a sale of shares in physical form, stamp duty at the rate
of 0.5% of the market value of the equity shares on the trade date is payable,
although customarily such duty is borne by the purchaser. 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


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

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

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

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

     A U.S. holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Indian dividend distribution taxes paid by
our company, unless it is a U.S. company holding at least 10% of our company
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 such
dividend is includible in the income of the U.S. holder, regardless of whether
the payment is in fact converted into U.S. dollars. Generally, gain or loss, if
any, resulting from currency exchange fluctuations during the period from the
date the dividend is paid to the date such payment is converted into U.S.
dollars will be treated as ordinary income or loss.

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

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

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

     .    75% or more of its gross income for the taxable year is passive
          income; or

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

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

     .    pay an interest charge together with tax calculated at maximum
          ordinary income rates on "excess distributions," which is defined to
          include gain on a sale or other disposition of equity shares;

     .    if a qualified electing fund election is made, to include in their
          taxable income their pro rata share of undistributed amounts of our
          income; or


                                      88
<PAGE>

     .    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.

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. As a foreign private
issuer, we are not required to use the EDGAR system but we have done so in the
past and will continue to do in order to make our reports available over the
Internet.

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, 2000    As of March 31, 2001
                                  -----------------------   --------------------
                                     Total                   Total
                                     -----                   -----
                                   Recorded                 Recorded
                                   --------                 --------
                                   Amount     Fair Value    Amount    Fair Value
                                   ------     ----------    ------    ----------
                                          ($ equivalent in thousands)
Debt:
Fixed rate short-term debt.......  $19,139      $19,139       -          -
Average interest rate............     12.6%
Variable rate short-term debt....     $182         $182     $7,358       $7,358
Average interest rate............     13.8%                   12.7%
Fixed rate long-term debt........  $41,995      $42,535    $24,384      $24,411
Average interest rate............     14.8%                   14.1%
Variable rate long-term debt.....  $23,512      $23,512    $18,458      $18,458
Average interest rate............     11.8%                   12.1%


                                      89
<PAGE>

     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 2000 and fiscal 2001, 90.0% and 89.8%, 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 1.5%, or $2.4 million, in fiscal 2000 and
1.8%, or $5.6 million, in fiscal 2001, while a hypothetical 10.0% decrease in
the value of the Indian rupee against all other currency would increase revenue
by 1.5%, or $2.4 million, in fiscal 2000 and 1.8%, or $5.6 million, in fiscal
2001. 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 have impacted our earnings before interest
and taxes by $2.4 million in fiscal 2000 and $5.6 million in fiscal 2001. This
amount would be offset, in part, from the impacts of local income taxes and
local currency interest expense. As at March 31, 2001, we had approximately
$57.8 million of non-Indian rupee denominated cash and cash equivalents, and
approximately $3.7 million of non-Indian rupee denominated borrowings.

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.



                                     PART II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

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


     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
$152.7 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 July 31, 2001,
approximately $46.1 million of these proceeds has been used for prepayment of
loans ($26.9 million); strategic investments in our subsidiaries ($1.5 million);
and working capital and general corporate purposes ($17.7 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. RESERVED

Item 16. RESERVED

                                    PART III

Item 17. FINANCIAL STATEMENTS


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

                                      90
<PAGE>

Item 18. FINANCIAL STATEMENTS

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

     Independent Auditor's Report

     Consolidated Balance Sheets as of March 31, 2000 and 2001

     Consolidated Statements of Operations and Comprehensive Income (Loss) for
     the years ended March 31, 1999, 2000 and 2001

     Consolidated Statements of Shareholder's Equity for the years ended March
     31, 1999, 2000 and 2001

     Consolidated Statements of Cash Flows for the years ended March 31, 1999,
     2000 and 2001

     Notes to 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). /(4)/

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     Joint Venture Agreement between TRW Inc. and Satyam Computer Services,
        dated September 26, 2000. /(1)/ *

4.5     Agreement for the Sale of Shares in CricInfo Limited, dated April 5,
        2000, by and between Indigo Holdings Limited and Satyam Infoway
        Limited. /(2)/

4.6     Subscription Agreement, dated May 26, 2000, by and among CricInfo
        Limited, Satyam Infoway Limited and the Senior Management. /(2)/

4.7     Agreed Form of Shareholders Agreement by and among CricInfo Limited,
        Satyam Infoway Limited and the Non-SIL Shreholders. /(2)/

4.8     Letter Agreement, dated May 2000, between Satyam Infoway Limited and
        Indigo Holdings Limited. /(2)/

4.9     Share Purchase Agreement, dated November 29, 1999, by and among Satyam
        Infoway Limited, IndiaWorld Communications Private Limited, Rajesh Jain
        and the other shareholders of IndiaWorld Communications Private Limited
        listed on the signature pages thereto. /(3)/

4.10    Agreement For Option to Purchase Shares, dated November 29, 1999, by and
        among Satyam Infoway Limited, IndiaWorld Communications Private Limited,
        Rajesh Jain and the other shareholders of IndiaWorld Communications
        Private Limited listed on the signature pages


                                      91
<PAGE>

        thereto. /(3)/

4.11    Share Purchase Agreement, dated as of June 30, 2000, by and among Rajesh
        Jain, Bhavana Jain, C.M. Jain Impex and Investments Private Limited,
        Satyam Infoway Limited and IndiaWorld Communications Private
        Limited. /(2)/


8.1     List of Subsidiaries. /(1)/

10.1    Consent of Price Waterhouse, Independent Accountants. /(4)/



(1)  Previous 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 by Satyam Infoway Limited with the Commission as an
     exhibit to the Registration Statement on Form F-2 (File No. 333-42292)
     filed on July 26, 2000 and incorporated herein by reference.

(3)  Previously filed by Satyam Infoway Limited with the Commission as an
     exhibit to Form 6-K (File No. 000-27663) filed on December 6, 1999 and
     incorporated herein by reference.

(4)  Filed herewith.

*    Confidential treatment has been requested.


                                      92
<PAGE>

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:        B. Rama Raju
                                Title:       Chief Executive Officer
                                             and Managing Director

                                By:          /s/ V. Srinivas
                                   ---------------------------------------------
                                Name:        V. Srinivas
                                Title:       Senior Vice President
                                             and Chief Financial Officer

Date: August 10, 2001
<PAGE>

                       SATYAM COMPUTER SERVICES LIMITED

             INDEX TO U.S. GAAP CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                      Page
<S>                                                                                                   <C>
 Report of Price Waterhouse, Independent Accountants................................................   F-2

 Consolidated Balance Sheets as of March 31, 2000 and 2001..........................................   F-3

 Consolidated Statements of Operations for the years ended March 31, 1999, 2000 and 2001............   F-4

 Consolidated Statements of Stockholders' Equity for the years ended March 31, 1999, 2000 and 2001..   F-5

 Consolidated Statements of Cash Flows for the years ended March 31, 1999, 2000 and 2001............   F-8

 Notes to Consolidated Financial Statements.........................................................  F-10
</TABLE>
<PAGE>

Report of Independent Accounts
--------------------------------------------------------------------------------



To the Board of Directors of:
Satyam Computer Services Limited


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows, and changes in shareholders'
equity present fairly, in all material respects, the financial position of
Satyam Computer Services Limited and its consolidated subsidiaries as of March
31, 2000 and 2001 and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2001, 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 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 provide a
reasonable basis for our opinion.


Price Waterhouse

/s/


Hyderabad, India
August 10, 2001
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 As of March 31
                                                                                                         -------------------------
                                                                                                             2000             2001
Assets
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                      <C>              <C>
Current assets
Cash and cash equivalents                                                                                $192,304         $ 66,068
Accounts receivable, net of allowance for doubtful debts                                                   51,515           92,564
Unbilled revenue on contracts                                                                               1,005            4,676
Inventory                                                                                                     417            2,350
Investments                                                                                                   518              210
Deferred taxes on income                                                                                      413              966
Prepaid expenses and other receivables, net of allowances                                                  15,664           22,556
----------------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                                      261,836          189,390

Premises and equipment, net                                                                                84,588          133,231
Goodwill and other intangible assets, net                                                                  58,562          109,995
Investments                                                                                                 2,681            2,498
Investment in associated companies                                                                            439           33,989
Other assets                                                                                                4,453           11,996
==================================================================================================================================
Total assets                                                                                             $412,559         $481,099
==================================================================================================================================

Liabilities and Shareholders' equity
----------------------------------------------------------------------------------------------------------------------------------
Current liabilities
Short-term and current portion of long-term debts                                                        $ 34,778         $ 40,575
Accounts payable                                                                                           12,001           15,908
Accrued expenses and other liabilities                                                                     12,897           31,780
Unearned and deferred revenue                                                                               3,448            4,132
----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                                  63,124           92,395

Long-term debts                                                                                            50,050            9,625
Deferred taxes on income                                                                                   30,274           36,777
Excess of cash received over carrying value of investment in Infoway,                                           -           35,156
  net of taxes (Note No.7)
Other non-current liabilities                                                                                 741            5,408
----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities                                                                                         144,189          179,361
----------------------------------------------------------------------------------------------------------------------------------

Minority interest                                                                                          99,896          107,043

Contingencies and Commitments (Note No.20)

Shareholders' equity
Common stock - par value Rs.2 (US$0.043*) per equity share;
(375 million equity shares authorized and 281,190,000 and
 281,190,000 equity shares issued as of March 31, 2000 and 2001
 respectively)                                                                                             15,726           15,726
Additional paid-in capital                                                                                189,508          253,409
Deferred stock compensation                                                                               (17,972)         (11,787)
Retained earnings (deficits)                                                                                2,563          (29,456)
Other comprehensive income (loss)                                                                          (9,194)         (21,659)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          180,631          206,233
Shares held by the Trust under employee stock option plan
 (11,768,400 and 11,170,070 equity shares as of March 31, 2000 and
 2001 respectively)                                                                                       (12,157)         (11,538)
----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                                                168,474          194,695

----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                                               $412,559         $481,099
==================================================================================================================================
</TABLE>

* the par value in $ has been converted at the closing rate as of March 31,
2001, 1$ = Rs.46.85
--------------------------------------------------------------------------------
The accompanying notes are part of the consolidated financial statements.

                                     F - 3
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                                        Years ended March 31
                                                                                 -------------------------------------------
                                                                                   1999            2000              2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>            <C>               <C>
Revenues                                                                         $  97,795      $  164,455        $  308,207

Cost of revenues, inclusive of deferred stock compensation of
$3,137 in fiscal 1999, $13,356 in fiscal 2000, and $31,336
in fiscal 2001.                                                                     49,559          90,449           208,121
----------------------------------------------------------------------------------------------------------------------------
Gross profit                                                                        48,236          74,006           100,086

Selling, general and administrative expenses, inclusive of
deferred stock compensation of $180 in fiscal 1999, $3,575
in fiscal 2000, and $14,782 in fiscal 2001.                                         31,898          69,592           122,000
Amortization of goodwill                                                               130           5,043            24,728
----------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                                            32,028          74,635           146,728

----------------------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                             16,208            (629)          (46,642)

Interest income                                                                         43           2,625             5,732
Interest expense                                                                    (6,905)        (11,290)           (9,632)
Other income                                                                           990           1,471             6,806
Other expenses                                                                         (28)           (418)             (344)
----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, minority interest and
equity in earnings (losses) of associated companies                                 10,308          (8,241)          (44,080)

Income taxes                                                                        (1,105)         (1,619)           (4,137)
Minority Interest                                                                     (171)          2,785            25,772
----------------------------------------------------------------------------------------------------------------------------
Income (loss) before equity in earnings (losses) of
associated companies                                                                 9,032          (7,075)          (22,445)

Equity in earnings (losses) of associated companies, net of
taxes                                                                                  (18)            135            (5,467)
----------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                                $   9,014      $   (6,940)       $  (27,912)
============================================================================================================================

Earnings (loss) per share:
Basic                                                                            $    0.03      $    (0.03)       $    (0.10)
Diluted                                                                          $    0.03      $    (0.03)       $    (0.10)
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are part of the consolidated financial statements.

                                      F-4
<PAGE>

Consolidated Statements of Changes in Shareholders' Equity
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as stated otherwise)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      --------------------------------------------------------------------------------------------
                                        Common Stock                   Additional    Deferred stock   Retained        Other
                                                                    paid-in capital   compensation    earnings     Comprehensive
                                      ----------------------------                        plan                     Income (loss)
                                           Shares       Par Value
                                      -------------------------------------------------------------------------------------------
<S>                                      <C>            <C>         <C>              <C>             <C>           <C>
Balance as of March 31, 1998             260,190,000      $8,765        $ 8,280              -       $11,909        $ (5,096)

Comprehensive income:
 Net income                                                                                            9,014
 Gain on dilution of interest in
  subsidiary on subsidiary's issuance
  of new shares, net of taxes                                             3,635
 Gain (loss) on foreign currency
  translation
 Total comprehensive income                                                                                           (1,756)

Deferred stock compensation                                              14,479       $(14,479)
Amortization of deferred stock
  compensation                                                                           3,315

Cash dividend paid at the rate of
  US$0.008 per share                               -           -              -              -        (2,174)              -
---------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1999             260,190,000      $8,765        $26,394       $(11,164)      $18,749        $ (6,852)
=================================================================================================================================

<CAPTION>
                                         ---------------------------------------------------
                                                 Shares held by           Total
                                                    SC-Trust          shareholders'
                                                                         Equity
                                         ---------------------------------------------------
<S>                                              <C>                  <C>
Balance as of March 31, 1998                           -              $  23,858

Comprehensive income:
 Net income                                                               9,014
 Gain on dilution of interest in
  subsidiary on subsidiary's issuance
  of new shares, net of taxes                                             3,635
 Gain (loss) on foreign currency
  translation                                                            (1,756)
                                                                      ---------
 Total comprehensive income                                              10,893

Deferred stock compensation                                                   -

Amortization of deferred stock
  compensation                                                            3,315

Cash dividend paid at the rate of
  US$0.008 per share                                   -                 (2,174)
-----------------------------------------------------------------------------------------------
Balance as of March 31, 1999                           -              $  35,892
===============================================================================================
</TABLE>

     (continuing on following page)

                                      F-5
<PAGE>

Consolidated Statements of Changes in Shareholder's Equity
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as stated otherwise)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      ----------------------------------------------------------------------------------------------
                                                Common Stock             Additional    Deferred stock     Retained      Other
                                                                      Paid-in capital   compensation      earnings  Comprehensive
                                      -------------------------------                      plan                     Income (loss)
                                           Shares         Par Value
                                      ---------------------------------------------------------------------------------------------
<S>                                     <C>              <C>          <C>              <C>                <C>       <C>
Balance as of March 31, 1999             260,190,000        $ 8,765      $ 26,394         $(11,164)        $18,749       $(6,852)
Comprehensive income:
   Net loss                                                                                                 (6,940)
   Gain on dilution of interest in                                        101,839
    subsidiary on subsidiary's
    issuance of new shares, net of
    taxes
   Loss on foreign currency                                                                                               (2,362)
    translation
   Unrealized gains on securities,                                                                                            20
    net of taxes

   Total comprehensive income

Acquisition of minority interest           8,000,000            183        24,878
Stock Split (effected in the form of
 a dividend)                                                  6,480                                         (6,480)

Deferred stock compensation                                                23,265          (23,265)
Amortization of deferred stock
 compensation                                                                               16,457

Shares issued to the Trust for
 stock-based compensation plan            13,000,000            298        13,132

Shares transferred by the Trust to
 employees on vesting

Cash dividend paid at the rate of
 US$0.012 per share                                                                                         (2,766)
----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2000             281,190,000        $15,726      $189,508         $(17,972)        $ 2,563       $(9,194)
==================================================================================================================================

<CAPTION>
                                      ------------------------------------------
                                            Shares held by          Total
                                            the Trust            shareholder's
                                                                    Equity

                                      ------------------------------------------
<S>                                          <C>                 <C>
Balance as of March 31, 1999                              -       $ 35,892
Comprehensive income:
   Net loss                                                         (6,940)
   Gain on dilution of interest in                                 101,839
    subsidiary on subsidiary's
    issuance of new shares, net of
    taxes
   Loss on foreign currency                                         (2,362)
    translation
   Unrealized gains on securities,                                      20
    net of taxes
                                                               -----------
   Total comprehensive income                                       92,557

Acquisition of minority interest                                    25,061
Stock Split (effected in the form of
 a dividend)                                                             -

Deferred stock compensation                                              -
Amortization of deferred stock
 compensation                                                       16,457

Shares issued to the Trust for
 stock-based compensation plan                      (13,430)             -

Shares transferred by the Trust to
 employees on vesting                                 1,273          1,273

Cash dividend paid at the rate of
 US$0.012 per share                                                 (2,766)
-------------------------------------------------------------------------------
Balance as of March 31, 2000                       $(12,157)      $168,474
===============================================================================
</TABLE>

(continuing on following page)

                                      F-6
<PAGE>

Consolidated Statements of Changes in Shareholders' Equity
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as stated otherwise)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      ---------------------------------------------------------------------------------------------
                                                Common Stock          Additional      Deferred stock    Retained        Other
                                                                    paid-in capital  compensation plan  earnings     Comprehensive
                                      ---------------------------                           plan                      Income (loss)
                                           Shares       Par Value
                                      ---------------------------------------------------------------------------------------------
<S>                                   <C>               <C>         <C>               <C>             <C>                <C>
Balance as of March 31, 2000             281,190,000     $15,726          $189,508         $(17,972)      $  2,563        $ (9,194)

Comprehensive income:
        Net loss                                                                                           (27,912)
        Gain on dilution of interest
         in subsidiary on
         subsidiary's issuance of new
         shares, net of taxes                                               24,599
      Loss on sale of Infoway shares
       by Cricinfo, net of taxes                                              (466)

        Loss on foreign currency                                                                                           (12,429)
         translation
        Unrealized losses on                                                                                                   (36)
         securities, net of taxes

        Total comprehensive income

Warrants issued to TRW (Note 6))                                             1,657
Deferred stock compensation                                                 38,034          (38,034)
Amortization of deferred stock
 compensation                                                                                44,219
Shares transferred by the Trust to
 employees on vesting                                                           77

Cash dividend paid at the rate of
 US$0.008 per share                                                                                         (4,107)
----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2001             281,190,000     $15,726          $253,409         $(11,787)      $(29,456)       $(21,659)
==================================================================================================================================

<CAPTION>
                                      ---------------------------------------------
                                          Shares held by              Total
                                            the Trust            shareholders'
                                                                    Equity

                                      ---------------------------------------------
<S>                                       <C>                          <C>
Balance as of March 31, 2000                      $(12,157)             $168,474

Comprehensive income:
        Net loss                                                         (27,912)
        Gain on dilution of interest
         in subsidiary on
         subsidiary's issuance of new
         shares, net of taxes                                             24,599
      Loss on sale of Infoway shares
       by Cricinfo, net of taxes                                            (466)

        Loss on foreign currency
         translation                                                     (12,429)
        Unrealized losses on
         securities, net of taxes                                            (36)
                                                                 ---------------
        Total comprehensive income                                       (16,244)

Warrants issued to TRW (Note 6))                                           1,657
Deferred stock compensation                                                    -
Amortization of deferred stock                                            44,219
 compensation
Shares transferred by the Trust to
 employees on vesting                                  619                   696

Cash dividend paid at the rate of
 US$0.008 per share                                                       (4,107)
--------------------------------------------------------------------------------
Balance as of March 31, 2001                      $(11,538)             $194,695
================================================================================
</TABLE>

The accompanying notes are part of the consolidated financial statements.

                                      F-7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                              Years ended March 31
                                                                                  -------------------------------------------------
                                                                                               1999            2000            2001
Cash Flows From Operating Activities:
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>             <C>            <C>
Net income (loss)                                                                          $  9,014        $ (6,940)      $ (27,912)
Adjustments to reconcile net income (loss) to net cash provided
 by operating activities:
  Depreciation and amortization                                                              11,527          25,268          54,493
  Deferred stock compensation                                                                 3,317          16,931          46,118
  Deferred taxes on income                                                                        2             261             154
  Profit on sale of investments                                                                   -              (2)             (1)
  Loss on sale of premises and equipment                                                         28              72              43
  Foreign currency translation on excess of amount received on
   sale of shares of Infoway over its carrying value                                              -               -           1,014
  Amortization of discount on share warrants issued to TRW and
   change in fair value of put option                                                             -               -           2,685
  Minority Interest                                                                             171          (2,785)        (25,772)
  Equity in share of (earnings) losses of associated companies                                   18            (135)          5,467
Changes in assets and liabilities:
  Accounts receivable, net and unbilled revenues                                            (15,497)        (23,199)        (49,452)
  Prepaid expenses, other receivables, and inventory                                           (870)        (10,330)        (10,164)
  Other assets, non-current                                                                  (1,536)           (694)         (9,797)
  Accounts payable                                                                              713           9,141           4,584
  Accrued expenses and other liabilities                                                      5,673           4,261          20,348
  Unearned and deferred revenue                                                               1,684           1,531             937
  Other liabilities, non-current                                                                  1             735          (6,810)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                    14,245          14,115           5,935

Cash Flows Used In Investing Activities
-----------------------------------------------------------------------------------------------------------------------------------

Acquisition of premises and equipment                                                      $(35,770)       $(40,847)      $ (84,764)
Expenditure on licence fees                                                                       -               -            (612)
Proceeds from sale of premises and equipment                                                    108              32              68
Acquisition and investments in associated companies                                            (250)        (40,176)        (52,470)
Purchase of investments, current and non-current                                               (177)         (2,641)              -
Proceeds from sale of investments                                                                 -              13               3
-----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                       (36,089)        (83,619)       (137,775)

Cash Flows From Financing Activities
-----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in short-term debts                                                    $  2,354        $ 14,318           8,330
Share Warrant Consideration                                                                       -               -             500
Issuance of common stock under Employee Stock Option Plan                                         -           1,273             648
Issuance of common stock by Infoway and other subsidiaries, net
 of issuance cost                                                                             5,193         232,534             240
Proceeds from long-term debts                                                                33,205          30,582
Proceeds from sale of shares of Infoway, net of cost                                              -               -          48,978
Repayment of long-term debts                                                                 (2,729)        (24,277)        (40,425)
Cash dividends paid                                                                          (2,174)         (2,766)         (4,107)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                                    35,849         251,664          14,164
</TABLE>
                                                  (Continuing on following page)

                                      F-8
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                                Year ended march 31
                                                                                  -------------------------------------------------
                                                                                              1999             2000            2001
<S>                                                                                        <C>             <C>            <C>
Effect of exchange rate changes on cash and cash equivalents                                 (4,191)         (3,071)         (8,560)

Net change in cash and cash equivalents                                                       9,814         179,089        (126,236)

Cash and cash equivalents at beginning of the year                                            3,401          13,215         192,304
Cash and cash equivalents at end of the year                                               $ 13,215        $192,304       $  66,068

Supplementary information:
-----------------------------------------------------------------------------------------------------------------------------------

Cash paid during the period for:
Income taxes                                                                               $  1,193        $  1,591       $   4,898
Interest                                                                                      6,487           9,826           9,250

Non-cash items:
Shares issued on acquisition of minority interest                                                          $ 25,061
Shares issued by Infoway on acquisitions                                                          -               -       $  69,815
Capital leases and hire purchase                                                           $    328             657           1,624
</TABLE>


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

--------------------------------------------------------------------------------
The accompanying notes are part of the consolidated financial statements.

                                      F-9
<PAGE>

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

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 seven offsite
centers located in the United States, Europe, Japan and Singapore. The range of
services offered by it, either on a "time and material" basis or "fixed price",
includes consulting, systems design, software development, system integration
and application maintenance.  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.

Satyam Infoway Limited (hereinafter referred to as "Infoway"), a subsidiary of
Satyam Computer Services, is an integrated Internet and electronic commerce
services company in India.  In addition, Infoway provides various internet
services such as electronic data exchange, email and other messaging services,
virtual private networks, web based solutions to businesses, web page hosting to
individuals and operates an Internet online portal and content offering.

2.   Summary of Significant Accounting Policies

a)   Basis of Consolidation

     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 inter-company balances and transactions have been
     eliminated. 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
     to third parties are recognized in income. 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
     the U.S. GAAP requires that the management 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, useful lives of premises and equipment (fixed assets) and
     goodwill. Actual results could differ from those estimates.

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 and Singapore dollar are the
     functional currencies for its foreign subsidiaries located in

                                      F-10
<PAGE>

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

     Japan, U.S., UK and Singapore respectively. The translation of the
     functional currencies into U.S. dollars (reporting currency) 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, 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.

     Satyam periodically enters into foreign exchange forward contracts to limit
     the effect of exchange rate changes on its foreign currency receivable and
     debts payable. Gains and losses on these contracts are recognized as income
     or expense in the statement of operations as incurred, over the life of the
     contract. As of March 31, 2000 and March 31, 2001, Satyam had no foreign
     exchange forward contracts outstanding.

d)   Revenue Recognition

     i) IT  Services

     Revenues from professional services consist of revenues earned from
     services performed on a "time and material" basis and related revenue is
     recognized as the services are performed. Satyam also performs time bound
     fixed-price engagements, under which revenue is recognized using the
     percentage-of-completion method of accounting, unless work completed cannot
     be reasonably estimated. Satyam recognizes revenue based on the completed-
     contract method where the work to complete cannot be reasonably estimated.
     The cumulative impact of any revision in estimates of the percent complete
     is reflected in the period in which the change becomes 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 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.

     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. In accordance with the contractual
     agreement, customers are allowed to use such services free of cost for a
     specified period of time or volume. No revenues are recognized for such
     exempted periods or volumes. Revenues from the sale of communication
     hardware and software required to provide Infoway's network based services
     are recognized when the sale is complete with the passing of title.

     Revenues from web-site design and development are recognized upon project
     completion, which occurs once the customer's web links are commissioned and
     available on the World-Wide-Web. 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 lines with revenue recognition policy of IT Services.

     Internet access is sold 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.

                                      F-11
<PAGE>

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

     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.

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.
     As of March 31, 2000 and 2001, restricted cash in the form of deposits
     placed with banks to obtain bank guarantees amounted to US$921 thousand and
     US$140 thousand, respectively.

f)   Inventory

     Inventory is stated at lower of cost or market. Cost is determined using
     the first-in-first-out (FIFO) method except CD ROMs used for Internet
     services activities for which the weighted average method is used to
     determine cost.

g)   Premises, Equipment and Depreciation

     Premises and equipment are stated at actual cost less accumulated
     depreciation. Depreciation is computed using the straight-line method over
     the estimated useful lives. Assets under capital leases and leasehold
     improvements are amortized over the lower of their useful lives or the term
     of the lease.

     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 third party software expense
     amounted to US$22 thousand, US$1,038 thousand and US$885 thousand for the
     year ended March 31, 1999, 2000 and 2001 respectively.

     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.
     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$1,632 thousand, US$5,787 thousand and US$3,124
     thousand for the year ended March 31, 1999, 2000 and 2001 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. Goodwill is amortized on a straight-line basis principally
     over a period of 5 years. Other intangible assets include licensing fees,
     which are being amortized over the license period of 5 years.

j)   Impairment of Long-lived Assets

     Satyam has adopted the provisions of SFAS 121 "Accounting for the
     Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
     Satyam reviews long-lived assets, including goodwill and identifiable
     intangibles, 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 an 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.

                                      F-12
<PAGE>

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

     Satyam does not have any long-lived assets, including goodwill and
     identifiable intangibles that it considers to have been impaired.

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

l)   Costs of Revenue and Selling, General and Administrative Expenses

     Costs 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 costs
     of revenues.

m)   Advertising Costs

     Satyam expenses all advertising costs as incurred. Advertising expenses
     charged to income amounted to US$360 thousand, US$3,575 thousand and
     US$11,301 thousand for the year ended March 31, 1999, 2000 and 2001
     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 year it is incurred.

     ii) Gratuity Plan

     In addition to the above benefit, Satyam provides for a gratuity
     obligation, 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. This plan has been accounted for under the provisions of FAS 87,
     Employers' Accounting for Pensions.

     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, LIC assumes the
     obligation to settle the gratuity payment to the employees to the extent of
     the funding

     iii) Superannuation Plan

     In addition to the above benefits, the senior employees of Satyam Computer
     Services in India are entitled to a superannuation, a defined contribution
     plan (the "Superannation 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 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

                                      F-13
<PAGE>

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

     a maximum of 3.0% of gross salary for all employees participating in the
     401(k) plan. Satyam's matching contribution amounted to US$71 thousand,
     US$176 thousand and US$376 thousand for the year ended March 31, 1999, 2000
     and 2001 respectively.

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 carryforwards. 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 are computed on the basis of the weighted average number
     of shares outstanding during the period. Diluted earnings per share are
     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)   Recently Issued Accounting Pronouncements

     In June 1998, the Financials Accounting Standards Board (FASB) issued SFAS
     133, "Accounting for Derivative Financial Instruments and for Hedging
     Activities". SFAS 133 provides a comprehensive and consistent standard for
     the recognition and measurement of derivatives and hedging activities. SFAS
     133 was amended by SFAS 137 and SFAS 138. SFAS 133, as amended is effective
     for Satyam's fiscal year 2002. The adoption of this standard does not have
     any material impact on Satyam's results of operations or financial
     position.

     In September 2000, the FASB issued SFAS 140 "Accounting for Transfers and
     Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 140
     replaces SFAS 125, revising the standards governing accounting for
     securitizations and other transfers of financial assets and collateral.
     Adoption of SFAS 140 is required for transfers and servicing of financial
     assets and extinguishments of liabilities occurring after March 31, 2001.
     The adoption of this standard does not have any material impact on Satyam's
     results of operations or financial position.

                                      F-14
<PAGE>

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

In July 2001, the FASB issued SFAS 141, "Business Combinations". SFAS 141
addresses financial accounting and reporting for business combinations and
supersedes APB 16, "Business Combinations", and SFAS 38, "Accounting for Pre-
acquisition Contingencies of Purchased Enterprises".  This statement requires
all business combinations in its scope to be accounted for using the purchase
method. This statement is applicable to all business combinations initiated
after June 30, 2001 and to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later.
Satyam is in the process of assessing the impact of the adoption of this
standard.

In July 2001, the FASB also issued SFAS 142, "Goodwill and Other Intangible
Assets".  SFAS 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB 17, "Intangible Assets".
This statement discontinues amortisation of goodwill and requires periodic
assessment for goodwill impairment and a charge to income statement, if
required. This statement is required to be applied starting with  fiscal years
beginning after December 15 2001. Early application is permitted with fiscal
years beginning after March 15, 2001, provided that the first interim financial
statements have not previously been issued. Satyam is in the process of
assessing the impact of the adoption of this standard.

s)  Reclassification

    Prior years figures have been regrouped, recast, rearranged to conform to
    the current year's presentation.

3.  Business Combination

a)  Acquisition of India World Communication by Infoway

On November 29, 1999, Infoway entered into an agreement with the shareholders of
IndiaWorld Communications Private Limited ("IndiaWorld") to acquire 49,000
shares (equivalent to 24.5% of the voting control) of IndiaWorld for US$28,289
thousand. IndiaWorld is engaged in the business of providing web-based solutions
and advertising services. Infoway also entered into an agreement with the
shareholders of IndiaWorld on the same date for the option to purchase the
remaining shares in IndiaWorld ("the option agreement"). The terms of the option
agreement provided that Infoway had the option to acquire all of the remaining
outstanding shares of IndiaWorld on the payment of an initial non-refundable
earnest money deposit of US$11,801 thousand and a second and final cash payment
of US$74,554 thousand which was to be made on or before June 30, 2000. The non-
refundable earnest money deposit of US$11,801 thousand was paid on November 29,
1999 and the final payment was settled on June 30, 2000 by a separate agreement
in a part cash and part stock deal to make IndiaWorld its 100.0% subsidiary.
Infoway paid US$48,666 thousand in cash and the balance in 268,500 equity
shares. The equity shares issued to the shareholders of IndiaWorld are not
listed in India and under present law are not convertible into ADSs.

The transaction to purchase IndiaWorld is accounted for as a two-step
acquisition under the purchase method of accounting. The financial statements of
Satyam have consolidated the accounts of IndiaWorld as of December 1, 1999 by
virtue of Infoway having obtained, through agreement with the shareholders of
IndiaWorld, control over IndiaWorld that will be other than temporary as of that
date. During the year ended March 31, 2000, Satyam recognized goodwill of
US$39,860 thousand, on the acquisition of the 24.5% on November 29, 1999 equal
to the excess of the consideration paid of US$40,090 thousand (US$28,289
thousand plus the earnest money deposit of US$11,801 thousand) over the fair
value of that portion of the net assets acquired of US$230 thousand.  During the
year ended March 31, 2001, Satyam has recognized additional goodwill equal to
the excess of consideration paid (cash of US$48,666 thousand plus US$24,609
thousand, being the fair value of 268,500 equity shares of Infoway) over the
fair value of the net assets acquired.

b)  Acquisition of IndiaPlaza.com by Infoway

On July 13, 2000, Infoway entered into an agreement (the "Merger Agreement") to
acquire all the outstanding equity of IndiaPlaza.com Inc., an internet company
which through its website operates an online internet shopping mall. The
consideration amounted to 455,192 ADS's (113,798 shares) of which 340,192 ADS's
(85,048 shares) have been paid and 115,000 ADS's (28,750 shares) have been
placed in escrow until January 1, 2002 to be adjusted for any breach of
representations or covenants set forth in the merger agreement.  Management
considers the release of the shares held in the escrow to be probable and has
accordingly included them in the computation of the purchase price and net loss
per share. The acquisition, which was consummated on December 15, 2000 upon
completion of regulatory formalities, has been accounted for by the purchase
method.

Satyam recognized goodwill of US$ 9,510 thousand, equal to the excess of the
consideration paid of US$ 7,921 thousand, being the fair value of 113,797 equity
shares of Infoway over the fair value of the net assets acquired of US$ (1,589)
thousand.

                                     F-15
<PAGE>

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

The following unaudited consolidated results of operations are presented as if
the acquisition of IndiaWorld and IndiaPlaza were made at the beginning of the
periods presented. The pro forma consolidated results of operations reflect the
amortization of goodwill attributable to the acquisition.

                                                   Years ended March 31
                          -----------------------------------------------
                                                      2000         2001
-------------------------------------------------------------------------

Revenues                                          $165,746     $309,344
Net loss                                           (20,978)     (30,648)
Loss per equity share                                (0.08)       (0.11)
Weighted average equity
 shares used in computing                          264,720      269,921
 loss per equity share
(in thousands)

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

c)  Acquisition of CricInfo by Infoway

In June 2000, Infoway entered into an agreement to acquire 25.0% of CricInfo
Limited, a private company incorporated in England and Wales, which owns a
popular cricket site on the Internet, for a consideration of US$37.5 million.
The consideration was payable at the option of Infoway in cash or its ADSs. On
July 29, 2000, Infoway issued 2,204,720 ADSs (representing 551,180 equity shares
of Infoway) to acquire 25.0% stake in CricInfo. The number of ADSs issued was
based on the price at NASDAQ on the day prior to the acquisition of CricInfo
shares. The investment is accounted for under the equity method, where the
difference between the cost of investment and underlying equity in net assets of
the investment has been accounted for as if the investee were a consolidated
subsidiary and is being amortized over a period of 5 years based on management
estimate.

4.  Acquisition of Minority Interest

Prior to April 1999, Satyam Computer Services owned 81.0% of Satyam Enterprise
Solutions Limited (SESL) and Mr. C Srinivasa Raju, Executive Director of Satyam
Computer Services owned the remaining 19.0% of SESL. In April 1999, Satyam
Computer Services agreed to acquire the remaining 19.0% of SESL from the
Executive Director at an exchange ratio of ten shares of Satyam Computer
Services (adjusted for stock splits) for one share of SESL. The exchange ratio
was determined based on an independent valuation. The exchange of these shares
took place in September 1999, after the necessary governmental approvals were
obtained.

As a result of the acquisition, 8,000,000 shares (adjusted for the stock splits
described in Note 21) were issued and total capital (share capital and
additional paid-in capital) was increased by approximately US$25,061 thousand.
The fair value of the consideration given was determined using the average
market price of Satyam Computer Services' stock over a period immediately before
and after the terms of the acquisition were agreed to and announced. The excess
of the increase in total capital over the underlying net equity of SESL has been
recognized as goodwill. The goodwill amounted to US$23,566 thousand which is
being amortized over a period of 5 years.

5.  Sale of shares by Infoway

In the years ended March 31, 2000 and 2001, Infoway issued new shares to third
parties and Satyam Computer Services, including two public offerings. After
these transactions, Satyam Computer Services' ownership reduced from 78.6% as of
March 31, 1999 to 56.32% and 52.55% as of March 31, 2000 and 2001 respectively.

In the year ended March 31, 2000, Infoway issued 6,499,425 shares to third
parties at amounts per share in excess of Satyam's average per share carrying
value. With respect to these transactions, the resulting gain of US$101,839
thousand, net of taxes, arising from the change in interest has been recorded in
additional paid-in capital.

In the year ended March 31, 2001 Infoway issued 268,500 shares to shareholders
of IndiaWorld, 551,180 shares to shareholders of Cricinfo and 113,797 shares to
shareholders of IndiaPlaza (all of which are described in Note 3) at amounts per
share in excess of Satyam's average per share carrying value. With respect to
these transactions, the resulting gain of US$ 24,237 thousand, net of taxes,
arising from the change in interest has been recorded in additional paid in
capital.

6.  TRW Inc.

In June 2000, Satyam Computer Services signed a non-binding framework agreement
to form a non-exclusive joint venture with TRW Inc. to be managed by Satyam
Computer Services and to issue warrants for a consideration of US$5 million to
TRW Inc. that are convertible into equity shares of Satyam Computer Services in
the eighteenth month after issuance. The 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 Inc. in exchange of Rs.71.6 (US$1.6) per share totaling to

                                     F-16
<PAGE>

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

US$0.5 million in cash representing 10.0% of the total consideration to acquire
the underlying equity shares in accordance with applicable Indian regulations.
These warrants are 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 upfront payment made by
ESL Inc. for these warrants, plus the aggregate exercise price for the 319,480
equity shares underlying these warrants, will equal US$5.0 million. 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., amounts to US$1,157 thousand. It is
being amortized ratably over the period, as described below with respect to the
joint venture agreement between Satyam Computer Services and TRW Inc. (that is
five years and three months period), starting from the date of signing of the
joint venture agreement (that is 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 has been determined by reference to the prevailing
market price of Satyam's 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%.

For the year ended March 31, 2001, Satyam has amortized the excess of the fair
value of the warrants over the consideration of the warrants paid ratably in the
method aforementioned.

In the event the price of Satyam Computer Services equity shares on the Bombay
Stock Exchange at the time of the exercise of the warrants is less than Rs.895.0
(US$20.0) per equity share, Satyam Computer Services are required to use its
best efforts to obtain the requisite shareholder and regulatory approvals to
issue new warrants to the holder on substantially the same terms. The exercise
price of these new warrants will be based on the fair market value of Satyam
Computer Services' equity shares at the time of exercise determined in
accordance with applicable Indian regulations.  The upfront payment made by the
holder for the new warrants, plus the aggregate exercise price for the equity
shares underlying these warrants, will be calculated in accordance with Indian
regulations based on the fair market value of Satyam Computer Services' equity
shares and will not exceed US$10.0 million.

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
Inc. respectively. After December 31, 2003, TRW has the option to require Satyam
Computer Services to purchase its 24.0% interest ("put option"). The buyout
price of TRW's interest in the joint venture depends on the aggregate amount of
revenue, which TRW will provide to the joint venture from June 1, 2000 to
December 31, 2005.  TRW has targeted to outsource to the joint venture at least
$200 million of revenues from information systems and engineering work over the
five years and seven months period. If the amount of revenues outsourced by TRW
to the joint venture by December 31, 2003 does not meet specified minimum
levels, Satyam Computer Services have the right to buy out TRW's 24.0% interest
in the joint venture for no consideration or lowest nominal consideration.
Satyam views that the fair value of the put is the amount that Satyam would have
to pay over and above the fair value of the 24.0% interest in the joint venture
owned by TRW. Satyam Computer Services records the put option at fair value at
each balance sheet date, with the initial fair value of the put option included
as part of the consideration for its 76.0% interest in the joint venture. The
difference between the fair values at each valuation date is charged to selling,
general and administration expenses in statement of operations. Based on the
terms of the agreement the value of put option was US$ Nil and US$ 2,572
thousand as of September 26, 2000 and March 31,2001 respectively.

If TRW exercises its option to sell the shares to Satyam Computer Services after
December 31, 2003, the purchase price of TRW's 24.0% stake will be determined by
the higher of an independent valuation of the 24.0% interest and a formula based
on the amount of revenues provided to the joint venture by TRW. In the event
that certain minimum cumulative revenues are achieved the price will be equal to
the higher of the amount computed above or an amount not to exceed US$40.0
million. Satyam Computer Services may, at its own discretion, use either cash or
its equity shares valued at the then prevailing market price as consideration
for TRW's stake.  The total amount payable to TRW if it divests its stake cannot
exceed two percent of Satyam Computer Services total market capitalization on
December 31, 2003. If TRW divests its stake, the terms of the joint venture's
supply agreement with TRW will continue until December 31, 2007 if TRW is
satisfied with the joint venture's performance of the supply agreement and TRW
is required to use its best attempts to provide the same levels of business to
the joint venture from January 1, 2006 through December 31, 2007 as it had
provided to the joint venture during the preceding two years.

If Satyam Computer Services undergo a change in control or bankruptcy, TRW may
terminate the joint venture agreement on or before December 31, 2003 and require
Satyam Computer Services to purchase its shares in the

                                     F-17
<PAGE>

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

joint venture and all of Satyam Computer Services securities issued to TRW or
its affiliates in connection with the joint venture agreement at a price equal
to US$1 million plus the total consideration TRW has invested in the shares of
the joint venture (but excluding the initial amount paid for its 24.0% interest)
and Satyam Computer Services securities, net of any amount received by TRW for
any sale of such shares or securities.

In addition, TRW Inc. will receive an amount in cash or Satyam Computer
Services' equity shares, at its discretion, equal to 33.0% of the excess of
actual revenues received by the joint venture from TRW Inc. over targeted
revenues, subject to the ceiling of US$25 million if such targeted revenues are
exceeded by 5.0% or more by December 31, 2005. However, such additional amount
together with the buyout of TRW Inc.'s 24.0% interest cannot exceed 2.0% of
Satyam Computer Services' total market capitalization as of December 31, 2003.
No accrual has been made for such contingent payment as it is not yet probable
that the actual revenues will exceed the targeted revenues.

TRW Inc. will also receive royalties from revenues related to services provided
by the venture to third parties referred to the venture by TRW Inc. Such
royalties will be computed at a rate of 5.0% of the first US$25 million of
revenues and 8.0% thereafter. However as of balance sheet date no such revenues
have been recognized by the venture.

7.  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 has a put option to sell the shares back to Satyam
Computer Services if Infoway does not complete an initial public offering on a
recognized stock exchange in India by September 2001. Under the terms of this
put option, Satyam Computer Services is required, in the event Infoway fails to
fulfill its obligations, to repurchase these equity shares at a price equal to
the Indian Rupee equivalent to the average NASDAQ closing price during the three
days before the exercise of the put option, discounted by 41.0%.

In the year ended March 31, 2001, in respect of this transaction Satyam Computer
Services has not recognized US$ 35,156 thousand in the statement of operations
because of the put option held by GSIC.  US$ 35,156 thousand represents an
amount equal to the excess of sales proceeds received from GSIC over the
carrying value of investments in Infoway in the books of Satyam Computer
Services, net of applicable income taxes.  It has been classified as liability
and presented as "Excess of cash received over the carrying value of investment
in Infoway, net of taxes" in the balance sheet.

Satyam Computer Services will recognize this gain in the statement of
operations, only upon Infoway's completion of an initial public offering on a
recognized stock exchange in India by September 2001 or upon the expiration or
forfeiture of the put option.  Satyam Computer Services accounts for the put
option at fair value.  However, since the exercise price of the put option is
equal to the estimated fair value of the shares to be reacquired at the date of
exercise, the Company believes that the fair value of the put option is de
minimus.

8.  Premises, Equipment and Depreciation

Premises and equipment at cost less accumulated depreciation consist of:

                                                     As of March 31
                                     ------------------------------
                                                2000           2001
-------------------------------------------------------------------

Freehold land                               $  2,239       $  7,323
Leasehold land                                    80             74
Premises                                      12,629         18,989
Computers                                     42,360         50,465
System software                                2,869         11,255
Office equipment                              35,936         59,652
Furniture and fixtures                        21,052         25,133
Vehicles                                       1,420          2,677
Leasehold improvements                           570          2,056
Assets under construction                      8,201         24,449
-------------------------------------------------------------------
Total                                        127,356        202,073
Less: Accumulated depreciation               (42,768)       (68,842)
-------------------------------------------------------------------
Premises and equipment, net                 $ 84,588       $133,231
===================================================================

                                     F-18
<PAGE>

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

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

     Premises                                  28 years
     Computers                                  2 years
     System Software                            3 years
     Office equipment                           5 years
     Furniture and fixtures                     5 years
     Vehicles                                   5 years

Depreciation expense amounted to US$11,341 thousand, US$20,170 thousand and
US$29,637 thousand for the years ended March 31, 1999, 2000 and 2001
respectively.

Satyam capitalizes interest as part of the cost of premises and equipment based
on the avoidable cost concept. Interest expenses capitalized amounted to US$8
thousand, US$71 thousand and US$202 thousand for the year ended March 31, 1999,
2000 and 2001 respectively.

9.   Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of:

                                                    As of March 31
                                      ----------------------------
                                              2000            2001
------------------------------------------------------------------

Goodwill
 Acquisition of minority interest          $23,566        $ 21,957
 Acquisition of IndiaWorld                  39,860         106,833
 Acquisition of IndiaPlaza                       -           9,490
 Others                                          -              59
License fees                                   273             852
------------------------------------------------------------------
Total                                       63,699         139,191
Less: Accumulated amortization              (5,137)        (29,196)
------------------------------------------------------------------
Goodwill and other intangible assets,
 net                                       $58,562        $109,995
==================================================================

Goodwill represents the excess of amount paid towards purchase price and non-
refundable deposit over the fair value of assets acquired, and is primarily
related to the IndiaWorld and IndiaPlaza acquisition by Infoway and the
acquisition of the minority interest in SESL by Satyam Computer Services. (Refer
Note 3, Business Combinations). Amortization expense amounted to US$186
thousand, US$5,098 thousand and US$ 24,856 thousand for the year ended March 31,
1999, 2000 and 2001 respectively.

10.  Investments

Investments of Satyam consist of available-for-sale securities, other non-
marketable securities and investments in associated companies.

Available-for-sale securities

                                                   As of March 31
                                        -------------------------
                                               2000          2001
-----------------------------------------------------------------

Amortized cost                                $ 184         $ 274
Gross unrealized holding gains                  353             5
Gross unrealized holding losses                 (19)          (69)
-----------------------------------------------------------------
Fair Value                                    $ 518         $ 210
=================================================================

Aggregate proceeds from the sale of available-for-sale securities amounted to
US$ 13 and US$3 thousand for the year ended March 31, 2000 and 2001
respectively. On those sales, gross realized gain computed on a FIFO basis
amounted to US$ 2 and US$1 thousand for the year ended March 31, 2000 and 2001
respectively. These gains and losses have been included in other income in the
statement of operations.

Other non-marketable investments

                                                    As of March 31
                                        --------------------------
                                               2000           2001
------------------------------------------------------------------

Investments - non-current assets
------------------------------------------------------------------
Other investments, at cost                   $2,681         $2,498
==================================================================

Investment in associated companies

Satyam Computer Services holds 50.0% stakes in two joint venture companies,
Satyam GE Software Services Limited and Satyam Venture Engineering Services
Private Limited. During the year ended March 31, 2001, Infoway invested/acquired
29.0% interest in Placements.com, 40.0% interest in Refco-SIFY Securities India
Pte Ltd., and 25.0% interest in Cricinfo Ltd. Investments in these companies
have been accounted for under the equity method.

The carrying value of investment in various associated companies of Satyam are
as follows:

                                                    As of March 31
                                    ------------------------------
                                               2000           2001
------------------------------------------------------------------


Satyam GE                                     $ 336        $ 1,699

                                     F-19
<PAGE>

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

Satyam Venture                                  103            140
Cricinfo                                          -         29,759
Placements.com                                    -            196
Refco.sify                                        -          2,195
------------------------------------------------------------------
Total                                         $ 439        $33,989
==================================================================

11.  Borrowings

Short-term debts

Short-term debts comprised of:

                                                    As of March 31
                                    ------------------------------
                                               2000           2001
------------------------------------------------------------------

Cash credit facilities                      $ 9,012         $5,224
Short-term debt                              10,309          2,134
------------------------------------------------------------------
Short-term debts                            $19,321         $7,358
==================================================================

The interest rates for the above borrowings range from 10.0% to 15.50% p.a. Cash
Credit facilities are guaranteed personally by Satyam's chairman and managing
director and are secured by a first charge on current assets and a second charge
on the premises and equipment of Satyam. Short-term debt is secured by a first
charge on the premises and equipment of Satyam. The weighted-average interest
rate on these borrowings was 12.4% and 12.35% for the year ended March 31, 2000
and 2001 respectively.

Long-term debts

Long-term debts outstanding consist of:

<TABLE>
<CAPTION>
                                                                                                            As of March 31
                                                                                                     ---------------------
                                                                                                           2000       2001
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                    <C>        <C>
   Secured debts, representing obligation principally to banks and financial institutions
 -  Foreign currency term loans (dollar denominated), maturing serially through fiscal 2004 with       $  4,668   $  3,730
    floating rate - LIBOR+ (175 to 350bps)
 -  Rupee term loans, maturing serially through fiscal 2005 with floating rate - MLR* + (150 to 200      18,844     14,728
    bps)
 -  Rupee term loans, maturing serially through fiscal 2004 with fixed rate - 12.5% to 18.5%              8,300      9,605
 -  15.5% Rupee term loan of a consolidated subsidiary, maturing serially through fiscal 2003             2,307          -
 -  13.0% Debentures of a consolidated subsidiary, due in fiscal 2002                                     2,463          -
 -  Working Capital loans, maturing serially through fiscal 2002 with fixed rate - 12.5% to 13.0%        14,892          -
   Unsecured debts
 -  14.03% Rupee loan of Satyam Associate Trust, maturing serially through fiscal 2004                   13,145     13,196
 Others                                                                                                     888      1,583
 Total Debt                                                                                              65,507     42,842
 Less: Current portion of long-term debts                                                               (15,457)   (33,217)
--------------------------------------------------------------------------------------------------------------------------
 Long-term debts, net of current portion                                                               $ 50,050   $  9,625
==========================================================================================================================
 *MLR = Minimum lending rate prevailing in India (as of March 31, 2000 - 12.75% and as of March 31, 2001 - 12.50%)
 bps = Basis Points
</TABLE>

Term loans are secured by a pari-passu charge on premises and equipment and
other loans classified as secured debts are secured by a pari-passu charge on
current assets. These are also generally guaranteed personally by Satyam's
chairman and managing director.

Aggregate maturities of long-term debts for the four years subsequent to March
31, 2001, are US$33,217 thousand in fiscal 2002, US$4,953 thousand in fiscal
2003, US$4,617 thousand in fiscal 2004, US$32 thousand in fiscal 2005, US$3
thousand in fiscal 2006 and thereafter.

As of March 31, 2000, Satyam had unused lines of credit amounting to US$8,353
thousand, of which US$4,276 thousand related to cash credit and short-term
debts, US$595 thousand related to long-term debts and US$3,482 thousand related
to non-fund facilities.

As of March 31, 2001, Satyam had unused lines of credit amounting to US$20,188
thousand, of which US$12,920 thousand related to cash credit and short-term
debts, US$1,067 thousand related to long-term debts and US$6,201 thousand
related to non-fund facilities. Subsequent to the balance sheet date, Satyam has
prepaid foreign currency term loans and Rupee term loans amounting to US$28,063
thousand. The debts have been included in the current portion of long-term
debts.

                                     F-20
<PAGE>

Notes to Consolidated Financial Statements
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as stated otherwise)
--------------------------------------------------------------------------------
12.  Fair Value of Financial Instruments

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 fair value due to
their short maturity. The approximate fair value of long-term debts, as
determined by using current interest rates, as of March 31, 2000 and 2001 was
US$66,047 thousand and US$42,779 thousand as compared to the carrying amounts of
US$65,507 thousand and US$42,842 thousand respectively.



                                     F-21
<PAGE>

Notes to Consolidated Financial Statements
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as state otherwise)
--------------------------------------------------------------------------------



13.  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 balance sheet.

<TABLE>
<CAPTION>
                                                                          Years ended March 31
                                                           -----------------------------------
                                                                   1999      2000         2001
----------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>        <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of the year             $ 208     $ 349      $   572
Service cost                                                        144       197          323
Interest cost                                                        30        61           60
Actuarial loss (gain)                                               (17)      (22)         279
Benefits paid                                                        (1)       (3)          (5)
Effect of exchange rate changes                                     (15)      (10)         (50)
Projected benefit obligation at end of the year                     349       572        1,179
----------------------------------------------------------------------------------------------

Change in plan assets
Fair value of plan assets at beginning of the year                    7        16           25
Actual return on plan assets                                          1         2            3
Employer contribution                                                13        18           18
Benefits paid from plan assets                                       (5)      (11)          (7)
----------------------------------------------------------------------------------------------
Fair value of plan assets at end of the year                         16        25           39

Funded status of the plans                                         (333)     (547)      (1,140)
Unrecognized transition obligation (asset)                           63        50           35
Unrecognized prior service cost (benefit)                             -         -            -
Unrecognized net actuarial loss (gain)                              (13)      (27)         251
----------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                                    $(283)    $(524)     $  (854)
==============================================================================================

The components of net gratuity costs are reflected below:
Service cost                                                      $ 153     $ 220      $   323
Interest cost                                                        21        38           60
Expected returns on plan assets                                      (1)       (2)          (3)
Amortization                                                         13        13           12
----------------------------------------------------------------------------------------------
Net gratuity costs                                                $ 186     $ 269      $   392
==============================================================================================
Principal actuarial assumptions:
Discount rate                                                      11.0%     11.0%        11.0%
Long-term rate of compensation increase                            10.0%     10.0%        10.0%
Long-term rate of return on plan assets                            11.0%     11.0%        11.0%
</TABLE>

Provident Fund

Satyam contributed US$882 thousand, US$1,176 thousand and US$1,399 thousand
towards the Provident Fund during the years ended March 31, 1999, 2000 and 2001
respectively.

Superannuation Plan

Satyam Computer Services contributed US$12 thousand, US$15 thousand and US$ 26
thousand towards the Superannuation Plan maintained by LIC during the years
ended March 31, 1999, 2000 and 2001 respectively.

                                      F-22
<PAGE>

Notes to Consolidated Financial Statements
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as state otherwise)
--------------------------------------------------------------------------------

14.    Income Taxes

The provision for income taxes consists of:

                                      Years ended March 31
                          ------------------------------------------
                                   1999          2000           2001
--------------------------------------------------------------------

Foreign taxes
Current                          $1,065        $1,118         $3,437
Deferred                            110           146            530
Domestic taxes
Current                              35           239            546
Deferred                           (105)          116           (376)
--------------------------------------------------------------------
Aggregate taxes                  $1,105        $1,619         $4,137
====================================================================

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:

                                         Years ended March 31
                                --------------------------------------
                                    1999          2000            2001
----------------------------------------------------------------------

Net income (loss) before         $10,308      $ (8,241)       $(44,080)
 taxes..........................
Enacted tax rates in India......    35.0%         38.5%          39.55%
----------------------------------------------------------------------
Computed tax expense/
 (benefit)...................... $ 3,608      $ (3,173)       $(17,433)
Tax effect due to
 non-taxable export income......  (4,883)      (11,079)        (28,041)
Difference arising from
 different tax rate in other
 tax jurisdiction...............     218           679           1,241
Stock compensation
 (non-deductible)...............   1,161         6,518          18,235
Goodwill (non-deductible).......      46         1,942           9,759
Permanent Differences...........  (2,024)       (1,284)          2,574
Changes in valuation
 allowance, including losses
 of subsidiaries................   1,540         7,275          15,963
Effect of tax rate change.......       -            13               7
Other non-deductible expenses...   1,430           636            1584
----------------------------------------------------------------------
Income taxes....................   1,096         1,527           3,889
Tax for earlier years
 /excess tax provided...........       9            92             248
======================================================================
Income taxes recognized in
 statement of operations........ $ 1,105      $  1,619        $  4,137
======================================================================

As of March 31, 2000 and 2001, the current provision for income taxes, net of
payments, were US$653 thousand and US$ 6,707 thousand respectively.. The
provision for foreign taxes is due to income taxes payable overseas 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 Satyam Computer Services' operations are from
"Software Technology Parks" which is entitled to a tax holiday of ten years from
the date of commencement of operations. However, Satyam earns certain other
income, which are taxable irrespective of tax holiday. Foreign 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 on the balance sheet are as follows:

                                                 As of March 31
                                          ---------------------------
                                                  2000           2001
---------------------------------------------------------------------
Deferred tax assets:
Operating loss carryforwards                  $ 10,366       $ 22,620
Provision for accounts receivable and
advances                                           280            902
Premises and equipment                               6             18
Others                                             291          3,553
---------------------------------------------------------------------
Gross deferred tax assets                       10,943         27,093
Less: Valuation allowance                      (10,524)       (24,756)
---------------------------------------------------------------------
Total deferred tax assets                          419          2,337

Deferred tax liabilities:
Premises and equipment                             548          2,379
Deferred tax due on sale of interest of                        34,316
 a subsidiary accounted through                 29,693
 additional paid-in capital
Others                                             162             82
---------------------------------------------------------------------
Total deferred tax liabilities                  30,403         36,777
---------------------------------------------------------------------
Deferred income taxes assets
 (liabilities)                                $(29,984)      $(34,440)
=====================================================================

No deferred income taxes have been provided on undistributed earnings of foreign
subsidiaries due to the losses incurred by them since their inception. These

                                      F-23
<PAGE>

Notes to Consolidated Financial Statements
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as state otherwise)
--------------------------------------------------------------------------------

losses aggregated to approximately US$12,862 thousand, and US$ 30,064 thousand
as of March 31, 2000 and 2001 respectively.

No deferred taxation provision has been recognized for the 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 for 10 years, except to the extent
timing differences 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$10,366 thousand and US$
22,620 thousand as of March 31, 2000 and 2001 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 assets (liabilities) included in the consolidated balance
sheets were as follows:

                                                  As of March 31
                                          -------------------------
                                                2000           2001
-------------------------------------------------------------------

Current assets - deferred taxes on
 income                                     $    413       $    966
Non-current assets - other assets*                 6          1,371
Current liabilities - accrued                   (129)             -
 expenses and other liabilities*
Long-term liabilities - Deferred
 taxes on income                             (30,274)       (36,777)
-------------------------------------------------------------------
Net deferred tax assets (liabilities)       $(29,984)      $(34,440)
===================================================================
* - Included in "other assets" and "accrued expenses and other liabilities"
respectively.

15.  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
and unvested shares held by the Satyam Associate Trust). At March 31, 2000 and
2001, 7,536,100 and 15,213,249 respectively allocated but unvested shares were
not included in the calculation of weighted-average shares outstanding for basic
earnings per share. 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. For the years ended March 31,
2000 and 2001, 7,536,100 and 15,213,249 respectively allocated but unvested
shares have been excluded from the diluted earnings per share calculation due to
their antidilutive effect.

In addition to the above, the unallocated shares held by Satyam Associate Trust,
which are by definition unvested, have been excluded from all earnings per share
calculations. Such shares amounted to 4,232,300and 10,188,321 as of March 31,
2000 and 2001 respectively.

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

                                            Years ended March 31
                              --------------------------------------
                                    1999         2000           2001

Net income                      $  9,014     $ (6,940)      $(27,912)

Average outstanding shares
 (in thousands)*                 260,190      264,720        269,943
Dilutive effect of:
 Employee Stock Options               70            -              -
Share and share                  260,260      264,720        269,943
 equivalents (in
 thousands)*

Earnings (loss) per share
Basic                           $   0.03     $  (0.03)      $  (0.10)
Diluted                             0.03        (0.03)         (0.10)

*  - on an adjusted basis

16.    Stock-based Compensation Plans

Stock-based compensation plan of Satyam Computer Services

History of the plan

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

All the Trust's trustees are nominated by Satyam Computer Services. The Trust
issue warrants solely at the discretion of Satyam Computer Services and cannot
earn

                                      F-24
<PAGE>

Notes to Consolidated Financial Statements
Satyam Computer Services Limited
(Thousands of US Dollars except per share data and as state otherwise)
--------------------------------------------------------------------------------

any other income. The shares purchased by the Trust, as described below, have
been pledged against all Trust liabilities. Hence, the Trust has been
consolidated in the financial statements.

At the Annual General Meeting in May 1999, shareholders approved a two-for-one
stock split in the form of a dividend, available to all shareholders of record
as of August 31, 1999 (refer note  21 "Stock Split in the form of stock
dividend"). All holders of trust warrants were given the choice of converting
their underlying Satyam Computer Services warrants to Satyam Computer Services
shares ahead of their scheduled vesting dates. Upon payment of the balance of
the exercise price, the underlying Satyam Computer Services warrants would be
converted into shares and remain in the custody of the trust until the original
vesting period expired. The `bonus' share, at the effective date of the stock
split, immediately vested to the employees who availed themselves of this plan.
Warrants for 62,500 shares were converted into Satyam Computer Services shares
in this manner, and Satyam Computer Services recognized US$137 thousand in
compensation expense associated with this transaction.

In order to ensure all its employees received the benefits of the Satyam
Computer Services stock split in December 1999, the 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 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 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 has been treated as an equity restructuring
pursuant to EITF  90-9.  Correspondingly no additional compensation cost has
been recognized as a result of the conversion of warrants held by the Trust.

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 employees 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, employees have 3 months to exercise these warrants. No equity shares
have been issued by Satyam Computer Services to the Trust as under the ASOP plan
B.

Warrant grants

During the year ended March 31, 1999, the Trust issued to employees immediately-
vesting warrants for 1,170,300 shares as well as warrants for 4,739,900 shares
with vesting periods ranging between one and three years. As of March 31, 1999,
the Trust held warrants for 5,910,200 shares allocated to employees and warrants
for 7,089,800 shares unallocated to employees. Unallocated warrants are not
considered outstanding for purposes of computing earnings per share.

During the year ended March 31, 2000, the exercise period of the immediately
vesting warrants for 1,170,300 shares was extended for another one year. The
difference between the fair market value and exercise price at the extension
date was taken immediately to current-year income.

During the year ended March 31, 2000, the Trust issued immediately vesting
warrants for 74,000 shares and warrants for 2,911,200 shares with longer vesting
periods to the employees. As of March 31, 2000, the Trust held warrants for
7,536,100 shares allocated to employees. At this date, warrants for 4,232,300
shares remained unallocated to employees. Unallocated warrants are not
considered outstanding for purposes of computing earnings per share.

During the year ended March 31, 2001, the 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 employees
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 employees.

Satyam Computer Services recognized deferred stock compensation of US$14,479
thousand,  US$23,265 thousand and US$38,034 thousand for the year ended March
31, 1999, 2000 and 2001 respectively.  US$3,315 thousand, US$16,457 thousand and
US$44,219 thousand was amortized and charged to income for the year ended March
31, 1999, 2000 and 2001 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.

                                      F-25
<PAGE>

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

Deferred stock compensation is amortized on a straight-line basis over the
vesting period of the related warrants. The weighted-average grant-date fair
value of options granted during the years 1999, 2000 and 2001 was US$3.42,
US$7.02 and US$9.49 respectively.

As mentioned above, Satyam Computer Services amended the exercise price of its
warrants to reflect the interest component associated with the loan used to fund
the Trust's share purchase. As a result of this, the weighted-average exercise
price for warrants at the beginning of the year ended March 31, 2000 is greater
than that of the year ended March 31, 1999.

Changes in number of shares representing stock options outstanding were as
follows:

<TABLE>
<CAPTION>
                                                                                                       Years ended March 31
                                      ---------------------------------------------------------------------------------------
                                                   1999                        2000                           2001
-----------------------------------------------------------------------------------------------------------------------------
  ASOP - A                              Number of     Weighted       Number of       Weighted       Number of       Weighted
                                         shares       Average        shares          Average         shares          Average
                                                      Exercise                       Exercise                        Exercise
                                                       Price                           Price                          Price
-----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>           <C>              <C>           <C>              <C>
Balance at the beginning of period                                   5,910,200        $1.24        7,536,100          $1.26
Granted                                 5,910,200       $1.03        2,985,200         1.36        3,717,110          $1.27
Exercised                                                           (1,231,600)        1.22         (598,330)         $1.05
Cancelled                                                             (126,500)        1.03         (521,500)         $1.08
Lapsed                                                                  (1,200)        1.08         (679,240)         $1.59
-----------------------------------------------------------------------------------------------------------------------------
Balance at the end of the period        5,910,200       $1.03        7,536,100        $1.26        9,454,140          $1.24
=============================================================================================================================
</TABLE>

                ASOP-B                     Year ended March 31, 2001
---------------------------------------------------------------------
                                        Number of            Weighted
                                        shares               Average
                                                             Exercise
                                                              Price
---------------------------------------------------------------------

Balance at the beginning of period
Granted                                 6,050,409              $ 7.32
Exercised
Cancelled                                (291,200)             $10.38
Lapsed
---------------------------------------------------------------------
Balance at the end of the period        5,759,209              $ 7.17
=====================================================================

<TABLE>
<CAPTION>
Information about number of shares representing stock options outstanding:
---------------------------------------------------------------------------------------------------------------------------------
                                                 Outstanding                                                Exercisable
                          -------------------------------------------------------------------------------------------------------
 Period        Range of         Weighted Average               Weighted            Number of          Weighted         Number of
               Exercise        Exercise Price (per              Average              shares           Average           shares
              Price (per             share)                    remaining         arising out of    Exercise Price     arising out
                share)                                     contractual Life         options         (per share)       of options
---------------------------------------------------------------------------------------------------------------------------------
<S>          <C>               <C>            <C>           <C>                   <C>              <C>                <C>
Fiscal       Rs.45.0 -         US$1.0 -       Rs.55.1           1.82 yrs           7,536,100          Rs.48.0           74,000
2000         Rs.82.8           US$1.8         US$1.2                                                  US$1.0

Fiscal       Rs.45.0-          US$1.0-        Rs.134.54         1.88 yrs          15,213,349          Rs.49.69         720,620
2001         Rs.655.6          US$14.0        US$2.87                                                 US$1.1
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Number of shares are presented on an adjusted basis
The US$ numbers in the above table have been translated using the closing
exchange rate as of March 31, 2001 1$= Rs.46.85

                                      F-26
<PAGE>

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

Stock-based compensation plan of Infoway

During the year ended March 31, 1999, Infoway established its Associate Stock
Option Plan (the "IASOP") which provides for the issuance of 825,000 warrants to
eligible employees. Infoway issued 825,000 warrants of Re. 1 each to an employee
welfare trust (the "SI-Trust"). The SI-Trust holds the warrants and transfers
them to eligible employees over a period of three years. The exercise period for
these warrants is 30 days from the vesting period. The warrants are to be
transferred to employees at Re. 1 each and each warrant entitles the holder to
purchase one share of Infoway at an exercise price as decided and determined by
the Board of Directors. The warrants and the shares received upon the exercise
of warrants are subject to progressive vesting over a three-year period from the
date of issue of warrants to employees. The intrinsic value of each warrant is
based on 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 Infoway.

During the year ended March 31, 1999, 5,000 warrants were granted at US$1.61 per
warrant to a single employee resulting in a deferred stock compensation of US$39
thousand for the difference between the exercise price and the fair market value
of the shares underlying the warrants, as was determined by the Board of
Directors to be US$9.5, as of the date the warrants were unconditionally made
available to the employee. The deferred stock compensation is being amortized on
a straight-line basis over the vesting period of the warrants and the charge
amounted to US$2 thousand.

During the year ended March 31, 2000, 225,000 warrants (net of 5,700 warrants
forfeited) were granted to eligible employees at a weighted average exercise
price of US$18.56, which are convertible into Indian shares at the time of
exercise of the said warrants by the employees. Further, Infoway also granted
87,460 warrants to eligible employees at 90.0% of the market price of the shares
on NASDAQ as on the grant date. These warrants are convertible into American
Depository Shares (ADS) at the time of exercise of the said options by the
employees. Infoway recognized deferred stock compensation of US$3,209 thousand
for the year and during the year US$474 thousand was amortized and charged to
income for the year ended March 31, 2000.

During the year ended March 31, 2001 Infoway granted 342,800 warrants to
eligible employees at 90% of the market price of the shares on NASDAQ as on the
grant date. These warrants are convertible into ADS at the time of exercise of
the said options by the employees. Infoway recognized deferred stock
compensation of US$2,225 thousand for the year and during the year US$1,899
thousand was amortized and charged to income.

The deferred stock compensation has been computed at the grant date as the
difference between the exercise price and the intrinsic value of warrants based
on its underlying shares. The deferred stock compensation is being amortized on
a straight-line basis over the vesting period of the warrants. The weighted-
average grant-date fair value of options granted during the years 1999, 2000 and
2001 was US$1.6, US$54.1 and US$69.83.

Stock options outstanding are as follows:

<TABLE>
<CAPTION>
                                                                                                    Years ended March 31
                                      ----------------------------------------------------------------------------------
                                                 1999                        2000                          2001
------------------------------------------------------------------------------------------------------------------------
                                       Number of     Weighted      Number of       Weighted      Number of      Weighted
                                        shares        Average       shares          Average       shares         Average
                                                     Exercise                      Exercise                      Exercise
                                                      Price                          Price                        Price
------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>             <C>           <C>            <C>
Balance at the beginning of period                                    5,000          $ 1.57       312,460         $53.57
Granted                                   5,000         $1.57       313,160           53.57       342,800          60.21
Exercised                                     -             -             -               -          (200)          7.47
Cancelled                                     -             -        (5,700)           8.02       (90,040)         51.42
Lapsed                                        -             -             -               -             -              -
------------------------------------------------------------------------------------------------------------------------
Balance at the end of the period          5,000         $1.57       312,460          $53.57       565,020         $55.54
========================================================================================================================
</TABLE>

                                      F-27
<PAGE>

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

Information about stock options outstanding:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                Outstanding                                  Exercisable
    Period        Range of Exercise
                                            -------------------------------------------------------------------------------------
                  Price (per share)            Weighted           Weighted          Number of          Weighted        Number of
                                                Average            Average            shares           Average          shares
                                            Exercise Price        remaining        arising out      Exercise Price    arising out
                                              (per share)     contractual Life      of options       (per share)      of options
---------------------------------------------------------------------------------------------------------------------------------
<S>               <C>       <C>             <C>               <C>                  <C>              <C>              <C>
2001               Rs.70    $  1.49             $  1.49            0.96yrs             5,000          $ 1.49            2,500
                     250       5.34                5.34            1.75yrs                              8.54           18,750
                     350       7.47                7.47            1.75yrs           112,500           28.84            7,867
                     973      20.77               20.77            2 .18yrs           62,520           88.05           13,956
                   1,879      40.11               40.11            2.18yrs            47,200                                -
                   3,809      81.30               81.30            2.08yrs           267,620                                -
                   5,892     125.76              125.76            2.08yrs            60,580                                -
                   8,603     183.63              183.63            2.08yrs             9,600                                -
</TABLE>

The US$ numbers in the above table have been translated using the closing
exchange rate at March 31, 2001 1$ = Rs.46.85.

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 (ISO's) and nonqualified options to eligible individuals
responsible for the management, growth and financial success of VCI. As of March
31, 2000, there are 25,000,000 shares 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, 2000, 650,600 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 500 options were forfeited during this
period. As of March 31, 2000, no outstanding options are exercisable, and the
outstanding options have a weighted-average remaining contractual life of 9.7
years.

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.

Additional Disclosure

Satyam follows APB 25, "Accounting for Stock Issued to Employees", to account
for stock options. An alternative method of accounting for stock options is SFAS
123, Accounting for Stock-Based Compensation. Under SFAS 123, employee stock
options are valued at grant date using the Black-Scholes valuation model, and
compen-sation cost is recognized ratably over the vesting period. FAS 123
requires that an entity recognizes incremental compensation cost associated with
an extension of the exercise period, computed as the difference between the fair
values of the option before and after such modification. Under APB 25, the
company recognizes a new measurement date and new measure cost. Correspondingly,
the extension of the exercise periods of stock options held by some employees
has had a lesser effect on income under FAS 123 than under APB 25.

Had compensation cost for Satyam's stock options been determined based on the
Black-Scholes value at the grant dates for awards, pro forma statement of
operations would have been as follows:

                                      Years ended March 31
                        ---------------------------------------------
                                  1999           2000            2001
---------------------------------------------------------------------

Net Income (loss)
         - As reported      $9,014        $(6,940)       $(27,677)
         - Pro forma         8,876           (351)        (29,933)
Earnings (loss) Per
Share:

Basic    - As reported      $ 0.03        $ (0.03)       $  (0.10)
         - Pro forma          0.03          (0.00)          (0.11)
Diluted  - As reported        0.03          (0.03)          (0.10)
         - Pro forma          0.03          (0.00)          (0.11)

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

                                      F-28
<PAGE>

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

The fair value of Satyam Computer Services' stock options used to compute pro
forma net income and earnings per share disclosures is the estimated present
value at grant date using the Black-Scholes option-pricing model. The following
assumptions were used:

                                        Years ended March 31
                           ---------------------------------

                                1999       2000         2001
------------------------------------------------------------

Dividend yield                  0.65%      0.65%        0.51%
Expected volatility            90.00%     90.00%       73.00%
Risk-free interest rate         9.01%      9.87%       10.40%
Expected term                   1.70       1.99         2.09


17.  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. The companies
   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. Satyam also operates
   an on-line portal, Sify.com (formerly satyamonline.com), and 21 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-29
<PAGE>

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

Satyam's operating segment information for the years ended March 31, 1999 and
2000 and for the year ended March 31, 2001 were as follows:

Business Segments

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                      IT  Services  Internet Services   Software Products   Elimination   Consolidated totals
-----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>                 <C>                 <C>           <C>
For the year 1999
Revenue - External customers          $     95,573       $      2,222                   -             -        $      97,795
Revenue - Inter-segment                        374                226                   -    $     (600)                   -
----------------------------------------------------------------------------------------------------------------------------
Total Revenues                        $     95,947       $      2,448                   -    $     (600)       $      97,795
============================================================================================================================

Operating income (loss)               $     21,884       $     (3,836)       $     (1,840)            -        $      16,208
Net income (loss)                           15,241             (4,387)             (1,840)            -                9,014
Segment assets                             110,123             10,658                 114    $   (4,576)             116,319
Depreciation and amortization               10,361              1,164                   2             -               11,527
Capital expenditures for long-lived         35,229              3,816                  26             -               39,071
 assets
----------------------------------------------------------------------------------------------------------------------------
For the year 2000
Revenue - External customers          $    149,257       $     15,198                   -             -        $     164,455
Revenue - Inter-segment                      5,768                208                   -    $   (5,976)                   -
----------------------------------------------------------------------------------------------------------------------------
Total Revenues                        $    155,025       $     15,406                   -    $   (5,976)       $     164,455
============================================================================================================================

Operating income (loss)               $     18,356       $    (10,630)       $    (10,802)   $    2,447        $        (629)
Net income (loss)                            9,787             (5,713)            (11,014)            -               (6,940)
Segment assets                             183,283            243,551               1,758       (16,033)             412,559
Depreciation and amortization               19,616              5,600                  52             -               25,268
Capital expenditures for long-lived         22,389             20,003                 517             -               42,909
 assets
For the year 2001
Revenue - External customers          $    271,367       $     36,840                   -                      $     308,207
Revenue - Inter-segment                      3,547              2,148                 213        (5,908)                   -
----------------------------------------------------------------------------------------------------------------------------
Total Revenues                        $    274,914       $     38,988        $        213       ($5,908)       $     308,207
============================================================================================================================

Operating income (loss)               $     24,230           ($56,994)           ($13,878)            -             ($46,642)
Net income (loss)                           14,765            (28,804)            (13,873)            -              (27,912)
Segment assets                             257,143            246,766               2,243      ($25,053)             481,099
Depreciation and amortization               24,374             29,695                 424                             54,493
Capital expenditures for long-lived         42,296             41,934                 926                             85,156
 assets
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The capital expenditures for long-lived assets in the above table represent the
additions to premises and equipment (fixed assets) of each segment.

                                     F-30
<PAGE>

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

Geographic Information

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

<TABLE>
<CAPTION>
                                   Fiscal 1999                         Fiscal 2000                       Fiscal 2001
-----------------------------------------------------------------------------------------------------------------------------
                            Revenues          Long-lived         Revenues       Long-lived         Revenues        Long-lived
                          from external         assets        from external       assets         from external       assets
                            customers                            customers                         customers
-----------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                 <C>             <C>               <C>              <C>               <C>
United States             $     76,443        $   6,367       $     123,262     $    7,585           222,521       $   11,610
Europe                           7,068                -               8,493             68            20,481              134
India                            3,545           57,189              16,473        134,959            31,461          231,046
Japan                            4,066                -              10,364            344             7,260              263
Rest of the World                6,673                -               5,863            194            26,484              173
-----------------------------------------------------------------------------------------------------------------------------
Total                     $     97,795        $  63,556       $     164,455     $  143,150        $  308,207       $  243,226
=============================================================================================================================
</TABLE>

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.

18.  Concentration of 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. During the year ended March 31, 2000, revenues
generated from two customers accounted for 14.2% and 11.9% of the total
revenues, respectively. During the year ended March 31, 2001, revenues generated
from two customers accounted for 15.48% and 8.13% of the total revenues,
respectively. During the year ended March 31, 2000, total revenue from Satyam's
top ten customers accounted for 51.9% of the total revenues. During the year
ended March 31, 2001, total revenue from Satyam's top ten customers accounted
for 46.08% of the total revenues.

19.  Related Party Transactions

Satyam provides infrastructure and other services to Satyam GE and Satyam
Venture, associate companies (joint ventures) which amounted to US$539 thousand
for the year ended March 31, 2000 and US$ 1,492 thousand for the year ended
March 31, 2001.

Software services provided by Satyam GE and Satyam Venture to Satyam amounted to
US$182 thousand and US$165 thousand for the year ended March 31, 2000 and 2001
respectively. Satyam GE owes an amount equivalent to US$50 thousand and US$ 631
thousand to Satyam Computer Services as of March 31, 2000 and 2001 respectively.
Satyam Venture owes an amount equivalent to US$ 896 thousand to Satyam Computer
Services as of March 31, 2001.

An Executive Director of SESL who is also a director of Satyam Computer Services
was allotted 8,000,000 equity shares in the share swap deal pursuant to the
acquisition of shares of SESL by Satyam Computer Services. Refer note 4 on
"Acquisition of minority interest".

20.  Contingencies and Commitments

Contingencies

The bank guarantees outstanding are US$1,449 thousand and US$1,012 thousand as
of March 31, 2000 and 2001 respectively. These 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.

                                     F-31
<PAGE>

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

Capital Commitments

Satyam has various letters of credit outstanding to different vendors totaling
US$166 thousand and US$473 thousand as of March 31, 2000 and 2001 respectively.
These letters of credit are generally established for the import of hardware,
software and other capital items.

Satyam had contractual commitments of US$4,718 thousand and US$8,565 thousand as
of March 31, 2000 and 2001 respectively, for capital expenditures relating to
acquisition of premises, equipment and new network infrastructure.

Satyam had commitments towards investment in equity capital under joint venture
agreements amounting to US$780 thousand and US$2,645 thousand as of March 31,
2000 and 2001 respectively.

Operating Lease

Satyam has certain operating leases for office premises and guesthouses. These
are renewable on a periodic basis at its option, with the longest renewal period
extending through 2005. Most of the operating leases provide for increased rent
through increases in general price levels. The operating leases are cancelable
at either party's option generally with three months notice.

Rental expense for operating leases amounted to US$2,851 thousand, US$3,971
thousand and US$7,626 thousand for the year ended March 31, 1999, 2000 and 2001
respectively.

Future minimum annual lease commitments, including those leases for which
renewal options may be exercised, as of March 31, 2001 are US$5,120 thousand in
fiscal 2002, US$4,551 thousand in fiscal 2003, US$4,032 thousand in fiscal 2004,
US$4,003 thousand in fiscal 2005 and US$3,800 thousand in fiscal 2006.

21.  Shareholders' Equity and Dividends

Stock Split (in the form of stock dividend)

During the year ended March 31, 2000, the shareholders of Satyam Computer
Services approved a two-for-one stock split (in the form of stock dividend)
which was effective on September 1, 1999. Consequently, Satyam capitalized an
amount of US$6,480 thousand from its retained earnings to common stock.

Further, the shareholders also authorized a five-for-one stock split of Satyam
Computer Services' common stock whereby each issued and outstanding equity
share, par value Rs.10 each, was split into five equity shares, par value Rs.2
each. The record date of stock split was August 25, 2000.

All references in the financial statements to number of shares, per share
amounts, stock option data, and market prices of Satyam Computer Services'
equity shares have been retroactively restated to reflect the stock split unless
otherwise noted.

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
shareholder 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 Service 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. For the year
ended March 31, 2000, under Indian GAAP the net income available for
distribution to equity shareholders was US$29,954 thousand and US$103,797
thousand for the year ended March 31, 2001.

Under the 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.
Dividends declared, distributed or paid by an Indian corporation are subject to
a dividend tax of 12%, including the presently applicable surcharge, of the
total amount of the dividend declared, distributed or paid. This tax is not paid
by shareholders nor is it a withholding requirement, but rather it is a direct
tax payable by the corporation.

                                     F-32
<PAGE>

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

22.    Balance Sheet and Income Statement Schedules

a)     Cash and Cash Equivalents

The cash and cash equivalents consist of:

<TABLE>
<CAPTION>
                                                 As of March 31
                                              -------------------
                                              2000           2001
-----------------------------------------------------------------
<S>                                    <C>            <C>
Cash and bank balances                 $    25,947    $    37,130
Cash equivalents                           166,357         28,938
-----------------------------------------------------------------
Cash and cash equivalents              $   192,304    $    66,068
=================================================================
</TABLE>

Cash equivalents include deposits of US$193 thousand and US$261 thousand as of
March 31, 2000 and 2001 respectively, placed in "No-charge-no-lien" accounts as
security towards performance guarantees issued by Satyam's bankers on Satyam's
behalf. Satyam cannot utilize these amounts until the guarantees are discharged
or revoked.

b)    Accounts Receivable

Accounts receivable consist of:

<TABLE>
<CAPTION>
-----------------------------------------------------------------
                                                 As of March 31
                                               ------------------
                                               2000          2001
<S>                                        <C>          <C>
Customers (trade)                          $ 52,337     $  95,444
Related parties                                  92     $     650
Less: allowance for doubtful debts             (914)       (3,530)
-----------------------------------------------------------------
Accounts receivable                        $ 51,515     $  92,564
=================================================================
</TABLE>

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.

c)    Inventory

Inventory consists of:

<TABLE>
<CAPTION>
                                                  As of March 31
                                               -------------------
                                               2000           2001
------------------------------------------------------------------
<S>                                           <C>         <C>
CD-ROMs                                       $  25       $    153
Communication hardware                          323          2,010
Application software                             62            126
Others                                            7             70
Less: Valuation Allowance                                       (9)
------------------------------------------------------------------
Inventory                                     $ 417       $  2,350
==================================================================
</TABLE>

d)  Prepaid Expenses and Other Receivables

Prepaid expenses and other receivables consist of:

<TABLE>
<CAPTION>
                                                  As of March 31
                                                ------------------
                                                2000        2001
------------------------------------------------------------------
<S>                                           <C>         <C>
Prepaid expenses                              $  7,210    $  5,922
Advance for expenses                             3,267      13,089
Loans and advance to employees                   1,740       2,493
Other advances and receivable                    3,728       1,364
Less: Allowance for doubtful                      (281)       (312)
 advances
------------------------------------------------------------------
Prepaid expenses and other                    $ 15,664    $ 22,556
 receivables
==================================================================
</TABLE>

Prepaid expenses principally include the unexpired 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:

<TABLE>
<CAPTION>
                                                  As of March 31
                                               --------------------
                                               2000            2001
-------------------------------------------------------------------
<S>                                       <C>              <C>
Rent and maintenance deposits             $   2,376        $  3,570
Telephone and other deposits                  1,694           2,190
Loans and advances to employees due             247           1,918
 after one year
Deferred taxes on income                          6           1,371
Others                                          279           3,594
Less: Allowance for doubtful deposits          (149)           (647)
-------------------------------------------------------------------
Other Assets                              $   4,453        $ 11,996
===================================================================
</TABLE>

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-33
<PAGE>

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

f)    Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of:

<TABLE>
<CAPTION>
                                                As of March 31
                                              ------------------
                                              2000           2001
-----------------------------------------------------------------
<S>                                       <C>            <C>
Accrued expenses                          $  7,972       $ 20,142
Unclaimed dividend                           1,398            335
Provision for taxation                         653          6,707
Provision for gratuity                         524            854
Deferred taxes on income                       129              -
Others                                       2,221          3,742
-----------------------------------------------------------------
Accrued expenses and other liabilities    $ 12,897       $ 31,780
=================================================================
</TABLE>

g)  Other Income

Other income consists of:

<TABLE>
<CAPTION>
                                              Years ended March 31
                                       ----------------------------
                                       1999        2000        2001
-------------------------------------------------------------------
<S>                                  <C>        <C>         <C>
Gain on foreign exchange             $  918     $ 1,072     $ 5,816
transactions
Others                                   72         399         990
-------------------------------------------------------------------
Other income                         $  990     $ 1,471     $ 6,806
===================================================================
</TABLE>

h)  Other expenses

Other expenses consist of:

<TABLE>
<CAPTION>
                                           Years ended March 31
                                       ----------------------------
                                       1999        2000        2001
-------------------------------------------------------------------
<S>                                   <C>        <C>          <C>
Loss on sale of equipment             $  28      $  72        $  43
Miscellaneous expenses                    -        346          301
-------------------------------------------------------------------
Other expenses                        $  28      $ 418        $ 344
===================================================================
</TABLE>

23.  Subsequent Events:

a)   Issuance of common stock

     In the month of May 2001, the Company issued 14.5 million American
     Depository Shares (ADS) at a price of $ 9.71 per ADS. The ADS were listed
     for trading on the New York Stock Exchange ("NYSE" ticker symbol "SAY").
     The Company issued 21,75,000 ADS at the price of $9.71 per ADS on the
     exercise of 15% Greenshoe option by the Underwriters. Each ADS represents
     two equity shares of Rs.2 each fully paid up.

     In effect the Company issued a total of 16,675,000 ADS, including the
     Greenshoe option, representing 33,350,000 equity shares of Rs. 2 each fully
     paid up.

b)   Restructuring in Vision Compass, Inc.

     In April 2001, the Board of Directors of VCI approved a plan to refocus
     VCI, concentrating on several core functions. As a result, VCI announced
     that it would be reallocating its resources, which included laying off
     almost 70% of VCI's employees. Presently, Satyam does not have any plan to
     discontinue the operations of VCI. The restructuring costs are expected to
     be approximately US $750 thousand.

c)   Dividends

     On June 29, 2001, shareholders authorized payment of a cash dividend of
     US$0.009 per share amounting to US$2,654 thousand to shareholders of record
     on June 25, 2001 for equity shares issued on or prior to March 31, 2001.

d)   In August 2001, the Board of Directors of Satyam have decided to close down
     four subsidiaries--Satyam Europe Limited, Satyam Asia Pte Limited, Satyam
     Japan Limited and Dr. Millemium, Inc. The company does not believe that
     there will be any material cost associated with this exercise.
__________

                                     F-34
<PAGE>

                               INDEX TO EXHIBITS

Exhibit Number                     Documents
-------------            -------------------------------

     2.2                 Deposit Agreement

    10.1                 Consent of Independent Accounts