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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
 For
the transition period from _________ to _________
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 Date of event requiring this shell company report
 For the fiscal year ended March 31, 2006
    
    Commission file number 001-15190
 Satyam Computer Services Limited
  N/A
    
    Republic of India(Translation of Registrants Name Into English)
    
    (Jurisdiction of Incorporation or Organization)
 
 
  þ o
   þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filero
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TABLE OF CONTENTS
 SATYAM COMPUTER SERVICES LIMITED
  
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    4ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    4ITEM 3. KEY INFORMATION
    
    
    4ITEM 4. INFORMATION ON THE COMPANY
    
    
    23ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    37ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    38ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    58ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    65ITEM 8. FINANCIAL INFORMATION
    
    
    66ITEM 9. THE OFFER AND LISTING
    
    
    66ITEM 10. ADDITIONAL INFORMATION
    
    
    69ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    87ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    88ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    89ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    89ITEM 15. CONTROLS AND PROCEDURES
    
    
    89ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    89ITEM 16B. CODE OF ETHICS
    
    
    90ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    90ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    90ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES
    
    
    90ITEM 17. FINANCIAL STATEMENTS
    
    
    91ITEM 18. FINANCIAL STATEMENTS
    
    
    91ITEM 19. EXHIBITS
    
    
    91Ex-4.2 Associate Stock Option Plan B as amended and restated.Ex-4.3 Associate Stock Option Plan ADS as amended and restated.EX-8.1 List of SubsidiariesEx-10.1 Consent of Price Waterhouse,Independent Registered Public Accounting Firm.Ex-12.1 Certification of Chief Executive Officer under Section 302 of the Sarbane Oxley Act.Ex-12.2 Certification of Chief Financial Officer under Section 302 of the Sarbane Oxley Act.Ex-13.1 Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act.Ex-13.2 Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act.
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CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
      FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 Selected Financial Data
  Year Ended March 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars in millions, except per share and per ADS data, or as stated otherwise)Statement of operations dataRevenues:IT services
    
    $
    1,082.7
    
    
    $
    786.7
    
    
    $
    565.1
    
    
    $
    459.2
    
    
    $
    414.5BPO
    
    
    13.6
    
    
    
    6.9
    
    
    
    1.3
    
    
    
    
    
    
    
    Total revenues
    
    
    1,096.3
    
    
    
    793.6
    
    
    
    566.4
    
    
    
    459.2
    
    
    
    414.5Cost of revenues(1)
    
    
    (689.0
    )
    
    
    (506.8
    )
    
    
    (343.6
    )
    
    
    (275.2
    )
    
    
    (240.3
    )Gross profit
    
    
    407.3
    
    
    
    286.8
    
    
    
    222.8
    
    
    
    184.0
    
    
    
    174.2Operating expenses:Selling, general and administrative expenses(2)
    
    
    (187.6
    )
    
    
    (124.3
    )
    
    
    (101.7
    )
    
    
    (116.9
    )
    
    
    (139.6
    )Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17.0
    )Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81.1
    )Impairment of other non-marketable investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.3
    )
    
    
    Reversal of put option charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.8
    
    
    
    Total operating expenses
    
    
    (187.6
    )
    
    
    (124.3
    )
    
    
    (101.7
    )
    
    
    (100.4
    )
    
    
    (237.7
    )Operating income/(loss)
    
    
    219.7
    
    
    
    162.5
    
    
    
    121.1
    
    
    
    83.6
    
    
    
    (63.5
    )Interest income
    
    
    26.3
    
    
    
    22.3
    
    
    
    20.3
    
    
    
    7.2
    
    
    
    3.8Interest expense
    
    
    (1.3
    )
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.8
    )
    
    
    (2.9
    )Gain on sale of shares in associated companies/ other investments
    
    
    43.6
    
    
    
    
    
    
    
    2.7
    
    
    
    0.8
    
    
    
    45.6Gain/(loss) on foreign exchange transactions
    
    
    0.3
    
    
    
    (4.6
    )
    
    
    (8.9
    )
    
    
    (4.8
    )
    
    
    10.8Other income/(expenses), net
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    2.3
    
    
    
    (1.7
    )
    
    
    1.3Income/(loss) before income taxes, minority interest and equity in
earnings/ (loss) of associated companies
    
    
    287.8
    
    
    
    180.2
    
    
    
    137.0
    
    
    
    84.3
    
    
    
    (4.9
    )Income taxes
    
    
    (37.7
    )
    
    
    (25.3
    )
    
    
    (22.5
    )
    
    
    (9.8
    )
    
    
    (0.7
    )Minority interest
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    11.1
    
    
    
    73.4Income before equity in earnings/(losses) of associated companies
    
    
    250.2
    
    
    
    154.9
    
    
    
    114.5
    
    
    
    85.6
    
    
    
    67.8Equity in earnings/ (losses) of associated companies, net of taxes
    
    
    (0.8
    )
    
    
    (1.1
    )
    
    
    (2.6
    )
    
    
    (3.3
    )
    
    
    (25.4
    )Net income (loss)
    
    $
    249.4
    
    
    $
    153.8
    
    
    $
    111.9
    
    
    $
    82.3
    
    
    $
    42.4
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Year Ended March 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(dollars in millions, except per share and per ADS data, or as stated otherwise)Earnings (loss) per share:Basic
    
    $
    0.78
    
    
    $
    0.49
    
    
    $
    0.36
    
    
    $
    0.26
    
    
    $
    0.14Diluted
    
    
    0.75
    
    
    
    0.48
    
    
    
    0.35
    
    
    
    0.26
    
    
    
    0.14Earnings (loss) per ADS:Basic
    
    
    1.56
    
    
    
    0.98
    
    
    
    0.71
    
    
    
    0.53
    
    
    
    0.28Diluted
    
    
    1.50
    
    
    
    0.96
    
    
    
    0.71
    
    
    
    0.52
    
    
    
    0.28Weighted average equity shares used in computing earnings per
shares (in millions):Basic
    
    
    320.6
    
    
    
    316.2
    
    
    
    313.2
    
    
    
    311.8
    
    
    
    305.8Diluted
    
    
    331.4
    
    
    
    323.6
    
    
    
    317.1
    
    
    
    318.7
    
    
    
    307.1Weighted average equity shares used in computing earnings per ADS:Basic
    
    
    160.3
    
    
    
    158.1
    
    
    
    156.6
    
    
    
    155.9
    
    
    
    152.9Diluted
    
    
    165.7
    
    
    
    161.8
    
    
    
    158.5
    
    
    
    159.3
    
    
    
    153.6Cash dividend per equity share
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.08
    
    
    
    0.03
    
    
    
    0.02Cash dividend per ADS
    
    
    0.22
    
    
    
    0.24
    
    
    
    0.17
    
    
    
    0.06
    
    
    
    0.02
 
 (1)
    
    Inclusive of stock-based compensation expense of $Nil, $0.8 million, $0.9
million, $1.6 million and $7.2 million in fiscal 2006, 2005, 2004, 2003 and 2002 respectively.(2)
    
    Inclusive of stock-based compensation expense of $0.8 million, $1.1 million, $0.8
million, $2.9 million and $3.6 million in fiscal 2006, 2005, 2004, 2003 and 2002 respectively. As at March 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(dollars in millions)Balance sheet dataCash and cash equivalents
    
    $
    292.8
    
    
    $
    129.8
    
    
    $
    86.7
    
    
    $
    62.2
    
    
    $
    243.4Investments in bank deposits
    
    
    403.7
    
    
    
    411.6
    
    
    
    332.1
    
    
    
    259.4
    
    
    
    Total assets
    
    
    1,181.2
    
    
    
    884.1
    
    
    
    713.8
    
    
    
    561.7
    
    
    
    515.6Total long-term debt, excluding current portion
    
    
    17.9
    
    
    
    1.2
    
    
    
    1.8
    
    
    
    1.7
    
    
    
    2.7Preferred stock of subsidiary
    
    
    20.0
    
    
    
    20.0
    
    
    
    10.0
    
    
    
    
    
    
    
    Total shareholders equity
    
    
    994.4
    
    
    
    767.9
    
    
    
    633.9
    
    
    
    487.7
    
    
    
    394.4Capital stock(1)
    
    
    481.5
    
    
    
    449.5
    
    
    
    431.7
    
    
    
    421.6
    
    
    
    419.1
 
 (1)
    
    Includes common stock and additional paid-in capital but excludes shares
held by Satyam Associate Trust. SFAS 142 pro forma disclosure
 Goodwill and Other Intangible Assets.
 Year Ended March 31,2002(dollars in millionsexcept per shareamount)Reported net income
    
    $
    42.4Add:Goodwill amortization
    
    
    17.0Amortization of excess of cost of investment
over equity in net assets of associated companies
    
    
    3.6Adjusted net income
    
    $
    63.0Basic and diluted earnings per share:As reported
    
    $
    0.14As adjusted
    
    
    0.21
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Risk Factors
 Any investment in our ADSs involves a high degree of risk. You should carefully consider 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
 Our revenues and profitability are difficult to predict and can vary significantly from period to
period which could cause our share price to decline significantly.
  Any inability to manage our rapid growth could disrupt our business and reduce our profitability.
   
    
    recruiting and retaining sufficiently skilled technical, marketing and management
personnel;
    
    providing adequate training and supervision to maintain our high quality standards;
    
    preserving our culture and values and our entrepreneurial environment; and
    
    developing and improving our internal administrative infrastructure, particularly our
financial, operational, communications and other internal systems.
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The current economic environment, pricing pressure and rising wages in India have negatively
impacted our revenues and operating results.
   Our business will suffer if we fail to anticipate and develop new services and enhance existing
services in order to keep pace with rapid changes in technology and the industries on which we
focus.
  Our revenues are highly dependent on customers primarily located in the United States and
customers concentrated in certain industries, and economic slowdowns or factors that affect the
economic health of the United States and our customers industries may affect our business.
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We face intense competition in the IT services and BPO markets which could prevent us from
attracting and retaining customers and could reduce our revenues.
  
    
    consulting firms such as Accenture, BearingPoint, Capgemini and Deloitte Consulting;
    
    divisions of large multinational technology firms such as Hewlett-Packard and IBM;
    
    IT outsourcing firms such as Computer Sciences Corporation, Electronic Data Systems
and IBM Global Services; and
    
    offshore IT services firms such as Infosys Technologies Limited, Tata Consultancy
Services Limited and Wipro Limited.
    Our revenues are highly dependent upon a small number of customers.
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Our fixed-price contracts expose us to additional risks, many of which are beyond our control,
which may reduce the profitability of these contracts.
  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.
  A number of our customer contracts are conditioned upon our performance, which, if unsatisfactory,
could result in less revenues than previously anticipated.
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Some of our multi-year customer contracts contain certain provisions which, if triggered, could
result in lower future revenues and profitability under the contract.
    We may be unable to attract skilled professionals in the competitive labor market.
  We dedicate significant resources to develop international operations which may be more difficult
to manage and operate.
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We are investing substantial cash assets in new facilities and physical infrastructure and our
profitability could be reduced if our business does not grow proportionately.
  Restrictions on immigration may affect our ability to compete for and provide services to
customers in the United States and in other countries, which could hamper our growth and cause our
revenues to decline.
   We may engage in acquisitions, strategic investments, strategic partnerships or alliances or other
ventures that may or may not be successful.
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System failure could disrupt our business.
  We may be liable to our customers for damages caused by disclosure of confidential information or
system failure.
  Our success depends in large part upon our management team and key personnel and our ability to
attract and retain them.
  Our insiders are significant shareholders, are able to control the election of our board and may
have interests which conflict with those of our shareholders or holders of our ADSs.
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Our financial results are impacted by the financial results of entities that we do not control.
  The value of our interest in our subsidiaries may decline.
  Stock-based compensation expenses may significantly reduce our net income under U.S. GAAP.
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Our earnings will be adversely affected once we change our accounting policies with respect to the
expensing of stock options.
 Accounting for Stock
Issued to Employees, , Accounting for Stock-Based Compensation. Share-Based Payment, an amendment of FASB Statements
No. 123 and 95
 Compliance with new and changing corporate governance and public disclosure requirements adds
uncertainty to our compliance policies and increases our costs of compliance.
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As a foreign private issuer, we are subject to different U.S. securities laws and rules than a
domestic issuer, which may, among other things, limit the information available to holders of our
securities.
  Terrorist attacks or a war could adversely affect our business, results of operations and
financial condition.
  Risks Related to Investments in Indian Companies
  The Government of India has recently taken actions to curtail or eliminate tax benefits that we
have historically benefited from.
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Foreign investment restrictions under Indian law may adversely impact the value of our ADSs,
including, for example, restrictions that limit your ability to reconvert equity shares into ADSs,
which may cause our equity shares to trade at a discount or premium to the market price of our
ADSs.
    Regional conflicts or natural disasters in South Asia and elsewhere could adversely affect the
Indian economy, disrupt our operations and cause our business to suffer.
  Political instability could seriously harm business and economic conditions in India generally and
our business in particular.
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Currency exchange rate fluctuations may affect the value of our ADSs and our financial condition.
     Our ability to acquire companies organized outside India as part of our growth strategy depends on
the approval of the Government of India and/or the RBI and failure to obtain this approval could
negatively impact our business.
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If we are unable to protect our intellectual property rights, or if we infringe on the
intellectual property rights of others, our business may be harmed.
      Indian laws limit our ability to raise capital outside India and may limit the ability of others
to acquire us, which could prevent us from operating our business or entering into a transaction
that is in the best interests of our shareholders.
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Conditions in the Indian securities market may affect the price or liquidity of our equity shares
and our ADSs.
  High
    
    LowFiscal Year
    
    Rs
    
    $ equivalent
    
    Rs.
    
    $ equivalent2001
    
    
    902.0
    
    
    
    19.3
    
    
    
    179.0
    
    
    
    3.82002
    
    
    331.2
    
    
    
    6.8
    
    
    
    111.0
    
    
    
    2.32003
    
    
    291.9
    
    
    
    6.1
    
    
    
    175.1
    
    
    
    3.72004
    
    
    391.0
    
    
    
    9.0
    
    
    
    127.3
    
    
    
    2.92005
    
    
    442.0
    
    
    
    10.1
    
    
    
    250.0
    
    
    
    5.72006
    
    
    862.0
    
    
    
    19.4
    
    
    
    364.4
    
    
    
    8.42007 (Through April 21, 2006)
    
    
    890.0
    
    
    
    20.0
    
    
    
    755.1
    
    
    
    17.0
 ,
  It may be difficult for you to enforce any judgment obtained in the United States against us or
our affiliates.
  (i)
    
    effect service of process upon us outside India or these persons outside the
jurisdiction of their residence; or(ii)
    
    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.
  You may be subject to Indian taxes arising out of capital gains on the sale of the underlying
equity shares.
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There may be less company information available in Indian securities markets than securities
markets in other countries.
  Risk Related to our ADSs and our Trading Market
 Historically, our ADSs have traded at a significant premium to the trading prices of our
underlying equity shares, a situation which may not continue.
  You may be restricted in your ability to exercise preemptive rights under Indian law and thereby
may suffer future dilution of your ownership position.
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Holders of ADSs may be restricted in their ability to exercise voting rights.
    An active or liquid trading market for our ADSs is not assured.
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The future sales of securities by our company or existing shareholders may harm the price of our
ADSs or our equity shares.
  Forward-looking statements contained in this Annual Report may not be realized.
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ITEM 4. INFORMATION ON THE COMPANY
 Business Overview
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Industry Overview
 Global IT Services Overview
   
    
    Increased importance of IT to businesses.In todays increasingly competitive
business environment, companies have become dependent on information 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 information systems continually
become more complex with the use of multiple applications and rapidly changing
technologies, companies are increasingly turning to external IT service providers to
develop and implement new technologies and integrate them with existing applications in
which they may have already made considerable investments.
    
    Impact of the Internet and other new technologies on
business. Businesses are
increasingly using the Internet to interact with new and existing customers and create new
revenue opportunities. Businesses conducted electronically over the Internet extend beyond
Internet-based applications to include packaged software tools, such as customer and
supply chain management software, that need to be integrated with a companys enterprise
systems. These initiatives are often large and difficult to manage in-house and need to
keep pace with constantly evolving business processes and technological innovations
leading to demand for IT services companies.
    
    Managing and upgrading existing systems.Managing and upgrading existing systems has
become critical given the importance of IT and related systems to new business
initiatives. Internal IT departments often do not have the appropriate resources or
breadth of skills necessary to manage or upgrade existing systems. As a result, companies
are increasingly looking to external service providers to design, integrate, implement and
maintain their applications based on new technologies.
    
    Increasing trend towards offshore outsourcing.The increasing complexities and costs
of IT services, together with an increasing need for highly skilled technology
professionals and tightening IT budgets for companies, are driving demand for professional
IT services companies who are able to provide a cost effective, high quality,
comprehensive range of services. The offshore delivery model is enabling companies to
increasingly outsource complex assignments and generate not only cost savings in IT
services but also greater efficiencies in their business processes. In addition, companies
are increasingly using the utility computing or pay for what you use, model for
infrastructure, data- warehousing and IT system usage, which is further fueling growth in
infrastructure, network outsourcing and network management services.
 Indian IT Services Industry Overview
   
    
    High quality delivery record.Indian companies have developed high quality delivery
processes. A 2004 NASSCOM survey of international quality standards of the top 275 Indian
IT services companies reported that 195 companies had acquired International Standards
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Organization, or ISO, 9000 quality certification. According to NASSCOM, during 2004, 74
Indian companies received a level five assessment under 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.
    
    Large supply of English-speaking IT professionals.We believe that India ranks second
only to the United States as the country with the largest population of English-speaking
IT professionals. According to the NASSCOM Strategic Review 2004, educational institutes
in India produce approximately 290,000 engineering students and 139,000 computer software
engineers each year. Given the shortage of technical labor in the United States and other
developed economies, the availability of technically skilled personnel is proving to be a
competitive advantage for Indian IT service companies.
    
    Significant cost advantage.We believe that the cost of employing IT professionals in
India is significantly lower than in developed countries such as the United States. The
use of high quality, low cost resources provides a significant opportunity for companies
to realize cost savings by offshoring IT services to India.
 Trends
  
    
    Enhanced expectations.Increasingly, companies are expecting more value from their IT
service providers than just the traditional cost advantages derived by offshoring the
delivery of IT services. Companies increasingly prefer service providers that can provide
strategic advice related to designing and increasing efficiencies of business processes
and also assist in implementing their recommendations. Also, service providers with strong
industry expertise are favored over those who can only provide strong technical skills.
    
    Large, multi-year, end-to-end contracts.Companies are increasingly looking for IT
service providers that can provide end-to-end solutions over a long period of time. In
addition, companies, which have a presence across various geographies, need IT support on
a global scale and often seek a single service provider that can offer a comprehensive
range of services on a long-term basis across the world, and understand and integrate a
wide spectrum of emerging technologies with existing systems.
    
    Relationships with customers key senior management.As outsourcing contracts
increasingly gain strategic importance to businesses, customers senior management teams
have become more involved in outsourcing contract negotiation and monitoring. As a result,
IT service providers need to ensure that their senior account managers develop strong and
lasting working relationships with customers senior management.
    
    Performance measurement.Companies are increasingly demanding transparency in
performance measurement. IT service providers with their own well developed benchmarks,
frameworks and models to measure performance or demonstrate potential benefits are likely
to have significant advantage over their competitors who offer more generic IT services.
 Our Competitive Strengths
  
    
    Comprehensive range of services combined with specialized industry expertise.Our
comprehensive range of end-to-end technology-based services encompasses application
development and maintenance services, consulting and enterprise business solutions,
extended engineering solutions, infrastructure management services and BPO services. Our
comprehensive range of services enables us to broaden our dialogue with potential
customers, deepen our relationships with existing customers and diversify our revenue
base. Our services are built on a foundation of a rich understanding of the industries in
which our customers operate and the underlying technologies that drive those industries.
Our industry-
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focused business units such as manufacturing, banking and financial services, insurance,
TIMES, healthcare, retail and transportation, allow us to understand the strategic issues
facing our customers. At the Gartner Global Sourcing Summit 2004, we were adjudged the
winner of the Risk Management Award, a prestigious award that recognizes effectiveness in
managing risk and were also declared a joint winner of the Solution Delivery Award which
recognizes creativity in enhancing customers business competitiveness. The voting for
these awards was done solely by the business executives attending the summit. Our dedicated
technology competency centers, which we refer to as centers of excellence, track trends
in key technologies, which facilitates creation of solutions based on these technologies.
Our centers of excellence work closely with the industry-focused business units in areas
such as business intelligence, data warehousing, customer relationship management, product
life cycle management and supply chain management to ensure that our services fulfill our
customers business objectives and IT requirements.
    
    Flexible, highly evolved delivery model.We provide our services through 20 centers
located in Australia, Canada, China, Hungary, India, Japan, Malaysia, Singapore, United
Arab Emirates, United Kingdom and United States and our onsite teams operating at our
customers premises. Over the past decade, we have made substantial investments in our
infrastructure, processes and systems allowing us to evolve our global delivery model to
effectively integrate offshore, offsite, nearshore and onsite services and perform a
greater volume of work at our offshore development centers. This delivery model seeks to
provide customers with seamless solutions in reduced timeframes, enabling them to achieve
operating efficiencies and realize significant cost savings. It also enables us to deliver
the most appropriate mix of resources and services on a 24/7 basis. Furthermore, our
robust delivery model is flexible, so that it can be adapted to respond to customer
objectives relating to critical issues such as scalability and security. We continue to
evolve our delivery model and believe that our customer-oriented approach and ongoing
refinements represent an important competitive advantage.
    
    Established leadership position in consulting and enterprise business solutions.Our
consulting and enterprise business solutions help customers optimize their operating
costs, enhance the efficiency of their business processes and improve their overall
competitiveness. These solutions span the development, implementation, integration and
maintenance of various enterprise-wide applications. Our solutions are enhanced by our
strategic alliances with more than 60 leading technology providers such as SAP and Oracle.
Our highly evolved delivery model, coupled with our industry expertise and center of
excellence-driven technology competencies, allows us to provide customers with a value
proposition in consulting and enterprise solutions. Over the past few years, we have made
strategic investments to augment our capabilities in this area which is reflected in the
growing revenues from this business. During fiscal 2006 and fiscal 2005, 39.2% and 34.3%
respectively, of our revenues, was generated from consulting and enterprise business
solutions.
    
    Strong relationships with blue chip customers.We have long-standing relationships
with large multinational corporations built on our successful execution of prior
engagements. We believe we have significantly more Fortune Global 500 or Fortune U.S. 500
corporations as customers, relative to scale of revenue, as compared to other leading
Indian IT services companies. As of March 31, 2006, 156 of our 506 customers were Fortune
Global 500 or Fortune U.S. 500 corporations. Our track record of delivering comprehensive
solutions based on demonstrated industry and technology expertise has helped in forging
strong relationships with our major customers and gaining increased business from them. We
have a history of high customer retention and derive a significant proportion of our
revenue from repeat business. During fiscal 2006 and fiscal 2005, 90.6% and 92.1%
respectively, of our revenues, was generated from existing customers.
    
    Track record of high quality execution.We are committed to achieving
operational excellence in our processes, people
and infrastructure. Our quality assurance programs form an integral part of our project
management methodology and
seek to ensure that we consistently deliver high quality services to our customers.
For instance, we have a company-wide quality management system, which satisfies the ISO
9001:2000 TickIT standard. We have been assessed at CMMI Level 5, the highest level
possible, and have implemented the Six Sigma processes for application development and
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maintenance. We have also achieved domain specific certifications like AS9100/EN9100 for ES
group  Aerospace domain, PCMM Level 5 Assessment for Pune Location, S15000/ISO20000
certification for N&S across India and BS15000 Global Certification for IMS business.We have a large pool of highly skilled, well-trained technical associates spanning 60
nationalities. As of March 31, 2006, we employed 26,711 technical associates in the IT
services area, of which 51% had bachelors degrees in engineering and 4% had masters
degrees in engineering, technology or computer applications. Each new technical associate
participates in an intensive 12 week initial training program and a minimum of 40 hours
training each year on development and leadership. We continue to develop our
infrastructure to make it more resilient. For instance, we have implemented ISO 27001, the
internationally recognized global upgrade from BS7799 standard, which delivers a high
level of information security to protect our customers intellectual property. We have
also established a comprehensive disaster recovery and business continuity model to ensure
uninterrupted service availability from our global delivery network. We constantly
benchmark our processes, people and infrastructure against globally recognized standards.
    
    Culture of innovation.We have a history of innovation that is facilitated by our
entrepreneurial culture and our managements willingness to make strategic investments in
growth markets. We believe we were one of the pioneers in the delivery of India-based IT
services. For example, we believe that we were among the earliest Indian IT service
companies to set up in 1992 a dedicated satellite link between a customers facilities and
our India operations. Our technology laboratories continue to develop and bring to market
new solutions based on new technologies. For instance, we are one of the few companies in
India to offer utility and grid computing services to customers. We have also been
innovative in our internal organization and have introduced industry leading practices in
hiring, resource planning and knowledge sharing. These accomplishments and initiatives
have further enhanced our brand and reputation in the marketplace.
 Our Growth Strategy
  
    
    Building on our long-standing customer relationships to cross-sell our comprehensive
range of services.Our goal is to build long-term sustainable business relationships with
our customers to generate consistent revenues. We plan to continue to expand the scope and
range of services provided to our existing customers by continuing to build our expertise
in major industries and extending our capabilities into new and emerging technologies. For
example, we intend to capitalize on the BPO services offered by Nipuna by cross-selling
these services to our existing customers, which will enable us to secure a higher share of
our customers spending. To further strengthen our relationships and broaden the scope and
range of services we provide to existing customers, our senior corporate executives have
specific account management and relationship responsibilities. We have successfully
established strong relationships with our customers chief information officers and are
continuing to strengthen our relationships with other key members of our customers
management teams. These strong relationships have helped us to better understand our
customers business needs and enabled us to provide effective solutions to meet these
needs.
    
    Continuing to focus on enterprise-wide business solutions and high quality value-added
services.To better serve our customers in key industry segments, we intend to continue
to focus on providing end-to-end enterprise-wide business solutions and increasing our
share of value-added services, such as data warehousing and business intelligence,
application portfolio management, process and quality consulting, business performance
management, industry and regulatory specific solutions and grid computing solutions. To
continue to differentiate our services and achieve recognition as a leading global
provider of comprehensive IT services, we intend to continually invest in research and
development and broaden our range of solution offerings as new technologies become
available.
    
    Expanding our presence in existing markets and penetrating new geographic markets.We
plan to expand our presence in our existing markets and establish a presence in new
geographic markets throughout North America, Europe, Latin America, and the Asia-Pacific
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region. We intend to accomplish this by increasing our brand visibility and leveraging our
global development centers to extend our services to customers located in these
geographies. We also plan to continue to hire local associates to staff and manage our
global development centers and to strengthen our sales and marketing functions to
facilitate building strong relationships. We believe that the use of locally hired
technical associates and managers working from our global development centers will enable
us to increase our market share in the local markets and compete effectively by combining
local expertise with our global delivery capabilities. We expect that a wider geographical
presence will also facilitate revenue generation in multiple currencies, reduce our
exposure to volatility in a particular currency, and help hedge against margin erosion due
to currency fluctuations.
    
    Continuing to enhance our industry expertise.We aim to have an in-depth
understanding of targeted industries including manufacturing, banking and financial
services, insurance, TIMES, healthcare, retail and transportation, which will help us
identify and understand customer needs and proactively design and offer customized IT
solutions to address those needs. By focusing on targeted industries, we believe we can
develop industry-specific solutions and services that can be leveraged effectively to
deliver services within the same industry, thereby lowering our cost of delivering those
services. We intend to enhance our business knowledge and competencies in the various
industries that we service by hiring additional specialists with deep industry knowledge
and 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 performance-linked incentives. We also intend
to continue to devote significant resources to train our technical associates in a variety
of software languages and computer platforms through our Satyam Learning Center.
    
    Enhancing our capabilities through technology alliances and acquisitions.We intend
to continue to explore the formation of new alliances as well as strengthen existing
partnerships with key technology vendors to enable us to leverage our partners strengths.
We will also consider acquisitions to gain access to specific technologies and exploit
synergies with our existing business. We regularly engage in discussions and negotiations
in the ordinary course of our business relating to potential investment, technology
alliances and acquisitions that would achieve these objectives.
 IT Service Offerings
  Application development and maintenance services
 Application development
  Application maintenance
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Consulting and enterprise business solutions
  Extended engineering solutions
  Infrastructure management services
  Delivery of IT Services
  Offshore centers
   29




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Offsite centers
  Nearshore centers
   Onsite teams
  Quality and Project Management
   30




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Customers
    Fiscal2006
    
    2005
    
    2004No. of $1+ million customers
    
    
    101
    
    
    
    109
    
    
    
    81No. of $5+ million customers
    
    
    22
    
    
    
    30
    
    
    
    24No. of $10+ million customers
    
    
    23
    
    
    
    19
    
    
    
    9
   Fiscal2006
    
    2005
    
    2004Manufacturing
    
    
    28.6
    %
    
    
    29.2
    %
    
    
    32.0
    %Banking and Finance
    
    
    18.5
    
    
    
    17.8
    
    
    
    18.3Insurance
    
    
    8.8
    
    
    
    11.4
    
    
    
    13.7TIMES
    
    
    18.4
    
    
    
    17.3
    
    
    
    13.5Healthcare
    
    
    6.1
    
    
    
    6.0
    
    
    
    6.0Retail
    
    
    3.1
    
    
    
    2.8
    
    
    
    1.9Transportation
    
    
    2.6
    
    
    
    2.7
    
    
    
    2.1Others
    
    
    13.9
    
    
    
    12.8
    
    
    
    12.5Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Sales and Marketing
  31




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BPO Services and Nipuna
     Claims administration and transaction processing services
  Customer care services
   Engineering services
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Strategic Alliances
   Employees
   Recruiting
  Learning and Developmental Training
  33




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##### Table of Contents



Retention
    Competition
  
    
    consulting firms such as Accenture, BearingPoint, Capgemini and Deloitte Consulting;
    
    divisions of large multinational technology firms such as Hewlett-Packard and IBM;
    
    IT outsourcing firms such as Computer Sciences Corporation, Electronic Data Systems
and IBM Global Services; and
    
    offshore IT services firms such as Infosys Technologies Limited, Tata Consultancy
Services Limited and Wipro Limited.
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Communications Infrastructure
      Facilities
      35




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Intellectual Property
  Seasonality
  Government Regulation
   Research and Development
  36




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ITEM 4A. UNRESOLVED STAFF COMMENTS
  37




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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Overview
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
    
    IT services:We provide a comprehensive range of IT services,
including application development and maintenance, consulting and
enterprise business solutions, extended engineering solutions, and
infrastructure management services. We seek to be the single service
provider capable of servicing all of our customers IT requirements.
Our consulting and enterprise business solutions includes services in
the area of enterprise resource planning, customer relationship
management and supply chain management, data warehousing and business
intelligence, knowledge management, document management and enterprise
application integration. We also assist our customers in making their
existing computing systems accessible over the Internet. The segment
information for the year ended March 31, 2006 includes the results of
Citisoft and Knowledge Dynamics which were acquired during the year.
    
    BPO:We provide outsourced BPO services in areas such as human
resources, finance and accounting, customer care (such as voice, email
and chat) besides also providing industry-specific transaction
processing services. We target our BPO services at the insurance,
healthcare, banking and financial services, transportation, tourism,
manufacturing, automotive, telecommunications, media, utilities and
retail industries. Revenues from this business segment currently do
not constitute a significant proportion of our total revenues;
however, we anticipate that this proportion will increase over time.
Our BPO services are offered through our majority-owned subsidiary,
Nipuna. As part of the investor rights and securities subscription
agreements which we have entered into with Nipunas two other
investors, we have agreed not to compete with Nipuna. Pursuant to
these agreements, we and our affiliates are restricted from engaging
in activities that are or could directly or indirectly be competitive
with the business of Nipuna. Such activities include among others
providing BPO, soliciting existing or prospective customers of Nipuna
to obtain the services offered by Nipuna from other service providers
and investing in companies engaged in the same or similar business as
Nipuna. These non-compete restrictions apply until the investors
redeem all of their preference shares in Nipuna or their equity
interest in Nipuna falls below 5% after an initial public offering.
 Revenues
   Year ended March 31,2006
    
    
    2005
    
    
    2004Segment
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in millions, except percentages)IT
services
    
    $
    1,082.7
    
    
    
    98.8
    %
    
    $
    786.7
    
    
    
    99.1
    %
    
    $
    565.1
    
    
    
    99.8
    %BPO
    
    
    13.6
    
    
    
    1.2
    %
    
    
    6.9
    
    
    
    0.9
    
    
    
    1.3
    
    
    
    0.2Total
    
    $
    1,096.3
    
    
    
    100.0
    %
    
    $
    793.6
    
    
    
    100.0
    %
    
    $
    566.4
    
    
    
    100.0
    %
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Revenues by technology
  Year ended March 31,2006
    
    
    2005
    
    
    2004Technology type
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in millions, except percentages)Application development and maintenance
services
    
    $
    541.4
    
    
    
    50.0
    %
    
    $
    429.5
    
    
    
    54.6
    %
    
    $
    339.2
    
    
    
    60.1
    %Consulting and enterprise business
solutions
    
    
    429.5
    
    
    
    39.7
    
    
    
    269.7
    
    
    
    34.3
    
    
    
    179.9
    
    
    
    31.8Extended engineering solutions
    
    
    70.2
    
    
    
    6.5
    
    
    
    55.2
    
    
    
    7.0
    
    
    
    20.9
    
    
    
    3.7Infrastructure management services
    
    
    41.6
    
    
    
    3.8
    
    
    
    32.3
    
    
    
    4.1
    
    
    
    25.1
    
    
    
    4.4Total
    
    $
    1,082.7
    
    
    
    100.0
    %
    
    $
    786.7
    
    
    
    100.0
    %
    
    $
    565.1
    
    
    
    100.0
    %
 Revenues by contract type
   Year ended March 31,2006
    
    
    2005
    
    
    2004Contract type
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in millions, except percentages)Time-and-material
basis
    
    $
    702.8
    
    
    
    64.9
    %
    
    $
    517.3
    
    
    
    65.8
    %
    
    $
    386.2
    
    
    
    68.3
    %Fixed-price basis
    
    
    379.9
    
    
    
    35.1
    
    
    
    269.4
    
    
    
    34.2
    
    
    
    178.9
    
    
    
    31.7Total
    
    $
    1,082.7
    
    
    
    100.0
    %
    
    $
    786.7
    
    
    
    100.0
    %
    
    $
    565.1
    
    
    
    100.0
    %
 Revenues based on offshore and onsite/offsite
    40




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Year ended March 31,2006
    
    
    2005
    
    
    2004Location
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in millions, except percentages)Offshore
    
    $
    496.0
    
    
    
    45.8
    %
    
    $
    327.1
    
    
    
    41.6
    %
    
    $
    248.3
    
    
    
    43.9
    %Onsite
/Offsite
    
    
    586.7
    
    
    
    54.2
    
    
    
    459.6
    
    
    
    58.4
    
    
    
    316.8
    
    
    
    56.1Total
    
    $
    1,082.7
    
    
    
    100.0
    %
    
    $
    786.7
    
    
    
    100.0
    %
    
    $
    565.1
    
    
    
    100.0
    %
 Revenues by top customers
  Revenues based on customer location
   Year ended March 31,2006
    
    
    2005
    
    
    2004Geographiclocation
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in millions, except percentages)North America
    
    $
    699.0
    
    
    
    64.6
    %
    
    $
    538.2
    
    
    
    68.4
    %
    
    $
    414.0
    
    
    
    73.3
    %Europe
    
    
    204.8
    
    
    
    18.9
    
    
    
    130.7
    
    
    
    16.6
    
    
    
    77.5
    
    
    
    13.7Japan
    
    
    15.5
    
    
    
    1.4
    
    
    
    13.9
    
    
    
    1.8
    
    
    
    11.1
    
    
    
    2.0India
    
    
    45.1
    
    
    
    4.2
    
    
    
    25.5
    
    
    
    3.2
    
    
    
    16.0
    
    
    
    2.8Rest of the world
    
    
    118.3
    
    
    
    10.9
    
    
    
    78.4
    
    
    
    10.0
    
    
    
    46.5
    
    
    
    8.2Total
    
    $
    1,082.7
    
    
    
    100.0
    %
    
    $
    786.7
    
    
    
    100.0
    %
    
    $
    565.1
    
    
    
    100.0
    %
 Expenses
 Cost of revenues
    Selling, general and administrative expenses
  41




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Subsidiaries
  Citisoft
      42




---



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US$ inmillionsPurchase price
    
    $
    17.4Allocated to:Net current assets
    
    $
    2.2Tangible assets
    
    
    0.3Customer Contracts related intangibles
    
    
    0.8Customer relationship related intangibles
    
    
    5.4Trade name
    
    
    0.7Goodwill
    
    
    10.3Deferred tax liability
    
    
    (2.3
    )Total
    
    $
    17.4
  Knowledge Dynamics
    US$ inmillionsPurchase price
    
    $
    3.3Allocated to:Net current assets
    
    $
    0.5Customer Contracts and Related
Relationships
    
    
    1.0Trade name
    
    
    0.1Goodwill
    
    
    2.1Deferred tax liability
    
    
    (0.4
    )Total
    
    $
    3.3
 Associate  Sify
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Income Taxes
   44




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Results of Operations
  Year ended March 31,2006
    
    
    2005
    
    
    2004Statement of Operations data:
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(dollars in millions)Revenues:IT services
    
    $
    1,083.5
    
    
    
    98.8
    %
    
    $
    787.4
    
    
    
    99.2
    %
    
    $
    565.6
    
    
    
    99.9
    %BPO
    
    
    19.9
    
    
    
    1.8
    
    
    
    10.0
    
    
    
    1.3
    
    
    
    2.4
    
    
    
    0.4Intersegment
    
    
    (7.1
    )
    
    
    (0.6
    )
    
    
    (3.8
    )
    
    
    (0.5
    )
    
    
    (1.6
    )
    
    
    (0.3
    )Total revenues
    
    
    1,096.3
    
    
    
    100.0
    
    
    
    793.6
    
    
    
    100.0
    
    
    
    566.4
    
    
    
    100.0Cost of
revenues:(1)IT services
    
    
    (678.1
    )
    
    
    (61.9
    )
    
    
    (502.2
    )
    
    
    (63.3
    )
    
    
    (343.1
    )
    
    
    (60.6
    )BPO
    
    
    (17.6
    )
    
    
    (1.6
    )
    
    
    (7.9
    )
    
    
    (1.0
    )
    
    
    (1.9
    )
    
    
    (0.3
    )Intersegment
    
    
    6.7
    
    
    
    0.6
    
    
    
    3.3
    
    
    
    0.4
    
    
    
    1.4
    
    
    
    0.2Total cost of revenues
    
    
    (689.0
    )
    
    
    (62.8
    )
    
    
    (506.8
    )
    
    
    (63.9)
    
    
    
    (343.6
    )
    
    
    (60.7
    )Gross profit:IT services
    
    
    405.4
    
    
    
    37.0
    
    
    
    285.2
    
    
    
    35.9
    
    
    
    222.5
    
    
    
    39.3BPO
    
    
    2.3
    
    
    
    0.2
    
    
    
    2.1
    
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.1Intersegment
    
    
    (0.4
    )
    
    
    (0.0
    )
    
    
    (0.5
    )
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.0
    )Total gross profit
    
    
    407.3
    
    
    
    37.2
    
    
    
    286.8
    
    
    
    36.1
    
    
    
    222.8
    
    
    
    39.3Operating expenses:Selling, general and administrative expenses:(2)IT services
    
    
    (176.8
    )
    
    
    (16.1
    )
    
    
    (113.4
    )
    
    
    (14.3
    )
    
    
    (97.3
    )
    
    
    (17.2
    )BPO
    
    
    (11.2
    )
    
    
    (1.0
    )
    
    
    (11.4
    )
    
    
    (1.4
    )
    
    
    (4.5
    )
    
    
    (0.8
    )Intersegment
    
    
    0.4
    
    
    
    0.0
    
    
    
    0.5
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.0Total selling, general and administrative expenses
    
    
    (187.6
    )
    
    
    (17.1
    )
    
    
    (124.3
    )
    
    
    (15.7
    )
    
    
    (101.6
    )
    
    
    (17.9
    )Operating income/(loss):IT services
    
    
    228.6
    
    
    
    20.9
    
    
    
    171.8
    
    
    
    21.7
    
    
    
    125.2
    
    
    
    22.1BPO
    
    
    (8.9
    )
    
    
    (0.8
    )
    
    
    (9.3
    )
    
    
    (1.2
    )
    
    
    (4.1
    )
    
    
    (0.7
    )Intersegment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating income/(loss)
    
    
    219.7
    
    
    
    20.0
    
    
    
    162.5
    
    
    
    20.5
    
    
    
    121.1
    
    
    
    21.4Interest income
    
    
    26.3
    
    
    
    2.4
    
    
    
    22.3
    
    
    
    2.8
    
    
    
    20.3
    
    
    
    3.6Interest expense
    
    
    (1.3
    )
    
    
    (0.1
    )
    
    
    (0.5
    )
    
    
    (0.1
    )
    
    
    (0.5
    )
    
    
    (0.1
    )Gain on sale of investments
    
    
    43.6
    
    
    
    4.0
    
    
    
    
    
    
    
    0.0
    
    
    
    2.7
    
    
    
    0.5Gain/ (loss) on foreign exchange transactions
    
    
    0.3
    
    
    
    0.0
    
    
    
    (4.6
    )
    
    
    (0.6
    )
    
    
    (8.9
    )
    
    
    (1.6
    )Other income/(expense), net
    
    
    (0.8
    )
    
    
    (0.1
    )
    
    
    0.4
    
    
    
    0.0
    
    
    
    2.3
    
    
    
    0.4Income before income taxes and equity in earnings/(losses)
of associated companies
    
    
    287.8
    
    
    
    26.3
    
    
    
    180.2
    
    
    
    22.7
    
    
    
    137.0
    
    
    
    24.2Income taxes
    
    
    (37.7
    )
    
    
    (3.4
    )
    
    
    (25.3
    )
    
    
    (3.2
    )
    
    
    (22.5
    )
    
    
    (4.0
    )Minority interest
    
    
    0.1
    
    
    
    0.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in earnings/(losses) of associated companies, net of
taxes
    
    
    (0.8
    )
    
    
    (0.1
    )
    
    
    (1.1
    )
    
    
    (0.1
    )
    
    
    (2.6
    )
    
    
    (0.5
    )Net income/(loss)
    
    $
    249.4
    
    
    
    22.7
    
    
    $
    153.8
    
    
    
    19.4
    
    
    $
    111.9
    
    
    
    19.8Depreciation
    
    
    30.6
    
    
    
    2.8
    
    
    
    25.0
    
    
    
    3.2
    
    
    
    24.4
    
    
    
    4.3Stock-based compensation
    
    
    0.8
    
    
    
    0.1
    
    
    
    1.9
    
    
    
    0.2
    
    
    
    1.7
    
    
    
    0.3
 
 (1)
    
    Inclusive of stock-based compensation expenses of $Nil, $0.8 million and $0.9
million during the years ended March 31, 2006, 2005 and 2004, respectively, in the IT
services segments.(2)
    
    Inclusive of stock-based compensation expenses of $0.8 million, $1.1 million and
$0.8 million during the years ended March 31, 2006, 2005 and 2004, respectively, in the IT
services segments. 45




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##### Table of Contents



Comparison of results for fiscal 2006 and fiscal 2005
 Revenues.
     Cost of Revenues.
 Selling, general and administrative expenses.
 46




---



##### Table of Contents



Operating income.
 Interest income. Interest
 Gain on sale of investments.
 Gain/(loss) on foreign exchange transactions.
 Other income/(expenses), net.
 Income taxes .
 Equity in earnings/(losses) of associated companies, net of taxes.
 Net
income.
 47




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##### Table of Contents



Comparison of results for fiscal 2005 and fiscal 2004
 Revenues.
     Cost of Revenues.
 Selling, general and administrative expenses.
 48




---



##### Table of Contents



Operating income.
 Interest income
 Gain on sale of shares in associated company/others.
 Gain/(loss) on foreign exchange transactions.
 Other income/(expenses), net.
 Income taxes.
 Equity in earnings/(losses) of associated companies, net of taxes.
 Net income.
 Liquidity and Capital Resources
 Net cash provided by operating activities
   49




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##### Table of Contents



Net cash used in investing activities
     Net cash provided by/ (used in) financing activities
    50




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##### Table of Contents



Amount
    
    Interest
    
    ComputationLoan Type
    
    Lenders
    
    outstanding
    
    (per annum)
    
    method(dollars in millions)Rupee loan of Satyam Associates Trust
    
    Cholamandalam
    

$             1.3
    
    10.25%
    
    FixedWorking capital term loan
    
    BNP Paribas
    
    5.6
    
    6 month LIBOR +0.95%
    
    FloatingExternal commercial borrowing
    
    BNP Paribas
    
    10.5
    
    6 month LIBOR +0.95%
    
    FloatingExport packing credit
    
    BNP Paribas
    
    4.1
    
    6 month LIBOR +0.25%
    
    FloatingOther loans
    
    Various other parties
    
    2.9
    
    3.0%-14.5%
    
    FixedTotal
    
    
    

$           24.4
     51




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##### Table of Contents



Payments due as at March 31, 2006,Within 1
    
    1-3
    
    3-5
    
    After 5year
    
    years
    
    years
    
    years
    
    Total(dollars in millions)Long-term debt
    
    $
    2.4
    
    
    $
    1.8
    
    
    $
    16.1
    
    
    
    
    
    
    $
    20.3Operating leases
    
    
    4.1
    
    
    
    3.0
    
    
    
    0.6
    
    
    $
    0.4
    
    
    
    8.1Unconditional purchase obligations:Other commercial commitments
    
    
    26.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26.7Bank guarantees
    
    
    3.7
    
    
    
    2.9
    
    
    
    0.4
    
    
    
    6.4
    
    
    
    13.4Letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gratuity Plan
    
    
    1.5
    
    
    
    3.7
    
    
    
    5.6
    
    
    
    13.0
    
    
    
    23.8Citisoft deferred and earn-out
consideration and EBT funding
(1)
    
    
    8.5
    
    
    
    15.0
    
    
    
    
    
    
    
    
    
    
    
    23.5Knowledge Dynamics deferred and
earn-out consideration
(2)
    
    
    1.1
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    3.8Total contractual cash obligations
    
    $
    48.0
    
    
    $
    29.1
    
    
    $
    22.7
    
    
    $
    19.8
    
    
    $
    119.6
 
 (1)
    
    The earn-out consideration and the further funding of EBT are based on fulfillment of
certain conditions.(2)
    
    Earn-out consideration of Knowledge Dynamics is based on certain
conditions.  Deferred Stock-based Compensation
  ASOP
  ASOP B
  ASOP ADS
  Nipuna ESOP
  52




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##### Table of Contents



Effect of recently issued accounting pronouncements
    Critical Accounting Policies
    53




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##### Table of Contents



Revenue recognition
     Impairment of Goodwill
  
 
 
 
 
    Accounts Receivable
  54




---



##### Table of Contents



Accounting for income taxes
   Effects of Inflation
  Exchange Rates
  Month
    
    Month end
    
    Average
    
    High
    
    Low(Rupees)April-04
    
    
    44.52
    
    
    
    43.89
    
    
    
    44.52
    
    
    
    43.40May-04
    
    
    45.42
    
    
    
    45.18
    
    
    
    45.57
    
    
    
    44.55June-04
    
    
    45.99
    
    
    
    45.50
    
    
    
    46.21
    
    
    
    44.94July-04
    
    
    46.40
    
    
    
    46.06
    
    
    
    46.45
    
    
    
    45.66August-04
    
    
    46.35
    
    
    
    46.32
    
    
    
    46.40
    
    
    
    46.21September-04
    
    
    45.91
    
    
    
    46.05
    
    
    
    46.35
    
    
    
    45.81October-04
    
    
    45.30
    
    
    
    45.74
    
    
    
    45.87
    
    
    
    45.30November-04
    
    
    44.47
    
    
    
    45.03
    
    
    
    45.40
    
    
    
    44.47December-04
    
    
    43.27
    
    
    
    43.85
    
    
    
    44.52
    
    
    
    43.27January-05
    
    
    43.60
    
    
    
    43.62
    
    
    
    43.82
    
    
    
    43.35February-05
    
    
    43.57
    
    
    
    43.58
    
    
    
    43.73
    
    
    
    43.28March-05
    
    
    43.62
    
    
    
    43.59
    
    
    
    43.70
    
    
    
    43.44April-05
    
    
    43.48
    
    
    
    43.64
    
    
    
    43.72
    
    
    
    43.48May-05
    
    
    43.62
    
    
    
    43.41
    
    
    
    43.62
    
    
    
    43.21June-05
    
    
    43.51
    
    
    
    43.52
    
    
    
    43.71
    
    
    
    43.44July-05
    
    
    43.40
    
    
    
    43.43
    
    
    
    43.59
    
    
    
    43.05August-05
    
    
    44.00
    
    
    
    43.55
    
    
    
    44.00
    
    
    
    43.36September-05
    
    
    43.94
    
    
    
    43.85
    
    
    
    43.98
    
    
    
    43.75October-05
    
    
    45.09
    
    
    
    44.76
    
    
    
    45.11
    
    
    
    44.00November-05
    
    
    45.87
    
    
    
    45.63
    
    
    
    45.87
    
    
    
    45.02December-05
    
    
    44.95
    
    
    
    45.56
    
    
    
    46.26
    
    
    
    44.94January-06
    
    
    43.96
    
    
    
    44.20
    
    
    
    44.92
    
    
    
    43.89February-06
    
    
    44.21
    
    
    
    44.23
    
    
    
    44.54
    
    
    
    44.10March-06
    
    
    44.48
    
    
    
    44.34
    
    
    
    44.58
    
    
    
    44.09
 Risk Management Policy
 55




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##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities,
  As at March 31,2006
    
    
    2005
    
    
    2004Amount
    
    
    Amount
    
    
    Amount(dollars in millions)Aggregate contracted principal amounts of contracts outstanding:Forward contracts
    
    $
    79.0
    
    
    $
    160.0
    
    
    $
    44.5Options contracts
    
    
    137.0
    
    
    
    141.5
    
    
    
    Total
    
    $
    216.0
    
    
    $
    301.5
    
    
    $
    44.5Gains/(loss) on outstanding contracts:Forward contracts
    
    $
    0.4
    
    
    $
    1.0
    
    
    $
    0.4Options contracts
    
    
    (1.8
    )
    
    
    0.1
    
    
    
    Total
    
    $
    (1.4
    )
    
    $
    1.1
    
    
    $
    0.4
   Year ended March 31,2006
    
    
    2005
    
    
    2004Amount
    
    
    Amount
    
    
    Amount(dollars in millions)Forward contracts
    
    $
    0.8
    
    
    $
    (0.5
    )
    
    $
    2.4Options contracts
    
    
    (1.6
    )
    
    
    0.2
    
    
    
    Total
    
    
    (0.8
    )
    
    $
    0.3
    
    
    $
    2.4
 Off-Balance Sheet Arrangements
  56




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##### Table of Contents



Foreign Currency Transactions/ Translation
    57




---



##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  Directors
 Name
    
    Age
    
    PositionB. Ramalinga Raju
    
    
    50
    
    
    ChairmanB. Rama Raju
    
    
    46
    
    
    Managing Director and Chief Executive Officer(3)V.P. Rama Rao
    
    
    72
    
    
    Director(1),(2),(3)Dr. Mangalam Srinivasan
    
    
    67
    
    
    Director(1),(2)Krishna G. Palepu
    
    
    51
    
    
    DirectorVinod K. Dham
    
    
    55
    
    
    Director(2)M.Rammohan Rao
    
    
    64
    
    
    Director(1), (2)
 Key Management Personnel
 Name
    
    Age
    
    PositionAnand T. R
    
    
    50
    
    
    Director and Senior Vice President, Vertical
Business Unit  TIMESJayaraman G
    
    
    50
    
    
    Sr. Vice President, Corporate Governance and
Company SecretaryJoseph Abraham
    
    
    53
    
    
    Director and Senior Vice President, Vertical
Business Unit  RetailKeshab Panda
    
    
    47
    
    
    Director and Senior Vice President, Regional
Business Unit, EuropeManish Sukhlal Mehta
    
    
    49
    
    

Director and Senior Vice President, Horizontal
Competency Unit  SAP, Engineering and Spatial
ServicesMohan Eddy F.S
    
    
    55
    
    
    Director, Internal Information Systems and
Platinum Processes GroupMurty A.S
    
    
    47
    
    
    Director and Senior Vice President, Leadership
Development GroupPrabhat G.B
    
    
    40
    
    
    Director, Horizontal Business Unit  Business SolutionRam Mynampati
    
    
    48
    
    
    President, Commercial and Healthcare BusinessesRavi Shanker Bommakanti
    
    
    47
    
    
    Director and Senior Vice President  Vertical
Business Unit  InsuranceShailesh Shah
    
    
    45
    
    
    Director and Senior Vice President  Corporate
Strategy GroupSrinivas V
    
    
    45
    
    
    Director, Senior Vice President and Chief
Financial OfficerSubramanian D
    
    
    46
    
    

Director and Senior Vice President  Vertical
Business Unit  Manufacturing, Energy, Oil and
Gas and UtilitiesVijay Prasad Boddupalli
    
    
    54
    
    
    Director and Senior Vice President  Horizontal
Competency Unit  Enterprise Applications and
Business Intelligence SolutionsVirender Aggarwal
    
    
    45
    
    

Director and Senior Vice President  Regional
Business Unit-India, Middle, Africa & Asia PacificV Murali
    
    
    41
    
    
    Director and Senior Vice President  Commercial
and Contract Management
 
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Investors Grievance Committee(4)
    
    Directors listed under key management personnel are directors of business/support units and
not members of our board of directors. B. Ramalinga Raju
 58




---



##### Table of Contents



B. Rama Raju
 V. P. Rama Rao
 Dr. Mangalam Srinivasan
 Professor Krishna G. Palepu
 Vinod K. Dham
 M Rammohan Rao,
 59




---



##### Table of Contents



Anand T.R.
 Jayaraman G.
 Joseph Abraham
 Keshab Panda
 Manish Sukhlal Mehta
 Mohan Eddy F. S.
 Murty A. S.
 60




---



##### Table of Contents



Prabhat G. B.
 Ram Mynampati
 Ravi Shanker Bommakanti
 Shailesh Shah
 Srinivas V.
 Subramanian D.
 Vijay Prasad Boddupalli
 61




---



##### Table of Contents



Virender Aggarwal
 V Murali
 Compensation
 Executive Compensation
    Annual Compensation
 Name and Principal Position
    
    Salary
    
    Bonus
    
    Others(1)B. Rama Raju, Managing
Director and Chief Executive
Officer
    
    $
    83,849
    
    
    
    
    
    
    $
    9,856
 62




---



##### Table of Contents



(1)
    
    Includes membership fees and housing allowance. Option Grants
  Employee Benefit Plans
  Our ASOP and ESOP Plans
  ASOP
  ASOP B
  ASOP ADS
  63




---



##### Table of Contents



Nipuna ESOP
  Board Practices
 Board Composition
  §
    
    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.
  Board Committees
    Director Compensation
  64




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##### Table of Contents



Employment, Severance and Other Agreements
  Employees
  Share Ownership
  Equity SharesBeneficially OwnedBeneficial Owner
    
    Number
    
    PercentB. Rama Raju
    
    
    14,593,000
    (1)
    
    
    4.49B. Ramalinga Raju
    
    
    13,272,000
    (2)
    
    
    4.09V.P. Rama Rao
    
    
    
    
    
    
    Dr. Mangalam Srinivasan
    
    
    
    
    
    
    Krishna G. Palepu
    
    
    
    
    
    
    Vinod K Dham
    
    
    
    
    
    
    M Rammohan Rao
    
    
    
    
    
    
    All directors and executive officers as a
group
    
    
    28,593,231
    
    
    
    8.88
 
 (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.  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Share Ownership
   Related Party Transactions
  65




---



##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 Financial Statements
  Legal Proceedings
   Dividends
   
 ITEM 9. THE OFFER AND LISTING
 Trading Markets
   66




---



##### Table of Contents



Price History
  Annual high and low market prices
 Rupee price per
    
    U.S. dollar priceequity share(1)
    
    per equity shareFiscal year ended March 31,(2)
    
    High
    
    Low
    
    High
    
    Low2002
    
    
    331.15
    
    
    
    111.00
    
    
    
    6.78
    
    
    
    2.272003
    
    
    291.85
    
    
    
    175.10
    
    
    
    6.14
    
    
    
    3.682004
    
    
    391.00
    
    
    
    127.30
    
    
    
    9.01
    
    
    
    2.932005
    
    
    442.00
    
    
    
    250.00
    
    
    
    10.10
    
    
    
    5.702006
    
    
    862.00
    
    
    
    364.40
    
    
    
    19.38
    
    
    
    8.382007(though April 21, 2006)
    
    
    890.00
    
    
    
    755.10
    
    
    
    20.01
    
    
    
    16.98Fiscal 2005:First Quarter
    
    
    338.00
    
    
    
    250.00
    
    
    
    7.35
    
    
    
    5.44Second Quarter
    
    
    394.00
    
    
    
    293.55
    
    
    
    8.58
    
    
    
    6.39Third Quarter
    
    
    442.00
    
    
    
    352.60
    
    
    
    10.21
    
    
    
    8.15Fourth Quarter
    
    
    424.30
    
    
    
    335.00
    
    
    
    9.73
    
    
    
    7.68Fiscal 2006:First Quarter
    
    
    517.45
    
    
    
    364.40
    
    
    
    11.89
    
    
    
    8.38Second Quarter
    
    
    566.00
    
    
    
    474.40
    
    
    
    12.88
    
    
    
    10.80Third Quarter
    
    
    741.00
    
    
    
    543.00
    
    
    
    16.48
    
    
    
    12.08Fourth Quarter
    
    
    862.00
    
    
    
    713.00
    
    
    
    19.38
    
    
    
    16.03Fiscal 2007:First Quarter (Through April 21, 2006)Monthly prices:October 2005
    
    
    616.35
    
    
    
    543.00
    
    
    
    13.67
    
    
    
    12.04November 2005
    
    
    679.05
    
    
    
    604.00
    
    
    
    14.80
    
    
    
    13.17December 2005
    
    
    741.00
    
    
    
    649.05
    
    
    
    16.48
    
    
    
    14.44January 2006
    
    
    775.00
    
    
    
    713.00
    
    
    
    17.63
    
    
    
    16.22February 2006
    
    
    790.00
    
    
    
    719.75
    
    
    
    17.87
    
    
    
    16.28March 2006
    
    
    862.00
    
    
    
    764.10
    
    
    
    19.38
    
    
    
    17.18April 2006(Though April 21, 2006)
    
    
    890.00
    
    
    
    755.10
    
    
    
    20.01
    
    
    
    16.98
 
 (1)
    
    Data derived from the BSE website. The prices and volumes quoted on the NSE may be
different.(2)
    
    Our ADSs commenced trading on the New York Stock Exchange on May 15, 2001, at an
initial offering price of $9.71 per ADS. The tables below set forth, for the periods
indicated, high and low trading prices for our ADS. 
 67




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##### Table of Contents



Price per ADSHigh
    
    LowFiscal2002 (since May 15, 2001)
    
    $
    14.74
    
    
    $
    5.052003
    
    
    13.50
    
    
    
    7.932004
    
    
    35.35
    
    
    
    7.252005
    
    
    28.50
    
    
    
    16.002006
    
    
    24.23
    
    
    
    21.002007 (through April 21, 2006)
    
    
    44.50
    
    
    
    35.47Fiscal 2005First Quarter
    
    
    23.96
    
    
    
    16.00Second Quarter
    
    
    24.85
    
    
    
    17.06Third Quarter
    
    
    28.50
    
    
    
    23.06Fourth Quarter
    
    
    26.25
    
    
    
    20.75Fiscal 2006First Quarter
    
    
    26.77
    
    
    
    21.00Second Quarter
    
    
    30.61
    
    
    
    25.75Third Quarter
    
    
    37.44
    
    
    
    28.25Fourth Quarter
    
    
    43.90
    
    
    
    36.60Monthly pricesSeptember 2005
    
    
    30.59
    
    
    
    27.55October 2005
    
    
    34.75
    
    
    
    28.25November 2005
    
    
    36.55
    
    
    
    34.19December 2005
    
    
    37.44
    
    
    
    33.00January 2006
    
    
    40.40
    
    
    
    36.60February 2006
    
    
    42.07
    
    
    
    37.00March 2006
    
    
    43.90
    
    
    
    37.62April 2006(through April 21,2006)
    
    
    44.50
    
    
    
    35.47
 68




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##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 Corporate Governance
   Standard for U.S. Listed
    
    Satyam Computer ServicesCompanies
    
    Limiteds PracticeDirector Independence     A majority of the board
must consist of independent directors.
    
         Four of our seven directors,
namely Mr. VP Rama
Rao, Dr. Mangalam Srinivasan,
Mr. Vinod K Dham and Mr. M
Rammohan Rao, are independent
within the meaning of the
NYSE standards.Independence is defined by
various criteria including the absence of
a material relationship between the director
and the listed company. For example,
directors who are employees, are immediate
family of the chief executive officer or
receive over $100,000 per year in direct
compensation from the listed company are
not independent. Directors who are
employees of or otherwise affiliated
through immediate family with the listed
companys independent auditor are also not
independent.
    
    However, at our April 21, 2006 meeting
of our Board of Directors, our directors have
proposed that Mr. Ram Mynampati, one of our
key management personnel, to be nominated to
the board of directors, subject to
shareholder approval at the forthcoming
annual general meeting. Mr. Ram Mynampati
would not qualify as an independent director
as he is an employee of our Company. If this
appointment is approved, our Board will
comprise eight directors, four of them will
be independent and four will be
non-independent. This 50:50 split is
permitted under corporate governance in
India.     The non-management directors
of each company must meet at regularly
scheduled executive sessions
without management.
    
         Our non-management directors do not
meet periodically without
management directors.Audit Committee     Listed companies must have an audit
committee that satisfies the
requirements of Rule 10A-3 under
the Securities Exchange Act. The
rule requires that the audit
committee (i) be comprised
entirely of independent directors;
(ii) be directly responsible for
the appointment, compensation and
oversight of the independent
auditor; (iii) adopt procedures
for the receipt and treatment of
complaints with respect to
accounting
    
         We have an audit committee which
meets all of the requirements
of Rule  10A-3.
 69




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Standard for U.S. Listed
    
    Satyam Computer ServicesCompanies
    
    Limiteds Practiceand auditing issues;
(iv) be authorized to engage
independent counsel and other
advisors it deems necessary in
performing its duties; and (v) be
given sufficient funding by the
board of directors to compensate
the independent auditors and other
advisors as well as for the
payment of ordinary administrative
expenses incurred by the committee.     The audit committee must consist of at
least three members, and each
member must be independent within
the meaning established by the
NYSE.
    
         Our audit committee consists of
three members and all the
members are independent under
the NYSEs rules.     The audit committee must have a written
charter that addresses the
committees purpose and
responsibilities.
    
         Our audit committee has a charter
outlining the committees
purpose and responsibilities.At a minimum, the committees purpose
must be to assist the board in the oversight of
the integrity of the companys financial
statements, the companys compliance with
legal and regulatory requirements, the
independent auditors qualifications and
independence and the performance of the
companys internal audit function and
independent auditors.The audit committee is also required to
review the independent auditing firms
annual report, describing the firms
internal quality control procedures, any
material issues raised by the most recent
internal quality control review or peer
review of the firm and any steps taken to
address such issues. The audit committee
is also to assess the auditors
independence by reviewing all
relationships between the company and its
auditor. It must establish the companys
hiring guidelines for employees and former
employees of the independent auditor.The committee must also discuss the
companys annual audited financial
statements and quarterly financial
statements with management and the
independent auditors, the companys
earnings press releases, as well as
financial information and earnings
guidance provided to analysts and rating
agencies, and policies with respect to
risk assessment and risk management. It
must also meet periodically with the
internal auditors and the board of
directors.
 70




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Standard for U.S. Listed
    
    Satyam Computer ServicesCompanies
    
    Limiteds Practice     Each listed company must have disclosed
whether their board of directors
has identified an Audit Committee
Financial Expert, and if not the
reasons why the board has not done
so.
    
         We do not have an individual serving
on its audit committee as an
Audit Committee Financial
Expert, as defined in
applicable rules of the
Securities and Exchange
Commission. This is because
our board of directors has
determined that no individual
audit committee member
possesses all of the
attributes required by the
definition of Audit
Committee Financial Expert.     Each listed company must have an
internal audit function.
    
         We have a separate department for
its internal audit function.Compensation Committee     Listed companies must have a
compensation committee composed entirely of
independent board members as
defined by the NYSE listing
standards.
    
         Our compensation committee has four
members, each of whom is
independent within the
meaning of the NYSE standards.     The committee must have a written
charter that addresses its purpose and
responsibilities.
These responsibilities include (i)
reviewing and approving corporate goals
and objectives relevant to CEO
compensation; (ii) evaluating CEO
performance and compensation in light of
such goals and objectives for the CEO;
(iii) based on such evaluation, reviewing
and approving CEO compensation levels;
(iv) recommending to the board non-CEO
compensation, incentive compensation plans
and equity-based plans; and (v) producing
a report on executive compensation as
required by the Securities and Exchange
Commission to be included in the companys
annual proxy statement or annual report.
The committee must also conduct an annual
performance self-evaluation.
    
         Our compensation committee reviews
among other things our
general compensation
structure, and reviews and
recommends the compensation
and benefits of directors and
the chief executive officer,
subject to ratification by
the Board of Directors.Nominating/CorporateGovernance
Committee     Listed companies must have a nominating/corporate
governance committee
composed entirely of independent
board members.
    
         We do not have a
nominating/corporate
governance committee.The committee must have a written
charter that addresses its purpose and
responsibilities, which include
(i) identifying qualified individuals to
become board member; (ii) selecting, or
recommending that the board select, the
 71




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Standard for U.S. Listed
    
    Satyam Computer ServicesCompanies
    
    Limiteds Practicedirector nominees for the next annual
meeting of shareholders; (iii) developing
and recommending to the board a set of
corporate governance principles applicable
to the company; (iv) overseeing the
evaluation of the board and management;
and (v) conducting an annual performance
evaluation of the committee.Equity-Compensation Plans     Shareholders must be given the
opportunity to vote on all
equity-compensation plans and
material revisions thereto, with
limited exceptions.
    
         The Company is in compliance with
this requirement.Corporate Governance Guidelines     Listed companies must adopt and disclose
corporate governance
guidelines.
    
         We are is fully compliant with
Clause 49 of the
listing agreement of
Indian Stock
Exchanges, with
regard to corporate
governance
guidelines. We
publish a report on
corporate governance
in annual report
which is distributed
to ourdomestic
shareholders and ADS
holders annually.Code of Business Conduct and Ethics     All listed companies, U.S. and foreign,
must adopt and disclose a
code of business conduct
and ethics for directors,
officers and employees,
and promptly disclose any
waivers of the code for
directors or executive
officers.
    
         We have adopted a Code of Business
Conduct and Ethics
Policy, which is
available at
www.satyam.com.
 Memorandum and Articles of Association
  Objects and Purposes
  72




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§
    
    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
  Managerial Remuneration
     Equity Shares
   73




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Dividends
    §
    
    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 5.0% of its paid up
capital.
  Bonus Shares
  Preemptive Rights and Issue of Additional Shares
  74




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Annual General Meetings of Shareholders
   Voting Rights
    Audit and Annual Report
  75




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Register of Shareholders; Record Dates; Transfer of Shares
       Disclosure of Ownership Interest
  76




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Company Acquisition of Equity Shares
  Liquidation Rights
  Takeover Code
   Material Contracts
  Exchange Controls
 General
  77




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ADR Guidelines
   Foreign Direct Investment
   78




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Investment by Non-Resident Indians
   Investment by Foreign Institutional Investors
   Ownership Restrictions
  79




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Voting Rights of Deposited Equity Shares Represented by ADSs
     Taxation
  80




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Indian Taxation
 General. shares
   
    
    a period or periods amounting to 182 days or more; or
    
    60 days or more if within the four preceding years he/she has been in India
for a period or periods amounting to 365 days or more; or
    
    182 days or more, in the case of a citizen of India or a person of Indian
origin living abroad who visits India and within the four preceding years has
been in India for a period or periods amounting to 365 days or more; or
    
    182 days or more, in the case of a citizen of India who leaves India for
the purposes of employment outside India in any previous year and has within
the four preceding years been in India for a period or periods amounting to 365
days or more.
  Taxation of Distributions.
  Taxation of Capital Gains.
  81




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Capital Losses.
 82




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##### Table of Contents



Withholding Tax on Capital Gains.
 Buy-back of Securities.
 Tax Treaties.
 Stamp Duty and Transfer Tax.
 Wealth Tax.
 Gift Tax and Estate Duty.
 Service Tax.
 Recent Developments  Budget.
 
    
    No change in the tax rates for companies or individuals is introduced: the effective corporate tax rate for domestic
companies stays at 33.66% and for foreign companies at 41.82%
    
    Increase in Rate of Minimum Alternate Tax (MAT) that is levied on companies from 7.5% to 10%; however, the carryforward
period for MAT credit shall be increased from 5 years to 7 years
    
    Long-term capital gains on the sale of listed securities, which is otherwise tax exempt, will now have to be considered for
MAT purposes
    
    Increase in Securities Transaction Tax (STT) by 25% for all categories w.e.f. from June 1, 2006
 83




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U.S. Taxation
   
    
    banks;
    
    financial institutions;
    
    insurance companies;
    
    broker dealers;
    
    traders that elect to mark to market;
    
    tax-exempt entities;
    
    persons liable for alternative minimum tax;
    
    U.S. expatriates;
    
    persons holding an ADS or equity share as part of a straddle, hedging, conversion or
integrated transaction;
    
    persons that actually or constructively own 10% or more of our voting stock; or
    
    persons holding ADSs or equity shares through partnerships or other pass-through
entities.
 PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE
U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND
FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR EQUITY
SHARES.
  
    
    a citizen or resident of the U.S.;
    
    a corporation (or other entity taxable as a corporation for U.S. federal income tax
purposes) organized under the laws of the U.S., any State or the District of Columbia;
    
    an estate whose income is subject to U.S. federal income taxation regardless of its
source; or
    
    a trust that (1) is subject to the supervision of a court within the United States and
the control of one or more U.S. persons or (2) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person.
 84




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Dividends
    Sale or Other Disposition of ADSs or Equity Shares
  85




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Stamp Duty and Transfer Tax
  Passive Foreign Investment Company
  
    
    at least 75% of its gross income is passive income, or
    
    at least 50% of the value of its assets (determined on the basis of a quarterly
average) is attributable to assets that produce or are held for the production of passive
income.
    U.S. Information Reporting and Backup Withholding
   86




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Documents On Display
  
   Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   As at March 31,2006
    
    2005
    
    2004Total Recorded
    
    Total Recorded
    
    Total RecordedAmount
    
    Fair Value
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair Value( dollars in millions)Debt:Variable rate short-term debt
    
    $
    4.1
    
    
    $
    4.1
    
    
    $
    1.7
    
    
    $
    1.7
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    5.33%
    
    
    
    
    
    
    
    3.61%
    
    
    
    
    
    
    
    Variable rate long termdebt
    
    $
    16.1
    
    
    $
    16.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    

    
    5.58%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed rate long-term debt
    
    $
    4.2
    
    
    $
    4.2
    
    
    $
    4.3
    
    
    $
    4.3
    
    
    $
    4.1
    
    
    $
    4.1Average interest rate
    
    
    

    
    7.78%
    
    
    
    
    
    
    
    9.49%
    
    
    
    
    
    
    
    10.93%
 Limitations:
  87




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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  88




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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
   
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  89




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ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  (Amounts in
$)Fiscal Year Ended
    
    Audit
    
    Audit Related
    
    Tax
    
    OtherMarch 31,
    
    Services
    
    Services
    
    Services
    
    Services
    
    Total2006
    
    
    $
    493,120
    
    
    $
    206,010
    
    
    $
    109,717
    
    
    $
    10,245
    
    
    $
    819,0922005
    
    
    $
    273,437
    
    
    $
    148,036
    
    
    $
    117,007
    
    
    $
    95,707
    
    
    $
    634,187
 Audit Services
  Audit Related Services
  Tax Services
  Other Services
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES
  90




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ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
 Financial Statement
  §
    
    Report of Price Waterhouse, Independent Registered Public Accounting Firm§
    
    Consolidated Balance Sheets as of March 31, 2005 and 2006§
    
    Consolidated Statements of Income for the years ended March 31, 2004, 2005
and 2006§
    
    Consolidated Statements of Shareholders Equity and Comprehensive Income
for the years ended March 31, 2004, 2005 and 2006.§
    
    Consolidated Statements of Cash Flows for the years ended March 31, 2004,
2005 and 2006§
    
    Notes to the Consolidated Financial Statements§
    
    Financial Statement Schedule  Valuation and qualifying accounts
 
 ITEM 19. EXHIBITS
 Number
    
    Description1.1
    
    Memorandum and Articles of Association of Satyam Computer Services. (1)1.2
    
    Certificate of Incorporation of Satyam Computer Services. (2)2.1
    
    Specimens of Share Certificates. (2)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). (3)4.1
    
    Associate Stock Option Plan (including Deed of Trust). (2)4.2
    
    Associate Stock Option Plan B as amended and restated (2)4.3
    
    Associate Stock Option Plan ADS as amended and restated. (2)4.4
    
    Investor Rights Agreement, dated October 7, 2002, by and among Sify
Limited (formerly Satyam Infoway Limited), Satyam Computer Services Limited,
SAIF Investment Company Limited and Venture Tech Solutions Pvt. Ltd. (4)8.1
    
    List of Subsidiaries. (5)10.1
    
    Consent of Price Waterhouse, Independent Registered Public Accounting
Firm. (5)12.1
    
    Certification of Chief Executive Officer under Section 302 of the Sarbane
Oxley Act. (5)12.2
    
    Certification of Chief Financial Officer under Section 302 of the Sarbane
Oxley Act. (5)13.1
    
    Certification of Chief Executive Officer under Section 906 of the
Sarbanes-Oxley Act. (5)13.2
    
    Certification of Financial Officer under Section 906 of the
Sarbanes-Oxley Act. (5)
 
 (1)
    
    Previously filed as an exhibit to our Registration Statement on Form F-3
(File No. 333-122996) filed on February 25, 2005 and incorporated herein by
reference. 91




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##### Table of Contents



(2)
    
    Previously filed as an exhibit to our Registration Statement on Form F-1
(File No. 333-13464) filed on May 7, 2001 and incorporated herein by
reference.(3)
    
    Previously filed as an exhibit to our Form 20F (File No. 00115190)
filed on August 13, 2001 and incorporated herein by reference.(4)
    
    Previously furnished by Sify Limited to the Commission as an exhibit to
Form 6-K (file No. 00027-663) on October 10, 2002 and incorporated herein by
reference.(5)
    
    Filed herewith. 92




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##### Table of Contents



SIGNATURES
  SATYAM COMPUTER SERVICES LIMITEDBy:
    
    /s/ B. Rama RajuName:
    
    B. Rama RajuTitle:
    
    Managing Director and Chief
Executive OfficerBy:
    
    /s/ Srinivas VName:
    
    Srinivas VTitle:
    
    Director and Senior Vice
President & Chief Financial
OfficerDate: April 28, 2006
 93




---



##### 



SATYAM COMPUTER SERVICES LIMITED
 INDEX TO THE U.S. GAAP CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2006 and 2005
    
    
    F-3Consolidated Statements of Income for the three years ended March 31, 2006
    
    
    F-4Consolidated Statements of Shareholders Equity and Comprehensive Income for
the three years ended March 31, 2006
    
    
    F-5Consolidated Statements of Cash Flows for the three years ended March 31, 2006
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-9Financial Statement Schedule
    
    
    F-34
  F-1




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Report of Independent Registered Public Accounting Firm
 To the Board of Directors and Shareholders of Satyam Computer Services Limited:
  Price Waterhouse
 Secunderabad, India
 April 21, 2006
 F-2




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Satyam Computer Services Limited
 
 Consolidated Balance Sheets
 (Millions of US Dollars except per share data and as stated otherwise)
 As of March 31,2006
    
    2005AssetsCurrent assetsCash and cash equivalents
    
    $
    292.8
    
    
    $
    129.8Investments in bank deposits
    
    
    403.7
    
    
    
    Accounts receivable, net of allowance for doubtful debts
    
    
    220.0
    
    
    
    160.9Unbilled revenue on contracts
    
    
    41.1
    
    
    
    17.0Deferred income taxes
    
    
    12.2
    
    
    
    9.1Prepaid expenses and other receivables
    
    
    48.9
    
    
    
    16.1Total current assets
    
    
    1,018.7
    
    
    
    332.9Investments
    
    
    
    
    
    
    Investments in bank deposits
    
    
    
    
    
    
    411.6Investments in associated companies
    
    
    3.5
    
    
    
    23.2Premises and equipment, net
    
    
    106.6
    
    
    
    84.1Goodwill, net
    
    
    27.6
    
    
    
    15.5Intangible assets, net
    
    
    6.6
    
    
    
    Other assets
    
    
    18.2
    
    
    
    16.8Total assets
    
    
    1,181.2
    
    
    
    884.1Liabilities and shareholders equityCurrent liabilitiesShort-term and current portion of long-term debt
    
    
    6.5
    
    
    
    4.8Accounts payable
    
    
    11.9
    
    
    
    10.9Accrued expenses and other current liabilities
    
    
    108.9
    
    
    
    64.8Unearned and deferred revenue
    
    
    11.8
    
    
    
    5.6Total current liabilities
    
    
    139.1
    
    
    
    86.1Long-term debt, excluding current portion
    
    
    17.9
    
    
    
    1.2Deferred income taxes
    
    
    8.9
    
    
    
    8.9Total liabilities
    
    
    165.9
    
    
    
    96.2Contingencies and Commitments (Note No. 19)Minority interest
    
    
    0.9
    
    
    
    Preferred Stock of Subsidiary0.05% Cumulative convertible redeemable preference shares, par value Rs.10
(US$0.22)* per share
    
    
    20.0
    
    
    
    20.0(100 million preference shares authorized, 91,009,999 and 91,009,999 preference
shares issued as of March 31, 2006 and 2005 respectively)Shareholders equityCommon stock  par value Rs.2 (US$0.04)* per equity share
    
    
    17.6
    
    
    
    17.4(375 million equity shares authorized, 324,449,539 and 319,265,291 equity shares
issued as of March 31, 2006 and 2005 respectively)Additional paid-in capital
    
    
    465.1
    
    
    
    433.6Shares subscribed but unissued
    
    
    0.4
    
    
    
    0.1Deferred stock-based compensation
    
    
    (0.4
    )
    
    
    (0.3
    )Retained earnings
    
    
    497.1
    
    
    
    289.0Accumulated other comprehensive income/(loss)
    
    
    15.8
    
    
    
    29.6995.6
    
    
    
    769.4Shares held by the SC-Trust under associate stock option plan
    
    
    (1.2
    )
    
    
    (1.5
    )(1,193,140 and 1,424,340 equity shares as of March 31, 2006 and 2005 respectively)Total shareholders equity
    
    
    994.4
    
    
    
    767.9Total liabilities and shareholders equity
    
    $
    1,181.2
    
    
    $
    884.1
 
 *
    
    The par value in US$ has been converted at the closing rate as of March 31, 2006, 1US$ = Rs 44.48  F-3




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Satyam Computer Services Limited
 
 Consolidated Statements of Income
 (Millions of US Dollars except per share data and as stated otherwise)
 Year Ended March 31,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    1,096.3
    
    
    $
    793.6
    
    
    $
    566.4Cost of revenues
(Includes stock-based compensation of US$Nil, US$0.8 and US$0.9 for the
three years ended March 31, 2006, 2005 and 2004 respectively)
    
    
    (689.0
    )
    
    
    (506.8
    )
    
    
    (343.6
    )Gross profit
    
    
    407.3
    
    
    
    286.8
    
    
    
    222.8Selling, general and administrative expenses(Includes stock-based compensation of US$0.8, US$1.1 and US$0.8 for the
three years ended March 31, 2006, 2005 and 2004 respectively)
    
    
    (187.6
    )
    
    
    (124.3
    )
    
    
    (101.7
    )Total operating expenses
    
    
    (187.6
    )
    
    
    (124.3
    )
    
    
    (101.7
    )Operating income
    
    
    219.7
    
    
    
    162.5
    
    
    
    121.1Interest income
    
    
    26.3
    
    
    
    22.3
    
    
    
    20.3Interest expense
    
    
    (1.3
    )
    
    
    (0.4
    )
    
    
    (0.5
    )Gain on sale of investments (Refer note 7)
    
    
    43.6
    
    
    
    
    
    
    
    2.7Gain/(Loss) on foreign exchange transactions
    
    
    0.3
    
    
    
    (4.6
    )
    
    
    (8.9
    )Other income/(expense), net
    
    
    (0.8
    )
    
    
    0.4
    
    
    
    2.3Income before income taxes and equity in earnings/(losses) of
associated companies
    
    
    287.8
    
    
    
    180.2
    
    
    
    137.0Income taxes
    
    
    (37.7
    )
    
    
    (25.3
    )
    
    
    (22.5
    )Minority interest
    
    
    0.1
    
    
    
    
    
    
    
    Income before equity in earnings/(losses) of associated companies
    
    
    250.2
    
    
    
    154.9
    
    
    
    114.5Equity in earnings/(losses) of associated companies, net of taxes
    
    
    (0.8
    )
    
    
    (1.1
    )
    
    
    (2.6
    )Net income
    
    $
    249.4
    
    
    $
    153.8
    
    
    $
    111.9Earnings per share:Basic
    
    $
    0.78
    
    
    $
    0.49
    
    
    $
    0.36Diluted
    
    $
    0.75
    
    
    $
    0.48
    
    
    $
    0.35Weighted average number of shares used in computing earnings per share
(in millions)Basic
    
    
    320.6
    
    
    
    316.2
    
    
    
    313.2Diluted
    
    
    331.4
    
    
    
    323.6
    
    
    
    317.1
  F-4




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##### Table of Contents



Satyam Computer Services Limited
 
 Consolidated Statements of Shareholders Equity and Comprehensive Income
 (Millions of US Dollars except per share data and as stated otherwise)
 Common Stock
    
    
    Additional
    
    
    Shares
    
    
    Deferred
    
    
    Retained
    
    
    Accumulated
    
    
    Shares held
    
    
    Totalpaid-in
    
    
    subscribed but
    
    
    stock-based
    
    
    earnings
    
    
    other
    
    
    by
    
    
    Shareholders'capital
    
    
    unissued
    
    
    compensation
    
    
    
    
    
    
    comprehensive
    
    
    SC-Trust
    
    
    EquityShares
    
    
    Par Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    income/(loss)Balance as of March 31, 2003
    
    
    314,542,800
    
    
    $
    17.1
    
    
    $
    406.7
    
    
    
    
    
    
    $
    (0.9
    )
    
    $
    87.1
    
    
    $
    (20.1
    )
    
    $
    (2.3
    )
    
    $
    487.6Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111.9
    
    
    
    
    
    
    
    
    
    
    
    111.9Other comprehensive income
    
    
    
    
    
    
    
    
    
    

    
    
    
    

    Gain on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49.5
    
    
    
    
    
    
    
    49.5Total Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161.4Issuance of common stock
    
    
    1,708,910
    
    
    
    0.1
    
    
    
    8.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.4Shares subscribed but unissued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on dilution of interest in associate company
on its issuance of new shares, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.7Shares transferred by SC-Trust to employees
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    1.0Cash dividend paid at the rate of US$0.08 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26.2
    )
    
    
    
    
    
    
    
    
    
    
    (26.2
    )Balance as of March 31, 2004
    
    
    316,251,710
    
    
    $
    17.2
    
    
    $
    416.2
    
    
    
    
    
    
    
    
    
    
    $
    172.8
    
    
    $
    29.4
    
    
    $
    (1.7
    )
    
    $
    633.9
  F-5




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##### Table of Contents



Satyam Computer Services Limited
Consolidated Statements of Shareholders Equity and Comprehensive Income  (Millions of US Dollars except per share data and as stated otherwise)
 Common Stock
    
    Additional
    
    Shares
    
    Deferred
    
    Retained
    
    Accumulated
    
    Shares held
    
    Totalpaid-in
    
    subscribed but
    
    stock-based
    
    earnings
    
    other
    
    by
    
    Shareholders'capital
    
    unissued
    
    compensation
    
    
    
    
    
    comprehensive
    
    SC-Trust
    
    EquityShares
    
    Par Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    income/(loss)Balance as of March 31, 2004
    
    
    316,251,710
    
    
    $
    17.2
    
    
    $
    416.2
    
    
    
    
    
    
    
    
    
    
    $
    172.8
    
    
    $
    29.4
    
    
    $
    (1.7
    )
    
    $
    633.9Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153.8
    
    
    
    
    
    
    
    
    
    
    
    153.8Other comprehensive incomeGain on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Total Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154.0Issuance of common stock
    
    
    3,013,581
    
    
    
    0.2
    
    
    
    14.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.9Shares subscribed but unissued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Gain on dilution of interest in associate company
on its issuance of new shares, net of taxes
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9Shares transferred by SC-Trust to employees
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.5Cash dividend paid at the rate of US$0.12 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37.6
    )
    
    
    
    
    
    
    
    
    
    
    (37.6
    )Balance as of March 31, 2005
    
    
    319,265,291
    
    
    $
    17.4
    
    
    $
    433.6
    
    
    $
    0.1
    
    
    $
    (0.3
    )
    
    $
    289.0
    
    
    $
    29.6
    
    
    $
    (1.5
    )
    
    $
    767.9
  F-6




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##### Table of Contents



Satyam Computer Services Limited
Consolidated Statements of Shareholders Equity and Comprehensive Income  (Millions of US Dollars except per share data and as stated otherwise)
 Common Stock
    
    Additional
    
    Shares
    
    Deferred
    
    Retained
    
    Accumulated
    
    Shares held
    
    Totalpaid-in
    
    subscribed but
    
    stock-based
    
    earnings
    
    other
    
    by
    
    Shareholders'capital
    
    unissued
    
    compensation
    
    
    
    
    
    comprehensive
    
    SC-Trust
    
    EquityShares
    
    Par Value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    income/(loss)Balance as of March 31, 2005
    
    
    319,265,291
    
    
    $
    17.4
    
    
    $
    433.6
    
    
    $
    0.1
    
    
    $
    (0.3
    )
    
    $
    289.0
    
    
    $
    29.6
    
    
    $
    (1.5
    )
    
    $
    767.9Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249.4
    
    
    
    
    
    
    
    
    
    
    
    249.4Other comprehensive income/(loss)Loss on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    (13.8
    )Total Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235.6Issuance of common stock
    
    
    5,184,248
    
    
    
    0.2
    
    
    
    30.3
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30.4Shares subscribed but unissued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4Deferred stock based compensation
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8Shares transferred by SC-Trust to employees
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.6Cash dividend paid at the rate of US$0.11 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41.3
    )
    
    
    
    
    
    
    
    
    
    
    (41.3
    )Balance as of March 31, 2006
    
    
    324,449,539
    
    
    $
    17.6
    
    
    $
    465.1
    
    
    $
    0.4
    
    
    
    ($0.4
    )
    
    $
    497.1
    
    
    $
    15.8
    
    
    
    ($1.2
    )
    
    $
    994.4
  F-7




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##### Table of Contents



Satyam Computer Services Limited
 
 Consolidated Statements of Cashflows
 (Millions of US Dollars except per share data and as stated otherwise)
 Year ended March 31,2006
    
    2005
    
    2004Cash Flows From Operating ActivitiesNet income
    
    $
    249.4
    
    
    $
    153.8
    
    
    $
    111.9Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of intangible assets
    
    
    31.5
    
    
    
    25.0
    
    
    
    24.4Stock-based compensation
    
    
    0.8
    
    
    
    1.9
    
    
    
    1.6Deferred income taxes
    
    
    (5.1
    )
    
    
    (1.9
    )
    
    
    (1.0
    )Gain on sale of investments
    
    
    (43.6
    )
    
    
    
    
    
    
    (2.7
    )Loss on sale of premises and equipment
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.3Minority Interest
    
    
    (0.1
    )
    
    
    
    
    
    
    Equity in losses of associated companies, net of taxes
    
    
    0.8
    
    
    
    1.1
    
    
    
    2.6Changes in assets and liabilities:Accounts receivable, net and unbilled revenue on contracts
    
    
    (81.9
    )
    
    
    (40.7
    )
    
    
    (22.5
    )Prepaid expenses and other receivables, net
    
    
    (31.7
    )
    
    
    16.6
    
    
    
    (24.7
    )Other assets, net
    
    
    (1.8
    )
    
    
    (8.0
    )
    
    
    5.0Accounts payable
    
    
    (2.5
    )
    
    
    2.5
    
    
    
    (4.2
    )Accrued expenses and other current liabilities
    
    
    40.6
    
    
    
    17.2
    
    
    
    (1.5
    )Unearned and deferred revenue
    
    
    6.1
    
    
    
    3.5
    
    
    
    Net cash provided by operating activities
    
    
    162.7
    
    
    
    171.3
    
    
    
    89.2Cash Flows From Investing ActivitiesProceeds from maturity of bank deposits
    
    
    
    
    
    
    332.1
    
    
    
    Investments in bank deposits
    
    
    
    
    
    
    (411.5
    )
    
    
    (45.4
    )Purchase of premises and equipment
    
    
    (54.1
    )
    
    
    (39.0
    )
    
    
    (16.7
    )Proceeds from sale of premises and equipment
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.2Payment for purchase of Citisoft Plc, net of cash acquired
    
    
    (12.1
    )
    
    
    
    
    
    
    Payment for purchase of Knowledge Dynamics Pte. Ltd., net of cash acquired
    
    
    (1.6
    )
    
    
    
    
    
    
    Purchase of investments
    
    
    
    
    
    
    (7.6
    )
    
    
    (4.2
    )Proceeds from sale of investments
    
    
    62.3
    
    
    
    10.2
    
    
    
    6.1Net cash used in investing activities
    
    
    (5.2
    )
    
    
    (115.5
    )
    
    
    (60.0
    )Cash Flows From Financing ActivitiesProceeds from short-term debt
    
    
    3.6
    
    
    
    1.7
    
    
    
    Repayments of short-term debt
    
    
    (1.2
    )
    
    
    
    
    
    
    (2.5
    )Proceeds from long-term debt
    
    
    16.3
    
    
    
    0.2
    
    
    
    1.7Repayment of long-term debt
    
    
    (2.7
    )
    
    
    (2.2
    )
    
    
    (3.4
    )Issuance of common stock
    
    
    31.0
    
    
    
    15.4
    
    
    
    9.4Shares subscribed but unissued
    
    
    0.4
    
    
    
    0.1
    
    
    
    Issuance of Preferred stock by subsidiary, net of issuance cost
    
    
    
    
    
    
    9.5
    
    
    
    9.4Cash dividends paid
    
    
    (41.3
    )
    
    
    (37.6
    )
    
    
    (26.2
    )Net cash provided by/(used in) financing activities
    
    
    6.1
    
    
    
    (12.9
    )
    
    
    (11.6
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (0.6
    )
    
    
    0.2
    
    
    
    6.9Net change in cash and cash equivalents
    
    
    163.0
    
    
    
    43.1
    
    
    
    24.5Cash and cash equivalents at the beginning of the period
    
    
    129.8
    
    
    
    86.7
    
    
    
    62.2Cash and cash equivalents at the end of the period
    
    $
    292.8
    
    
    $
    129.8
    
    
    $
    86.7Supplementary information:Cash paid during the period for:Income taxes
    
    $
    44.9
    
    
    $
    25.4
    
    
    $
    31.9Interest
    
    
    1.3
    
    
    
    0.5
    
    
    
    0.5Non-cash items:Capital leases and hire purchase
    
    $
    2.5
    
    
    $
    2.0
    
    
    $
    1.3Deferred consideration for purchase of Citisoft Plc
    
    
    3.1
    
    
    
    
    
    
    
    Deferred consideration for purchase of Knowledge Dynamics Pte Ltd
    
    
    1.5
    
    
    
    
    
    
    
    
  F-8




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##### Table of Contents



Satyam Computer Services Limited
 
  1. Description of Business
 Satyam Satyam Computer Services
  2. Summary of Significant Accounting Policies
 a) Principles of Consolidation and Basis of Presentation
      b) Use of Estimates
  F-9




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##### Table of Contents



Satyam Computer Services Limited
 c) Foreign Currency Translation
   d) Revenue Recognition
      e) Cash and Cash Equivalents
  f) Premises, Equipment and Depreciation
  F-10




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##### Table of Contents



Satyam Computer Services Limited
   g) Software Development Costs
 Accounting for Costs of Computer Software to be Sold,
Leased or Otherwise Marketed.
  h) Goodwill and Other Intangible Assets
  i) Impairment of Long-lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
 j) Investments
 Accounting for Certain Investments in Debt and Equity
Securities
 k) Cost of Revenues and Selling, General and Administrative Expenses
   l) Advertising Costs
  F-11




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##### Table of Contents



Satyam Computer Services Limited
 m) Employee Benefits
 i) Provident Fund
  ii) Gratuity Plan
   iii) Superannuation Plan
  iv) Other Benefit Plans
  n) Income Taxes
 Accounting for
Income Taxes
 o) Earnings Per Share
 Earnings Per
Share
 p) Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Certain Transactions
involving Stock Compensation an interpretation of APB Opinion No. 25, Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure, an amendment of FASB
Statement No. 123
 F-12




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##### Table of Contents



Satyam Computer Services Limited
 Pro forma disclosure
  (US$ in millions except per share data)Year ended March 31,2006
    
    
    2005
    
    
    2004Net IncomeAs reported
    
    $
    249.4
    
    
    $
    153.8
    
    
    $
    111.9Add: Charge under APB25
    
    
    0.8
    
    
    
    1.9
    
    
    
    1.6Less: Charge under FAS123
    
    
    (22.2
    )
    
    
    (22.6
    )
    
    
    (25.2
    )Pro forma
    
    $
    228.0
    
    
    $
    133.1
    
    
    $
    88.3Earnings Per Share:BasicAs reported
    
    $
    0.78
    
    
    $
    0.49
    
    
    $
    0.36Pro forma
    
    $
    0.71
    
    
    $
    0.42
    
    
    $
    0.28DilutedAs reported
    
    $
    0.75
    
    
    $
    0.48
    
    
    $
    0.35Pro forma
    
    $
    0.69
    
    
    $
    0.41
    
    
    $
    0.28
 Note: The pro forma disclosures shown above are not representative of the effects on net income
and earnings per share in future years.
   Year ended March 31,2006
    

    2005
    

    2004Dividend yield
    
    
    0.75
    %
    
    
    0.75
    %
    
    
    0.61
    %Expected volatility
    
    
    57.22
    %
    
    
    61
    %
    
    
    69
    %Risk-free interest rate
    
    
    7
    %
    
    
    7
    %
    
    
    7
    %Expected term (in years)
    
    

    1.26

    
    
    2.03

    
    
    2.69
 q) Derivative financial instruments
 Accounting for Derivative Instruments and Hedging
Activities
 r) Recently issued accounting pronouncements
 Share-Based Payments
 Share-Based Payment, an amendment of FASB
Statements No. 123 and 95 Accounting for Stock Issued to
Employees
 F-13




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##### Table of Contents



Satyam Computer Services Limited
   Accounting Changes and Error Corrections
  s) Reclassifications
  3. Acquisitions
 a) Citisoft Plc.
   F-14




---



##### Table of Contents



Satyam Computer Services Limited
   US$ in millionsPurchase price
    
    $
    17.4Allocated to:Net current assets
    
    $
    2.2Tangible assets
    
    
    0.3Customer Contracts related intangibles
    
    
    0.8Customer relationship related intangibles
    
    
    5.4Trade name
    
    
    0.7Goodwill
    
    
    10.3Deferred tax liability
    
    
    (2.3
    )Total
    
    $
    17.4
  b) Knowledge Dynamics Pte Ltd (Knowledge Dynamics).
    F-15




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##### Table of Contents



Satyam Computer Services Limited
 US$ in millionsPurchase price
    
    $
    3.3Allocated to:Net current assets
    
    $
    0.5Tangible assets
    
    
    Customer Contracts and Related Relationships
    
    
    1.0Trade name
    
    
    0.1Non-Compete agreements
    
    
    Internally developed technology
    
    
    Goodwill
    
    
    2.1Deferred tax liability
    
    
    (0.4
    )Total
    
    $
    3.3
  4. Preferred Stock of Subsidiary
    5. Investments
  (US$ in millions)As of March 31,2006
    
    
    2005Available-for-sale securitiesCost and fair value
    
    
    
    
    
    
    Other investments, at cost
    
    $
    3.7
    
    
    $
    3.6Less: Provision for impairment
    
    
    (3.7
    )
    
    
    (3.6
    )Investments  Non current
    
    
    
    
    
    
    
  F-16




---



##### Table of Contents



Satyam Computer Services Limited
  6. Investments in bank deposits
  7. Investments in associated companies
  (US$ in millions)As of March 31,2006
    
    2005Sify
    
    
    
    
    
    $
    20.4Satyam Venture
    
    
    2.7
    
    
    
    2.0CA Satyam
    
    
    0.8
    
    
    
    0.8Total
    
    $
    3.5
    
    
    $
    23.2
 Sify
     (US$ in millions)As of March 31,Balance sheet
    
    2005
    
    2004Current assets
    
    $
    51.9
    
    
    $
    49.3Non-current assets
    
    
    40.2
    
    
    
    38.2Current liabilities
    
    
    33.3
    
    
    
    23.6Net current asset
    
    
    18.6
    
    
    
    25.7Shareholders equity
    
    
    57.3
    
    
    
    62.6
 (US$ in millions)Period ended
    
    Year ended March 31,Statement of operations
    
    November 9, 2005
    
    2005
    
    2004Revenues
    
    $
    60.2
    
    
    $
    82.8
    
    
    $
    61.1Gross profit
    
    
    25.7
    
    
    
    36.4
    
    
    
    28.9Operating loss
    
    
    7.2
    
    
    
    10.4
    
    
    
    12.9Net loss
    
    
    5.3
    
    
    
    7.1
    
    
    
    8.0
  F-17




---



##### Table of Contents



Satyam Computer Services Limited
 Satyam Venture
  CA Satyam
  8. Premises, Equipment and Depreciation
  (US$ in millions)As of March 31,2006
    
    
    2005Freehold land
    
    $
    7.0
    
    
    $
    6.1Leasehold land
    
    
    1.8
    
    
    
    1.9Premises
    
    
    23.6
    
    
    
    14.3Computers including servers
    
    
    109.7
    
    
    
    99.8System software
    
    
    21.0
    
    
    
    15.8Office equipment
    
    
    61.6
    
    
    
    51.0Furniture and fixtures
    
    
    40.1
    
    
    
    31.9Vehicles
    
    
    7.0
    
    
    
    5.6Assets under construction
    
    
    19.9
    
    
    
    16.1Total
    
    
    291.7
    
    
    
    242.5Less: Accumulated depreciation
    
    
    (185.1
    )
    
    
    (158.4
    )Premises and equipment, net
    
    $
    106.6
    
    
    $
    84.1
  Premises
    
    28 yearsComputers including servers
    
    2 5 yearsSystem Software
    
    3 yearsOffice equipment
    
    5 yearsFurniture and fixtures
    
    5 yearsVehicles
    
    5 years
  F-18




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##### Table of Contents



Satyam Computer Services Limited
 9. Goodwill
  (US$ in millions)As of March 31,2006
    
    
    2005GoodwillAcquisition of Citisoft Plc
    
    $
    10.5
    
    
    
    Acquisition of Knowledge Dynamics Pte Ltd
    
    
    2.0
    
    
    
    Acquisition of minority interest inSatyam Enterprise Solutions Limited
    
    
    23.1
    
    
    $
    23.6Satyam Technologies Inc.
    
    
    3.6
    
    
    
    3.7Total
    
    
    39.2
    
    
    
    27.3Less: Accumulated amortization
    
    
    (11.6
    )
    
    
    (11.8
    )Goodwill, net
    
    $
    27.6
    
    
    $
    15.5
  (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Goodwill at the beginning of the year
    
    $
    15.5
    
    
    $
    15.5
    
    
    $
    14.2Acquisitions during the year
    
    
    12.4
    
    
    
    
    
    
    
    Impairment during the year
    
    
    
    
    
    
    
    
    
    
    Change due to foreign exchange
    
    
    (0.3
    )
    
    
    
    
    
    
    1.3Goodwill at the end of the year
    
    $
    27.6
    
    
    $
    15.5
    
    
    $
    15.5
 .
 10. Intangible assets, net
  (US$ in millions)As of March 31, 2006
    
    As of March 31, 2005Acquired and amortized
    
    Weighted
    
    Gross
    
    Accumulated
    
    Net
    
    Gross
    
    Accumulated
    
    Netintangible assets
    
    average life
    
    carrying
    
    amortization
    
    intangible
    
    carrying
    
    amortization
    
    intangible(in years)
    
    amount
    
    
    
    
    
    assets
    
    amount
    
    
    
    
    
    assetsCitisoft Plca) Customer Relationship
    
    
    8
    
    
    $
    4.9
    
    
    $
    (0.6
    )
    
    $
    4.3
    
    
    
    
    
    
    
    
    
    
    
    b) Customer Contracts
    
    
    6
    
    
    
    0.8
    
    
    
    (0.1
    )
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    c) Trade name
    
    
    5
    
    
    
    0.6
    
    
    
    (0.1
    )
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    6.3
    
    
    $
    (0.8
    )
    
    $
    5.5
    
    
    
    
    
    
    
    
    
    
    
    Knowledge Dynamics Pte
Ltda) Customer Contracts and
Related Relationships
    
    
    9
    
    
    $
    1.0
    
    
    $
    (0.1
    )
    
    $
    0.9b) Non-Compete agreements
    
    
    5
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1c.) Trade name
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    d.) Internally developed
technology
    
    
    3
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    1.2
    
    
    $
    (0.1
    )
    
    $
    1.1
    
    
    
    
    
    
    
    
    
    
    
    
  F-19




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##### Table of Contents



Satyam Computer Services Limited
  (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Identifiable intangibles at the beginning of the year
    
    
    
    
    
    
    
    
    
    
    Acquisitions during the year
    
    $
    8.0
    
    
    
    
    
    
    
    Amortization during the year
    
    
    (0.9
    )
    
    
    
    
    
    
    Change due to foreign exchange
    
    
    (0.5
    )
    
    
    
    
    
    
    Identifiable intangibles at the end of the year
    
    $
    6.6
    
    
    
    
    
    
    
    
   US$ in millionsEstimated amortization expense:For the year ended March 31,2007
    
    
    1.12008
    
    
    1.12009
    
    
    1.02010
    
    
    1.02011
    
    
    0.9Beyond 2011
    
    
    1.5
 11. Income Taxes
  (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Foreign taxesCurrent
    
    $
    15.4
    
    
    $
    18.1
    
    
    $
    20.2Deferred
    
    
    (0.8
    )
    
    
    (0.6
    )
    
    
    0.3Domestic taxesCurrent
    
    
    27.4
    
    
    
    9.1
    
    
    
    3.3Deferred
    
    
    (4.3
    )
    
    
    (1.3
    )
    
    
    (1.3
    )Aggregate taxes
    
    $
    37.7
    
    
    $
    25.3
    
    
    $
    22.5
  (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Net income before taxes
    
    $
    287.8
    
    
    $
    180.2
    
    
    $
    137.0Enacted tax rates in India
    
    
    33.66
    %
    
    
    36.59
    %
    
    
    35.88
    %Computed tax expense
    
    $
    96.9
    
    
    $
    65.9
    
    
    $
    49.2Tax effect due to non-taxable export income
    
    
    (75.3
    )
    
    
    (52.7
    )
    
    
    (38.2
    )Difference arising from different tax rates in other tax jurisdictions
    
    
    10.2
    
    
    
    5.5
    
    
    
    7.0Difference arising from different tax rates on gain on sale of
investment
    
    
    (7.0
    )
    
    
    
    
    
    
    (0.6
    )Stock- based compensation (non-deductible)
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.6Changes in valuation allowance, including losses of subsidiaries
    
    
    5.4
    
    
    
    3.5
    
    
    
    0.8Effect of tax rate change
    
    
    0.1
    
    
    
    
    
    
    
    Others
    
    
    7.1
    
    
    
    2.4
    
    
    
    3.7Income taxes recognized in the statement of income
    
    $
    37.7
    
    
    $
    25.3
    
    
    $
    22.5
  F-20




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##### Table of Contents



Satyam Computer Services Limited
    (US$ in millions)As of March 31,2006
    
    2005Deferred tax assets:Operating loss carry forwards
    
    $
    24.0
    
    
    $
    21.1Provision for accounts receivable, advances and investments
    
    
    5.7
    
    
    
    5.3Premises and equipment
    
    
    0.5
    
    
    
    0.4Provision for gratuity and unutilized leaves
    
    
    6.5
    
    
    
    3.8Gross deferred tax assets
    
    
    36.6
    
    
    
    30.6Less: Valuation allowance
    
    
    (24.0
    )
    
    
    (21.1
    )Total deferred tax assets
    
    
    12.7
    
    
    
    9.5Deferred tax liabilities:Premises and equipment
    
    
    (6.4
    )
    
    
    (3.5
    )Provision for accounts receivable and advances
    
    
    (2.8
    )
    
    
    (2.6
    )Intangibles
    
    
    (2.2
    )
    
    
    Investments in associated companies and gain on dilution
    
    
    (0.3
    )
    
    
    (5.4
    )Total deferred tax liabilities
    
    
    (11.7
    )
    
    
    (11.5
    )Net deferred tax assets/ (liabilities)
    
    $
    1.0
    
    
    $
    (2.0
    )
   F-21




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##### Table of Contents



Satyam Computer Services Limited
  (US$ in millions)As of March 31,2006
    
    
    2005Current assets  deferred income taxes
    
    $
    12.2
    
    
    $
    9.1Non-current assets  other assets*
    
    
    0.5
    
    
    
    0.4Current liabilities  accrued expenses and other liabilities*
    
    
    (2.8
    )
    
    
    (2.6
    )Long-term liabilities  deferred income taxes
    
    
    (8.9
    )
    
    
    (8.9
    )Net deferred tax asset/ (liabilities)
    
    $
    1.0
    
    
    $
    (2.0
    )
 
 *
    
    Included in other assets and accrued expenses and other liabilities respectively. 12. Borrowings
 Short-term debt
  Long-term debt
  (US$ in millions)As of March 31,2006
    
    
    2005Secured debts,representing obligation principally to banks and financial institutions 10.25% Rupee loans of SC-Trust, maturing serially through fiscal 2008
    
    $
    1.3
    
    
    $
    1.9 0.95% above 6 month LIBOR working capital term loan maturing
serially through fiscal 2009
    
    
    5.6
    
    
    
     0.95% above 6 month LIBOR external commercial borrowing maturing
serially through fiscal 2009
    
    
    10.5
    
    
    
    Hire Purchase Loans
    
    
    2.9
    
    
    
    2.4Total Debt
    
    
    20.3
    
    
    
    4.3Less: Current portion of long-term debt
    
    
    (2.4
    )
    
    
    (3.1
    )Long-term debt, net of current portion
    
    $
    17.9
    
    
    $
    1.2
   Unused lines of credit
  (US$ in millions)As of March 31,2006
    
    
    2005Short-term debt
    
    $
    3.8
    
    
    $
    3.4Long-term debt
    
    
    3.9
    
    
    
    20.0Non-fund facilities
    
    
    4.4
    
    
    
    14.1Total Unused lines of credit
    
    $
    12.1
    
    
    $
    37.5
 F-22




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##### Table of Contents



Satyam Computer Services Limited
  13. Employee Benefits
 The Gratuity Plan
  (US$ in millions)Year ended March 31,2006
    
    2005
    
    2004Accumulated benefit obligation
    
    $
    5.7
    
    
    $
    2.6
    
    
    $
    1.9Change in projected benefit obligationProjected benefit obligation at beginning of the period
    
    $
    5.2
    
    
    $
    4.0
    
    
    $
    2.5Service cost
    
    
    1.9
    
    
    
    1.5
    
    
    
    0.9Interest cost
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.2Actuarial loss/(gain)
    
    
    0.9
    
    
    
    (0.3
    )
    
    
    0.3Benefits paid
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Effect of exchange rate changes
    
    
    (0.1
    )
    
    
    
    
    
    
    0.3Projected benefit obligation at end of the period
    
    
    7.8
    
    
    
    5.2
    
    
    
    4.0Change in plan assetsEmployer contribution
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.2Benefits paid from plan assets
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Fair value of plan assets at end of the period
    
    
    
    
    
    
    
    
    
    
    Funded status of the plans
    
    
    (7.8
    )
    
    
    (5.2
    )
    
    
    (4.0
    )Unrecognized net actuarial loss
    
    
    1.3
    
    
    
    0.4
    
    
    
    1.2Amount recognized during the period
    
    
    
    
    
    
    
    
    
    
    Accrued benefit cost
    
    $
    (6.5
    )
    
    $
    (4.8
    )
    
    $
    (2.8
    )The components of net gratuity costs are reflected below:Service cost
    
    
    1.9
    
    
    $
    1.5
    
    
    $
    0.9Interest cost
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.2Amortization
    
    
    
    
    
    
    
    
    
    
    Amount recognized during the period
    
    
    
    
    
    
    
    
    
    
    Net gratuity costs
    
    $
    2.3
    
    
    $
    1.8
    
    
    $
    1.1
 F-23




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##### Table of Contents



Satyam Computer Services Limited
  Weighted-average assumptions used to determine benefit obligations:
 Year ended March 31,2006

    
    2005

    
    2004Discount rate
    
    
    8
    %
    
    
    8.0
    %
    
    
    7.0
    %Long-term rate of compensation increase
    
    
    7
    %
    
    
    7.0
    %
    
    
    7.0
    %
 Weighted-average assumptions used to determine net periodic benefit cost:
 Year ended March 31,2006
    

    2005
    

    2004Discount rate
    
    
    8
    %
    
    
    7.0
    %
    
    
    7.0
    %Long-term rate of compensation increase
    
    
    7
    %
    
    
    7.0
    %
    
    
    7.0
    %
 Cash Flows
  (US$ in millions)For the financial year ended March 31,
    
    Expected contribution2008
    
    $
    1.72009
    
    
    2.02010
    
    
    2.52011
    
    
    3.12012  2015
    
    
    13.0
 Provident Fund
  Superannuation Plan
  14. Earnings per Share
   F-24




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##### Table of Contents



Satyam Computer Services Limited
  (US$ in millions except per share data)Year ended March 31,2006
    
    
    2005
    
    
    2004Net income
    
    $
    249.4
    
    
    $
    153.8
    
    
    $
    111.9Equity Shares:Average outstanding shares (in millions)
    
    
    320.6
    
    
    
    316.2
    
    
    
    313.2Dilutive effect of Associate Stock Options (in millions)
    
    
    10.8
    
    
    
    7.4
    
    
    
    3.9Share and share equivalents(in millions)
    
    
    331.4
    
    
    
    323.6
    
    
    
    317.1Earnings per shareBasic
    
    $
    0.78
    
    
    $
    0.49
    
    
    $
    0.36Diluted
    
    $
    0.75
    
    
    $
    0.48
    
    
    $
    0.35
 15. Stock-based Compensation Plans
 ASOP plan
  ASOP B plan
  ASOP ADS plan
  Warrant grants
  F-25




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##### Table of Contents



Satyam Computer Services Limited
    Year ended March 31,2006
    
    2005
    
    2004Number of
    
    Weighted
    
    Number of
    
    Weighted
    
    Number of
    
    WeightedASOP Plan
    
    equity
    
    Average
    
    equity
    
    Average
    
    equity
    
    Averageshares
    
    Exercise
    
    shares
    
    Exercise
    
    shares
    
    ExercisePrice
    
    
    
    
    
    Price
    
    
    
    
    
    PriceBalance at the beginning of the year
    
    
    240,500
    
    
    $
    2.35
    
    
    
    58,200
    
    
    $
    1.99
    
    
    
    1,167,380
    
    
    $
    1.31Granted
    
    
    44,000
    
    
    $
    2.74
    
    
    
    435,340
    
    
    $
    2.24
    
    
    
    193,700
    
    
    $
    1.68Exercised
    
    
    (231,200
    )
    
    $
    2.26
    
    
    
    (253,040
    )
    
    $
    2.09
    
    
    
    (523,140
    )
    
    $
    1.81Cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,700
    )
    
    $
    1.90Lapsed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (768,040
    )
    
    $
    1.18Balance at the end of the year
    
    
    53,300
    
    
    $
    2.83
    
    
    
    240,500
    
    
    $
    2.35
    
    
    
    58,200
    
    
    $
    1.99Exercisable at the end of the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,600
    
    
    $
    1.81Weighted average fair value of options
granted during the year
    
    
    44,000
    
    
    $
    12.15
    
    
    
    435,340
    
    
    $
    7.65
    
    
    
    193,700
    
    
    $
    8.72
 Year ended March 31,2006
    
    2005
    
    2004Number of
    
    Weighted
    
    Number of
    
    Weighted
    
    Number of
    
    WeightedASOP B
    
    equity
    
    Average
    
    equity
    
    Average
    
    equity
    
    Averageshares
    
    Exercise
    
    shares
    
    Exercise
    
    shares
    
    ExercisePrice
    
    
    
    
    
    Price
    
    
    
    
    
    PriceBalance
at the beginning of the year
    
    
    26,830,315
    
    
    $
    7.14
    
    
    
    17,510,481
    
    
    $
    6.05
    
    
    
    14,464,148
    
    
    $
    5.33Granted
    
    
    3,289,776
    
    
    $
    9.41
    
    
    
    14,205,757
    
    
    $
    8.06
    
    
    
    5,110,799
    
    
    $
    6.33Exercised
    
    
    (4,519,802
    )
    
    $
    6.10
    
    
    
    (2,637,399
    )
    
    $
    5.02
    
    
    
    (1,418,938
    )
    
    $
    5.09Cancelled
    
    
    (2,797,595
    )
    
    $
    7.54
    
    
    
    (2,248,524
    )
    
    $
    6.67
    
    
    
    (645,528
    )
    
    $
    5.53Balance at the end of the year
    
    
    22,802,694
    
    
    $
    7.47
    
    
    
    26,830,315
    
    
    $
    7.14
    
    
    
    17,510,481
    
    
    $
    6.05Exercisable at the end of the year
    
    
    5,124,404
    
    
    $
    6.86
    
    
    
    5,695,198
    
    
    $
    6.76
    
    
    
    4,517,111
    
    
    $
    6.31Weighted average fair value of options
granted during the year
    
    
    3,289,776
    
    
    $
    9.41
    
    
    
    14,205,757
    
    
    $
    8.06
    
    
    
    5,110,799
    
    
    $
    6.33
 F-26




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##### Table of Contents



Satyam Computer Services Limited
 Year ended March 31,2006
    
    2005
    
    2004Number of
    
    Weighted
    
    Number of
    
    Weighted
    
    Number of
    
    WeightedASOP (ADS)
    
    equity
    
    Average
    
    equity
    
    Average
    
    equity
    
    Averageshares
    
    Exercise
    
    shares
    
    Exercise
    
    shares
    
    ExercisePrice
    
    
    
    
    
    Price
    
    
    
    
    
    PriceBalance at the beginning of the year
    
    
    2,515,802
    
    
    $
    7.42
    
    
    
    2,362,864
    
    
    $
    5.92
    
    
    
    2,526,550
    
    
    $
    5.08Granted
    
    
    320,430
    
    
    $
    11.48
    
    
    
    733,448
    
    
    $
    11.42
    
    
    
    254,686
    
    
    $
    8.65Exercised
    
    
    (664,446
    )
    
    $
    5.38
    
    
    
    (376,182
    )
    
    $
    5.41
    
    
    
    (289,972
    )
    
    $
    5.42Cancelled
    
    
    (180,444
    )
    
    $
    14.81
    
    
    
    (204,328
    )
    
    $
    7.82
    
    
    
    (128,400
    )
    
    $
    5.41Balance at the end of the year
    
    
    1,991,342
    
    
    $
    8.49
    
    
    
    2,515,802
    
    
    $
    7.42
    
    
    
    2,362,864
    
    
    $
    5.92Exercisable at the end of the year
    
    
    932,882
    
    
    $
    5.93
    
    
    
    713,700
    
    
    $
    5.43
    
    
    
    343,506
    
    
    $
    4.91Weighted average fair value of options
granted during the year
    
    
    320,430
    
    
    $
    11.48
    
    
    
    733,448
    
    
    $
    11.42
    
    
    
    254,686
    
    
    $
    8.65
  Outstanding
    
    ExercisableRange of Exercise Price
    
    Weighted
    
    Weighted
    
    Number of
    
    Weighted
    
    Number of(per equity share)
    
    Average Exercise
    
    Average
    
    equity shares
    
    Average Exercise
    
    equity sharesPrice (per equity
    
    remaining
    
    arising out of
    
    Price (per equity
    
    arising out ofshare)
    
    contractual life
    
    options
    
    share)
    
    optionsRs 111.68-
    
    $
    2.51-
    
    
    Rs 210.24
    
    
    
    
    
    
    
    
    
    Rs 211.34Rs 236.95
    
    $
    5.33
    
    
    $
    4.73
    
    
    
    0.48
    
    
    
    4,710,074
    
    
    $
    4.75
    
    
    
    2,475,018Rs 236.96-
    
    $
    5.33-
    
    
    Rs 364.10-
    
    
    
    
    
    
    
    
    
    Rs 349.36Rs 554.53
    
    $
    12.47
    
    
    $
    8.19
    
    
    
    1.02
    
    
    
    19,860,179
    
    
    $
    7.85
    
    
    
    3,471,231Rs 554.54-
    
    $
    12.47-
    
    
    Rs 621.64-
    
    
    
    
    
    
    
    
    
    Rs 625.39Rs 716.06
    
    $
    16.10
    
    
    $
    13.98
    
    
    
    1.46
    
    
    
    277,083
    
    
    $
    14.06
    
    
    
    111,037
 The US$ numbers in the above tables have been translated using the closing exchange rate as of
March 31, 2006 1US$= Rs 44.48
 Stock based compensation plan of Nipuna
   Deferred Stock-based compensation
   F-27




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##### Table of Contents



Satyam Computer Services Limited
 16. Segmental Reporting
 Disclosures about Segments of an Enterprise and Related Information
 
    
    IT services, providing a comprehensive range of services,
including application development and maintenance, consulting and
enterprise business solutions, extended engineering solutions,
infrastructure management services. Satyam provides its customers
the ability to meet all of their information technology needs from
one service provider. Satyams 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 also assists its
customers in making their existing computing systems accessible
over the Internet. The segment information for the year ended
March 31, 2006 includes the results of Citisoft and Knowledge
Dynamics which were acquired during the year.
    
    Business Process Outsourcing,providing BPO services covering HR,
Finance & Accounting, Customer Contact (Voice, Mail and Chat), and
Transaction Processing (industry-specific offerings).
  Business Segments
 (US$ in millions)IT
    
    BPO
    
    Elimination
    
    ConsolidatedServices
    
    
    
    
    
    
    
    
    
    totalsFor the year ended March 31, 2006Revenue  External customers
    
    $
    1,082.7
    
    
    $
    13.6
    
    
    
    
    
    
    $
    1,096.3Revenue  Inter-segment
    
    
    0.8
    
    
    
    6.4
    
    
    
    (7.2
    )
    
    
    Total Revenues
    
    
    1,083.5
    
    
    
    20.0
    
    
    
    (7.2
    )
    
    
    1096.3Operating income / (loss)
    
    
    228.5
    
    
    
    (8.8
    )
    
    
    
    
    
    
    219.7Equity in earnings/(losses) of associated
companies, net of taxes
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Net income / (loss)
    
    
    259.0
    
    
    
    (9.6
    )
    
    
    
    
    
    
    249.4Segment assets
    
    
    1,170.8
    
    
    
    27.7
    
    
    
    (17.3
    )
    
    
    1,181.2Depreciation and amortization
    
    
    29.0
    
    
    
    2.5
    
    
    
    
    
    
    
    31.5Capital expenditures for long-lived assets
    
    
    53.4
    
    
    
    3.2
    
    
    
    
    
    
    
    56.6For the year ended March 31, 2005Revenue  External customers
    
    $
    786.7
    
    
    $
    6.9
    
    
    
    
    
    
    $
    793.6Revenue  Inter-segment
    
    
    0.7
    
    
    
    3.1
    
    
    $
    (3.8
    )
    
    
    Total Revenues
    
    
    787.4
    
    
    
    10.0
    
    
    
    (3.8
    )
    
    
    793.6Operating income / (loss)
    
    
    171.8
    
    
    
    (9.3
    )
    
    
    
    
    
    
    162.5Equity in earnings/(losses) of associated
companies, net of taxes
    
    
    (1.1
    )
    
    
    
    
    
    
    
    
    
    
    (1.1
    )Net income / (loss)
    
    
    163.7
    
    
    
    (9.9
    )
    
    
    
    
    
    
    153.8Segment assets
    
    
    885.2
    
    
    
    16.1
    
    
    
    (17.2
    )
    
    
    884.1Depreciation
    
    
    23.4
    
    
    
    1.6
    
    
    
    
    
    
    
    25.0Capital expenditures for long-lived assets
    
    
    37.4
    
    
    
    3.7
    
    
    
    
    
    
    
    41.1
 F-28




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##### Table of Contents



Satyam Computer Services Limited
 IT
    
    BPO
    
    Elimination
    
    ConsolidatedServices
    
    
    
    
    
    
    
    
    
    totalsFor the year ended March 31, 2004Revenue  External customers
    
    $
    565.1
    
    
    $
    1.3
    
    
    
    
    
    
    $
    566.4Revenue  Inter-segment
    
    
    0.5
    
    
    
    1.1
    
    
    $
    (1.6
    )
    
    
    Total Revenues
    
    
    565.6
    
    
    
    2.4
    
    
    
    (1.6
    )
    
    
    566.4Operating income
    
    
    125.2
    
    
    
    (4.1
    )
    
    
    
    
    
    
    121.1Equity in earnings/(losses) of associated
companies, net of taxes
    
    
    (2.6
    )
    
    
    
    
    
    
    
    
    
    
    (2.6
    )Net income
    
    
    116.0
    
    
    
    (4.1
    )
    
    
    
    
    
    
    111.9Segment assets
    
    
    719.3
    
    
    
    9.9
    
    
    
    (15.4
    )
    
    
    713.8Depreciation
    
    
    24.0
    
    
    
    0.4
    
    
    
    
    
    
    
    24.4Capital expenditures for long-lived assets
    
    
    15.6
    
    
    
    2.5
    
    
    
    
    
    
    
    18.1
 The capital expenditures for long-lived assets in the above table represent the additions to
premises and equipment (fixed assets) of each segment.
 Geographic Information
  (US$ in millions)Year ended March 31,2006
    
    2005
    
    2004Revenues
    
    
    Long-lived
    
    
    Revenues
    
    
    Long-lived
    
    
    Revenues
    
    
    Long-livedfrom external
    
    
    assets
    
    
    from external
    
    
    assets
    
    
    from external
    
    
    assetscustomers
    
    
    
    
    
    
    customers
    
    
    
    
    
    
    customersNorth America
    
    $
    711.2
    
    
    $
    4.0
    
    
    $
    542.4
    
    
    $
    4.0
    
    
    $
    414.9
    
    
    $
    4.0Europe
    
    
    206.3
    
    
    
    0.9
    
    
    
    131.7
    
    
    
    0.6
    
    
    
    77.8
    
    
    
    0.5India
    
    
    45.1
    
    
    
    133.1
    
    
    
    27.2
    
    
    
    92.2
    
    
    
    16.1
    
    
    
    77.5Japan
    
    
    15.5
    
    
    
    0.5
    
    
    
    13.9
    
    
    
    0.5
    
    
    
    11.1
    
    
    
    0.2Rest of the World
    
    
    118.2
    
    
    
    2.3
    
    
    
    78.4
    
    
    
    2.3
    
    
    
    46.5
    
    
    
    1.8Total
    
    $
    1,096.3
    
    
    $
    140.8
    
    
    $
    793.6
    
    
    $
    99.6
    
    
    $
    566.4
    
    
    $
    84.0
 The long-lived assets in the above table represent premises and equipment and intangible assets of
each segment.
 17. Related Party Transactions
  (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Infrastructure and other services provided by Satyam toSify, its subsidiaries and associated companies
    
    
    
    
    
    $
    0.1
    
    
    $
    0.1Satyam Venture
    
    $
    0.5
    
    
    
    0.3
    
    
    
    1.2Short term advance provided by Satyam toCA Satyam
    
    
    0.1
    
    
    
    
    
    
    
    Total
    
    $
    0.6
    
    
    $
    0.4
    
    
    $
    1.3Infrastructure and other services received by Satyam fromSify, its subsidiaries and associated companies
    
    $
    2.9
    
    
    $
    1.5
    
    
    $
    1.4Satyam Venture
    
    
    8.6
    
    
    
    7.1
    
    
    
    5.4Total
    
    $
    11.5
    
    
    $
    8.6
    
    
    $
    6.8
 F-29




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##### Table of Contents



Satyam Computer Services Limited
  (US$ in millions)As of March 31,Amount due from/(to) associated companies
    
    2006
    
    
    2005Satyam Venture
    
    $
    (1.8
    )
    
    $
    (3.1
    )CA Satyam
    
    
    0.1
    
    
    
    Total
    
    $
    (1.7
    )
    
    $
    (3.1
    )
 18. Shareholders Equity-Dividends
    19. Contingencies and Commitments
 a) Funding and Warrant commitments  Nipuna
   b) Citisoft Plc and Knowledge Dynamics Pte Ltd.
  c) Bank guarantees
  d) Capital commitments
  F-30




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##### Table of Contents



Satyam Computer Services Limited
 e)     Operating
leases
   20. Concentration of Credit Risk
  Year ended March 31,2006
    
    2005
    
    2004Revenues generated from top two customersCustomer I
    
    
    8.80
    %
    
    
    10.81
    %
    
    
    14.28
    %Customer II
    
    
    5.14
    %
    
    
    7.35
    %
    
    
    9.92
    %Total revenues from top five customers
    
    
    24.21
    %
    
    
    29.21
    %
    
    
    36.45
    %
 21. Financial Instruments
 Forward and options contracts
  (US$ in millions)As of March 31,2006
    
    
    2005Aggregate contracted principal amounts of contracts outstanding:Forward contracts
    
    $
    79.0
    
    
    $
    160.0Options contracts
    
    
    137.0
    
    
    
    141.5Total
    
    $
    216.0
    
    
    $
    301.5Balance sheet exposure:Forward contracts
    
    $
    0.4
    
    
    $
    1.0Options contracts
    
    
    (1.8
    )
    
    
    0.1Total
    
    $
    (1.4
    )
    
    $
    1.1
   (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004Forward contracts
    
    $
    0.8
    
    
    $
    (0.5
    )
    
    $
    2.4Options contracts
    
    
    (1.6
    )
    
    
    0.2
    
    
    
    Total
    
    $
    (0.8
    )
    
    $
    (0.3
    )
    
    $
    2.4
 F-31




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##### Table of Contents



Satyam Computer Services Limited
 Fair value
  22. Schedules of Balance sheet
 a) Cash and Cash Equivalents
  (US$ in millions)As of March 31,2006
    
    2005Cash and bank balances
    
    $
    258.9
    
    
    $
    128.1Cash equivalents
    
    
    33.9
    
    
    
    1.7Cash and cash equivalents
    
    $
    292.8
    
    
    $
    129.8
 b) Accounts receivable and allowance for doubtful debts
  (US$ in millions)As of March 31,2006
    
    2005Customers (trade)
    
    $
    238.1
    
    
    $
    178.3Related parties
    
    
    1.0
    
    
    
    0.1Less: Allowance for doubtful debts
    
    
    (19.1
    )
    
    
    (17.5
    )Accounts receivable
    
    $
    220.0
    
    
    $
    160.9
  c) Prepaid Expenses and Other Receivables
  (US$ in millions)As of March 31,2006
    
    2005Interest accrued on bank deposits
    
    $
    24.9
    
    
    
    Prepaid expenses
    
    
    5.3
    
    
    $
    4.4Directors liability insurance
    
    
    0.4
    
    
    
    0.4Advance for expenses
    
    
    12.0
    
    
    
    5.6Loans and advance to employees
    
    
    6.2
    
    
    
    4.7Other advances and receivables
    
    
    2.4
    
    
    
    2.7Less: Allowance for doubtful advances
    
    
    (2.3
    )
    
    
    (1.7
    )Prepaid expenses and other receivables
    
    $
    48.9
    
    
    $
    16.1
   F-32




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##### Table of Contents



Satyam Computer Services Limited
 d) Other Assets
  (US$ in millions)As of March 31,2006
    
    2005Interest accrued on bank deposits
    
    
    
    
    
    $
    5.6Deposits
    
    $
    17.0
    
    
    
    9.6Loans and advances to employees due after one year
    
    
    0.8
    
    
    
    0.9Deferred taxes on income
    
    
    0.5
    
    
    
    0.4Others
    
    
    1.4
    
    
    
    1.8Less: Allowance for doubtful advances
    
    
    (1.5
    )
    
    
    (1.5
    )Other Assets
    
    $
    18.2
    
    
    $
    16.8
  e) Accrued Expenses and Other Current Liabilities
  (US$ in millions)As of March 31,2006
    
    2005Accrued expenses
    
    $
    56.3
    
    
    $
    28.3Unclaimed dividend
    
    
    1.1
    
    
    
    1.0Provision for taxation, net of payments
    
    
    8.5
    
    
    
    10.7Provision for gratuity and unutilised leave
    
    
    16.9
    
    
    
    9.5Deferred taxes on income
    
    
    2.8
    
    
    
    2.6Others
    
    
    23.3
    
    
    
    12.7Accrued expenses and other current liabilities
    
    $
    108.9
    
    
    $
    64.8
 23. Subsequent event:
   F-33




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##### Table of Contents



Satyam Computer Services Limited
 
 Financial Statement Schedule
 Financial
Statement Schedule Valuation and qualifying accounts
 1. Change in valuation allowance on deferred tax assets:
 (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004At the beginning of the year
    
    $
    21.1
    
    
    $
    17.6
    
    
    $
    15.3Change during the year
    
    
    3.3
    
    
    
    3.5
    
    
    
    0.8Change due to foreign exchange
    
    
    (0.4
    )
    
    
    
    
    
    
    1.5At the end of the year
    
    $
    24.0
    
    
    $
    21.1
    
    
    $
    17.6
 2. Allowance for doubtful accounts on trade accounts receivable:
 (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004At the beginning of the year
    
    $
    17.5
    
    
    $
    13.9
    
    
    $
    9.2Additions
    
    
    4.2
    
    
    
    7.5
    
    
    
    6.3Write offs, net of recoveries
    
    
    (2.2
    )
    
    
    (3.8
    )
    
    
    (2.7
    )Change due to foreign exchange
    
    
    (0.4
    )
    
    
    (0.1
    )
    
    
    1.1At the end of the year
    
    $
    19.1
    
    
    $
    17.5
    
    
    $
    13.9
 3. Allowance for doubtful advances:
 a) Prepaid Expenses and Other Receivables
 (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004At the beginning of the year
    
    $
    1.7
    
    
    $
    1.6
    
    
    $
    1.2Additions
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.3Write offs, net of recoveries
    
    
    
    
    
    
    
    
    
    
    Change due to foreign exchange
    
    
    
    
    
    
    
    
    
    
    0.1At the end of the year
    
    $
    2.3
    
    
    $
    1.7
    
    
    $
    1.6
 b) Other Assets
 (US$ in millions)Year ended March 31,2006
    
    
    2005
    
    
    2004At the beginning of the year
    
    $
    1.5
    
    
    $
    1.5
    
    
    $
    1.4Additions
    
    
    
    
    
    
    
    
    
    
    Write offs, net of recoveries
    
    
    
    
    
    
    
    
    
    
    Change due to foreign exchange
    
    
    
    
    
    
    
    
    
    
    0.1At the end of the year
    
    $
    1.5
    
    
    $
    1.5
    
    
    $
    1.5
 F-34