6-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Issuer

Pursuant to Section 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended June 30, 2003

Commission File Number 333-72195

Infosys Technologies Limited

(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s name into English)

Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)

Electronics City, Hosur Road, Bangalore, Karnataka, India 561 100. +91-80-852-0261
(Address of principal executive offices)

     Indicate by check mark registrant files or will file annual reports under cover Form 20-F or Form 40-F:

          Form 20-F x Form 40-F o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934.

          Yes o No x

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 2g 3-2(b).
Not applicable.

          This Form 6-K contains our Quarterly Report for the quarter ended June 30, 2003 that we mailed to our equity shareholders on or about July 30, 2003. In addition, we held our Annual General Meeting on June 14, 2003. In the Annual General Meeting, our shareholders approved the deletion of Article 107 of our Articles of Association, which had provided that as long as our Chairman, Mr. N.R. Narayana Murthy, and his family together held 5% or more of our issued equity share capital, Mr. Murthy would be our Managing Director and would not be liable to retire as a director by rotation. A copy of our Articles of Association, as amended, is attached to this Form 6-K as Exhibit 3.1. The information contained in this Form 6-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Infosys Technologies Limited
Report for the first quarter ended June 30, 2003

At a glance – Indian GAAP (Non-consolidated financials)

		in Rs. crore, except per share data
		Quarter ended						Year ended
		June 30, 2003			June 30, 2002			March 31, 2003
For the period
Total revenue			1,081.98			764.62			3,622.69
Export revenue			1,058.65			750.52			3,543.51
Operating profit (PBIDTA)			348.30			274.93			1,272.04
PBIDTA/ revenues (%)			32.19	%		35.96	%		35.11	%
Profit after tax (PAT)			278.12			216.85			957.93
PAT/revenues (%)			25.70	%		28.36	%		26.44	%
Earnings per share* (par value of Rs.5 each, fully paid)
	Basic		41.98			32.76			144.68
	Diluted		41.83			32.46			143.37
Dividend per share			—			—			27.00
Dividend amount			—			—			178.81
Capital expenditure			58.38			53.79			219.26
At the end of the period
Total assets			3,139.83			2,297.56			2,860.65
Fixed assets – net			786.75			755.93			772.72
Cash and cash equivalents			1,726.07			1,089.23			1,638.51
Working capital			2,187.36			1,459.83			2,017.92
Total debt			—			—			—
Net worth			3,139.83			2,297.56			2,860.65
Equity			33.12			33.09			33.12
Market capitalization			21,690.04			21,772.72			26,847.33

Note:

Market capitalization is calculated by considering the share price at National Stock Exchange on the shares outstanding at the period/ year end.

* EPS figures have been calculated for the period and have not been annualized.

 
 

2

Letter to the shareholder

Dear shareholder,

Your company is delighted to report another quarter of robust growth. Indian GAAP revenues grew by 6.1% over Q4 FY2003 while net profits from ordinary activities witnessed an increase of 7.4%. Free cash flows during the quarter amounted to Rs. 87.56 crore. Revenues in US$ terms grew by 7.7% for the quarter as compared to the quarter ended March 31, 2003. Revenue growth comprised of a volume growth of 9.6% and a price decline of 1.9%, over the previous quarter.

Business opportunities continue to grow. This quarter saw the end of the Iraq war, thereby partly easing tensions in this region. The SARS threat also subsided and the travel advisories were lifted. At the same time, the economic environment continues to be challenging and uncertain. Our continued investment in client- facing activities has enabled us to address client requirements more effectively and to deepen relationships. This has helped us manage a higher share of our clients’ wallet. The strong growth in volume has exceeded our initial expectations. In fact, we have increased our guidance for revenue and EPS for this fiscal.

Your company added 22 new clients during the quarter. Significant wins include a large, diversified bank based in the UK; a provider of securities and investment banking functions; one of the Fortune 500 automotive companies; a leading automotive system supplier in Europe; a leading manufacturer of electronic goods in the Asia Pacific region; and an energy company in the U.S.

Infosys’ Banking Business Unit expanded its presence across the globe through its suite of FINACLE^® banking products. One of the leading banks in Nepal, with its headquarters in Kathmandu, signed up with Infosys to deploy FINACLE™ Core Banking and FINACLE™ eChannels. Recently, your company started working with a bank headquartered in Jose, Nigeria. The bank chose to use FINACLE™ Core Banking, FINACLE™ eChannels and FINACLE™ eCorporate for implementing a strategic transformation plan.

In spite of the challenging environment, Infosys continued to invest in sales, marketing and new services, while improving existing services. New services introduced over the last three years contributed significantly to current revenues. Salaries were increased for your company’s employees in India. Despite these investments, we have been able to maintain our margins. This is partly due to the increased efficiency of operations. In fact, our utilization rates have improved during the quarter and there has been a change in the onsite-offshore mix due to a higher component of offshore work. In addition to this, the increased investments have been balanced with effective control of discretionary expenditure.

In the context of increasing forex flows to India, the Indian rupee continues to appreciate. In fact, the rupee has appreciated by around 2.4% during the last quarter. Your company has pro-actively hedged its net receivables to mitigate the impact of rupee appreciation on its margins.

IT service providers across the world are adopting the Global Delivery Model, which your company has pioneered and perfected. While they are learning this new way of doing business – working across disparate teams, geographies and time zones – Infosys continues to focus on exceeding clients’ expectations. This is reflected in our repeat business rate of 97.8% during the quarter.

The strength of our business model and its increasing acceptance around the world have been our key success factors. We have demonstrated the scalability of our operations by adding a net of 1,739 employees without compromising on operational excellence. In fact, our gross employee addition of 2,175 for this quarter has been the highest ever. Today, our value proposition to clients remains strongly differentiated, despite the increasing presence of global competitors. This is made possible by the dedicated efforts of all Infoscions. On your behalf, we thank them for contributing to yet another successful quarter.

	Nandan M. Nilekani	S. Gopalakrishnan
Bangalore	Chief Executive Officer, President	Chief Operating Officer
July 10, 2003	and Managing Director	and Deputy Managing Director

3

Auditors’ report to the members of Infosys Technologies Limited

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at June 30, 2003 and the Profit and Loss Account and Cash Flow Statement of the Company for the quarter ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

We report that:

(a)	we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b)	in our opinion, proper books of account have been kept by the Company so far as appears from our examination of the books;
(c)	the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;
(d)	in our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable;
(e)	in our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India:

(i)	in the case of the Balance Sheet, of the state of affairs of the Company as at June 30, 2003;
(ii)	in the case of the Profit and Loss Account, of the profit for the quarter ended on that date; and
(iii)	in the case of the Cash Flow Statement, of the cash flows for the quarter ended on that date.

for Bharat S. Raut & Co.
Chartered Accountants

	S. Balasubrahmanyam
Bangalore	Partner
July 10, 2003	Membership No: 53315

4

Balance Sheet as at

	in Rs. crore
	Quarter ended				Year ended
	June 30, 2003		June 30, 2002		March 31, 2003
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		33.12		33.09		33.12
Reserves and surplus		3,106.71		2,264.47		2,827.53
		3,139.83		2,297.56		2,860.65
APPLICATION OF FUNDS
FIXED ASSETS
Original cost		1,363.55		1,098.70		1,273.32
Less: Depreciation and amortization		621.03		431.74		577.15
Net book value		742.52		666.96		696.17
Add: Capital work-in-progress		44.23		88.97		76.55
		786.75		755.93		772.72
INVESTMENTS		127.38		56.96		33.20
DEFERRED TAX ASSETS		38.34		24.84		36.81
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		557.30		413.29		512.14
Cash and bank balances		1,373.51		887.32		1,336.23
Loans and advances		942.16		668.59		872.78
		2,872.97		1,969.20		2,721.15
Less: Current liabilities		354.08		213.71		315.25
Provisions		331.53		295.66		387.98
NET CURRENT ASSETS		2,187.36		1,459.83		2,017.92
		3,139.83		2,297.56		2,860.65

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

The schedules referred to above and the notes thereon form an integral part of the Balance Sheet.

This is the balance sheet referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman and Chief Mentor	Chief Executive Officer,	Chief Operating Officer and	Director
		President and Managing Director	Deputy Managing Director
	Marti G. Subrahmanyam	Philip Yeo	Omkar Goswami	Larry Pressler
	Director	Director	Director	Director
	Rama Bijapurkar	Claude Smadja	Sridar A. Iyengar	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
July 10, 2003				Vice President – Finance

5

Profit and Loss Account for the

		in Rs. crore, except per share data
		Quarter ended				Year ended
		June 30, 2003		June 30, 2002		March 31, 2003
INCOME
Software services and products
	Overseas		1,058.65		750.52		3,543.51
	Domestic		23.33		14.10		79.18
			1,081.98		764.62		3,622.69
SOFTWARE DEVELOPMENT EXPENSES			572.78		377.39		1,813.30
GROSS PROFIT			509.20		387.23		1,809.39
SELLING AND MARKETING EXPENSES			79.72		55.09		266.98
GENERAL AND ADMINISTRATION EXPENSES			81.18		57.21		270.37
			160.90		112.30		537.35
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION			348.30		274.93		1,272.04
Interest			—		—		—
Depreciation and amortization			44.26		40.48		188.95
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION			304.04		234.45		1,083.09
Other income			32.44		24.90		99.61
Provision for investments			6.36		—		23.77
NET PROFIT BEFORE TAX			330.12		259.35		1,158.93
Provision for taxation			52.00		42.50		201.00
NET PROFIT AFTER TAX			278.12		216.85		957.93
AMOUNT AVAILABLE FOR APPROPRIATION			278.12		216.85		957.93
DIVIDEND
	Interim		—		—		82.76
	Final (proposed)		—		—		96.05
	Dividend Tax		—		—		12.30
Amount transferred – general reserve			—		—		766.82
Balance in Profit and Loss Account			278.12		216.85		—
			278.12		216.85		957.93
EARNINGS PER SHARE (equity shares, par value Rs.5/- each)
	Basic		41.98		32.76		144.68
	Diluted		41.83		32.46		143.37
Number of shares used in computing earnings per share
	Basic		6,62,45,174		6,61,88,530		6,62,11,068
	Diluted		6,64,79,367		6,67,95,945		6,68,16,821

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

The schedules referred to above and the notes thereon form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman and Chief Mentor	Chief Executive Officer,	Chief Operating Officer and	Director
		President and Managing Director	Deputy Managing Director
	Marti G. Subrahmanyam	Philip Yeo	Omkar Goswami	Larry Pressler
	Director	Director	Director	Director
	Rama Bijapurkar	Claude Smadja	Sridar A. Iyengar	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
July 10, 2003				Vice President – Finance

6

Schedules to Profit and Loss Account for the

			in Rs. crore
			Quarter ended				Year ended
			June 30, 2003		June 30, 2002		March 31, 2003
SOFTWARE DEVELOPMENT EXPENSES
	Salaries and bonus including overseas staff expenses			454.78		297.65		1,433.85
	Staff welfare			3.13		1.69		7.91
	Contribution to provident and other funds			10.75		6.46		31.94
	Overseas travel expenses			41.61		37.06		162.66
	Consumables			1.72		1.16		6.25
	Cost of software packages for
		own use		13.60		9.76		54.75
		service delivery to clients		9.86		6.88		12.99
	Provision for post-sales client support			0.17		1.97		(6.18	)
	Computer maintenance			2.30		1.86		9.33
	Communication expenses			8.18		7.17		23.94
	Consultancy charges			26.68		5.73		75.86
				572.78		377.39		1,813.30
SELLING AND MARKETING EXPENSES
	Salaries and bonus including overseas staff expenses			49.84		30.05		141.73
	Staff welfare			0.08		0.13		0.62
	Contribution to provident and other funds			0.38		0.09		1.34
	Overseas travel expenses			8.78		8.69		45.16
	Consumables			0.06		0.02		0.21
	Cost of software packages for own use			0.01		0.01		0.21
	Computer maintenance			0.01		—		0.01
	Communication expenses			—		0.06		0.50
	Traveling and conveyance			0.32		0.15		1.19
	Rent			2.96		0.91		4.79
	Telephone charges			1.10		1.06		5.35
	Professional charges			1.96		2.27		10.63
	Printing and stationery			0.27		0.37		1.43
	Advertisements			0.12		0.16		1.04
	Brand building			5.72		7.99		29.05
	Office maintenance			0.04		0.15		2.72
	Repairs to plant and machinery			—		—		0.02
	Power and fuel			0.02		0.04		0.22
	Insurance charges			0.03		0.02		0.20
	Rates and taxes			0.03		0.11		0.27
	Bank charges and commission			0.01		0.01		0.09
	Commission charges			2.27		1.52		10.58
	Marketing expenses			0.85		1.11		6.72
	Sales promotion expenses			0.11		0.15		0.46
	Other miscellaneous expenses			4.75		0.02		2.44
				79.72		55.09		266.98

7

Schedules to Profit and Loss Account for the

									in Rs. crore
			Quarter ended						Year ended
			June 30, 2003			June 30, 2002			March 31, 2003
GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses			16.90			12.21			56.24
	Contribution to provident and other funds			1.14			0.79			3.49
	Overseas travel expenses			1.70			1.80			7.78
	Traveling and conveyance			4.33			2.92			16.76
	Rent			7.11			5.23			24.51
	Telephone charges			7.29			3.64			21.34
	Professional charges			6.49			6.53			37.99
	Printing and stationery			2.34			1.65			4.80
	Advertisements			0.99			0.65			5.15
	Office maintenance			6.23			3.93			20.13
	Repairs to building			1.90			1.87			7.27
	Repairs to plant and machinery			1.09			1.16			4.75
	Power and fuel			7.20			5.66			22.38
	Insurance charges			5.13			1.98			9.83
	Rates and taxes			1.21			1.17			5.14
	Donations			3.50			1.67			6.09
	Auditor’s remuneration
		audit fees		0.07			0.06			0.27
		certification charges		—			—			0.03
		out-of-pocket expenses		0.01			0.01			0.02
	Provision for bad and doubtful debts			3.29			0.07			0.73
	Provision for doubtful loans and advances			0.01			(0.04	)		(0.07	)
	Bank charges and commission			0.19			0.16			0.66
	Commission to non-whole time directors			0.39			0.24			1.12
	Postage and courier			1.24			1.25			3.99
	Books and periodicals			0.24			0.25			1.42
	Research grants			0.06			—			—
	Freight charges			0.15			0.11			0.58
	Professional membership and seminar participation fees			0.62			0.82			3.55
	Other miscellaneous expenses			0.36			1.42			4.42
				81.18			57.21			270.37
OTHER INCOME
	Interest received on deposits with banks and others*			22.75			17.68			78.05
	Miscellaneous income			1.83			0.72			3.89
	Exchange differences			7.86			6.50			17.67
				32.44			24.90			99.61
	*Tax deducted at source			4.34			3.23			14.69
PROVISION FOR TAXATION
	Current period/year
	Income taxes			52.61			43.12			212.09
	Deferred taxes			(1.53	)		(0.62	)		(12.59	)
				51.08			42.50			199.50
	Prior years			0.92			—			1.50
				52.00			42.50			201.00

8

1. Extracts of significant accounting policies and notes on accounts

Company overview

Infosys Technologies Limited (“Infosys”) along with its majority owned and controlled subsidiary, Progeon Limited (“Progeon”), is a global technology and services organization engaged in delivering a comprehensive range of end-to-end solutions to customers. Infosys provides solutions across the entire software and process life–cycles including design, development, implementation, maintenance and management using its Global Delivery Model. Infosys offers the following services: consulting, software development, software re-engineering, systems integration, package evaluation and implementation, software maintenance, and business process management services (“BPM”). Infosys also provides proprietary software products for the banking industry.

Management’s Statement on significant accounting policies contained in the audited financial statements.

There are no changes in the accounting policies during the quarter ended June 30, 2003. The significant accounting policies of the company relate to revenue recognition, expenditure, fixed asset and capital work in progress, depreciation, retirement benefits to employees – principally gratuity, superannuation and provident fund benefits, research and development, income tax, earning per share, foreign currency transactions and investments.

1.1 Significant accounting policies

1.1.1 Basis of preparation of financial statements

The accompanying financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and the provisions of the Companies Act, 1956. These accounting policies have been consistently applied.

The preparation of the financial statements in conformity with GAAP requires Infosys’ management (“Management”) to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include accounting for contract costs expected to be incurred to complete software development, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated. Actual results could differ from those estimates.

1.2 Notes on accounts

All amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. All exact amounts are stated with the suffix “/-”. One crore equals 10 million.

The previous period’s/year’s figures have been regrouped / reclassified, wherever necessary, to conform to the current period’s/year’s presentation.

1.2.1 Aggregate expenses

The following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI of the Companies Act, 1956.

		Quarter ended				Year ended
		June 30, 2003		June 30, 2002		March 31, 2003
Salaries and bonus including overseas staff expenses			521.52		339.91		1,631.82
Staff welfare			3.21		1.82		8.53
Contribution to provident and other funds			12.27		7.34		36.77
Overseas travel expenses			52.09		47.55		215.60
Consumables			1.78		1.18		6.46
Cost of software packages for own use			13.61		9.77		54.96
Cost of software packages for service delivery to clients			9.86		6.88		12.99
Computer maintenance			2.31		1.86		9.34
Communication expenses			8.18		7.23		24.44
Consultancy charges			26.68		5.73		75.86
Provision for post-sales client support			0.17		1.97		(6.18	)
Traveling and conveyance			4.65		3.07		17.95
Rent			10.07		6.14		29.30
Telephone charges			8.39		4.70		26.69
Professional charges			8.45		8.80		48.62
Printing and stationery			2.60		2.02		6.23
Advertisements			1.12		0.81		6.19
Office maintenance			6.27		4.08		22.85
Repairs to building			1.90		1.87		7.27
Repairs to plant and machinery			1.10		1.16		4.77
Power and fuel			7.22		5.70		22.60
Brand building			5.73		7.99		29.05
Insurance charges			5.16		2.00		10.03
Rates and taxes			1.23		1.28		5.41
Commission charges			2.27		1.52		10.58
Donations			3.50		1.67		6.09
Auditor’s remuneration
	audit fees		0.07		0.06		0.27
	certification charges		—		—		0.03
	out-of-pocket expenses		0.01		0.01		0.02

9

1.2.1 Aggregate expenses (contd.)

	Quarter ended					Year ended
	June 30, 2003		June 30, 2002			March 31, 2003
Provision for bad and doubtful debts		3.29		0.07			0.73
Provision for doubtful loans and advances		0.01		(0.04	)		(0.07	)
Bank charges and commission		0.20		0.17			0.75
Commission to non-whole time directors		0.39		0.24			1.12
Postage and courier		1.24		1.25			3.99
Books and periodicals		0.23		0.25			1.42
Research grants		0.06		—			—
Freight charges		0.14		0.11			0.58
Professional membership and seminar participation fees		0.62		0.82			3.55
Marketing expenses		0.85		1.11			6.72
Sales promotion expenses		0.11		0.15			0.46
Other miscellaneous expenses*		5.12		1.44			6.86
		733.68		489.69			2,350.65

*     Other miscellaneous expenses include Rs. 2.48 crore which relates to the settlement of the lawsuit filed by Ms. Reka Maximovitch against the company and its former director, Mr. Phaneesh Murthy. The company had provided Rs. 2.40 crore towards this settlement in the year ended March 31, 2003.

1.2.2 Obligations on long-term, non-cancelable operating leases

The lease rentals charged amounted to Rs. 10.07, Rs. 5.52 and Rs. 29.30 for the quarters ended June 30, 2003 and 2002 and the year ended March 31, 2003 respectively. The maximum obligations on long-term, non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows:

	As at June 30,				As at
Lease obligations	2003		2002		March 31, 2003
Within one year of the balance sheet date		24.81		17.04		17.93
Due in a period between one year and five years		55.82		43.25		36.00
Due after five years		7.09		6.62		7.00

The operating lease arrangements extend for a maximum of 10 years from their respective dates of inception and relates to rented overseas premises and car rentals.

Lease rental commitments on a contract with Progeon, as at June 30, 2003, due to Infosys within one year of the balance sheet date amounted to Rs. 4.84, and due in the period between one year and five years amounted to Rs. 6.23. The lease for premises extends for a maximum period of three years from the quarter ended June 30, 2002 (the period of inception).

Fixed assets stated below have been provided on operating lease to Progeon, a subsidiary company under the same management, as at June 30, 2003, June 30, 2002 and March 31, 2003.

			Accumulated
	Cost		depreciation		Net book value
Land and Building		10.24		0.79		9.45
		10.05		0.09		9.96
		10.21		0.62		9.59
Plant and machinery		3.31		0.85		2.46
		1.65		0.09		1.56
		2.94		0.70		2.24
Computers		1.02		0.60		0.42
		0.54		0.02		0.52
		0.85		0.49		0.36
Furniture & fixtures		4.15		1.11		3.04
		0.48		0.03		0.45
		2.64		0.88		1.76
		18.72		3.35		15.37
		12.72		0.23		12.49
		16.64		2.69		13.95

The aggregate depreciation charged on the above, for the quarter ended June 30, 2003 amounted to Rs. 0.66.( for the quarter ended June 30, 2002 was Rs. 0.23 and year ended March 31, 2003 was Rs. 2.69). The rental income from Progeon for the quarter ended June 30, 2003 amounted to Rs. 1.21 (for the quarter ended June 30, 2002 was Rs. 0.14 and year ended March 31, 2003 was Rs. 1.95)

1.2.3 Related party transactions

The company entered into related party transactions during the year ended March 31, 2002 with Yantra Corporation, USA, the subsidiary of the company until February 27, 2002, and the key management personnel.

The outstanding dues from Yantra Corporation as at June 30, 2002 were Rs. 0.34.

The company entered into related party transactions during the period ended June 30, 2003 with Progeon, the subsidiary company, under the same management. The transactions are set out as follows.

10

		Quarter ended June 30,				Year ended
		2003		2002		March 31, 2003
Capital transactions:
	Financing transactions – amount paid to Progeon for issue of 1,22,49,993 fully paid equity shares of Rs.10/- each at par		—		12.25		12.25
Revenue transactions:
	Purchase of services		0.14		0.21		2.07
Sale of services:
	Business consulting services		—		0.12		3.56
	Shared services including facilities and personnel		3.01		0.70		9.61

The company has an alliance with SupplyChainge Inc., USA to jointly market and deliver lead-time optimization solutions. Prof. Marti G. Subrahmanyam, an External Director of the company, is also a director on the board of SupplyChainge Inc. During the quarter ended June 30, 2003, the company paid Rs 0.71 to SupplyChainge Inc. towards marketing services under this alliance. Additionally, amount receivable from SupplyChainge as at June 30, 2003 amounted to Rs. 0.03 (as at June 30, 2002, Rs. 0.03 and March 31, 2003, Rs. 0.03), an amount that has been outstanding for a period exceeding six months and fully provided.

During the quarter ended June 30, 2003 an amount of Rs. 3.50 has been donated to Infosys Foundation, a not-for-profit trust, in which certain directors of the company are trustees. Donation to the foundation for the quarter ended June 30, 2002 was Rs. 1.25 and for the year ended March 31, 2003 were Rs. 5.53.

1.2.4 Transactions with key management personnel

The key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits provided to the key management personnel for the quarters ended June 30, 2003, 2002 and the year ended March 31, 2003:

				Contribution to
				provident and		Perquisties		Total
		Salary		other funds		and incentives		remuneration
Executive Directors
	Quarter ended June 30, 2003		0.29		0.04		0.33		0.66
	Quarter ended June 30, 2002		0.63		0.06		0.80		1.49
	Year ended March 31, 2003		2.60		0.17		3.30		6.07

						Reimbursement of
		Commission		Sitting fees		expenses		Total remuneration
Independent Directors
	Quarter ended June 30, 2003		—		0.01		0.11		0.12
	Quarter ended June 30, 2002		—		—		0.18		0.18
	Year ended March 31, 2003		1.12		0.04		0.48		1.64

				Contribution		Perquisites						Outstanding
				to provident		and		Total		Total		loans and
		Salary		and other funds		incentives		Remuneration		Loans granted		advances
Other key managerial personnel
	Quarter ended June 30, 2003		0.03		0.01		0.06		0.10		—		—
	Quarter ended June 30, 2002		0.01		0.01		0.02		0.04		—		—
	Year ended March 31, 2003		0.06		0.02		0.09		0.17		—		—

In addition, the details of stock options granted to non-whole time directors and other senior officers during the periods ended June 30, 2003 and March 31, 2003 are as follows:

					Number of		Exercise price		Expiration
		Date of grant	Option plan		options granted		(in Rs.)		of options
Non-whole time Directors:
	Claude Smadja	July 10, 2002		1999		2,000		3,333.65	July 9, 2012
	Sridar A. Iyengar	April 10, 2003		1999		2,000		3,049.75	April 9, 2013

1.2.5 Pro forma disclosures relating to the Employee Stock Option Plans (“ESOPs”)

The company’s 1994 stock option plan was established prior to the Securities and Exchange Board of India (“SEBI”) guidelines on stock options. Had the stock compensation costs for this stock option plan been determined as per the guidelines issued by SEBI, the company’s reported net profit would have been reduced to the pro forma amounts indicated below.

		Quarter ended June 30,				Year ended
		2003		2002		March 31, 2003
Net profit:
	– As reported		278.12		216.85		957.93
	– Adjusted pro forma		273.09		210.84		934.76

1.2.6 Fixed assets

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the company has the option to purchase the properties on expiry of the lease period. The company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as “Land-leasehold” under “Fixed assets” in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at June 30, 2003.

11

During the year ended March 31, 2003, the company entered into several arrangements to purchase Intellectual Property Rights (“IPR”). These primarily included:

The purchase of IPR in the Trade IQ, a treasury management product, from IQ Financial Systems Inc., USA (“IQFS”) for a consideration of Rs. 16.97 (US$ 3.47 million).

An agreement to purchase IPR in AUTOLAY, a commercial software application product, with the Aeronautical Development Agency, India (“ADA”). The company has a firm commitment to share revenues with ADA for a maximum of US$ 5 million (Rs. 24.50) payable by 10 years from the contract date after which the ownership of intellectual property in AUTOLAY will transfer to the company.

Purchase of a non-exclusive global license in ILink, a signature display software, from Integra Microsystems Private Limited, for Rs. 0.65.

1.2.7 Investment activity

	Quarter ended June 30,				Year ended
Particulars of investee companies	2003		2002		March 31, 2003
Progeon Limited, India		—		12.25		12.25
M-Commerce Ventures Pte. Limited, Singapore		0.54		0.27		0.27
		0.54		12.52		12.52

Progeon was incorporated on April 3, 2002, and is a majority owned and controlled subsidiary, established to provide business process management and transitioning services. As at the balance sheet date, the company has invested Rs. 12.25 in 1,22,49,993 fully paid equity shares in Progeon of face value Rs. 10/- each, at par. Progeon seeks to leverage the benefits of service delivery globalization, process redesign and technology to drive efficiency and cost effectiveness in customer business processes. Progeon obtained its financial closure by securing funding of Rs. 49.00 from Citicorp International Finance Corporation, USA (“CIFC”), in exchange for 43,75,000 cumulative, convertible, redeemable preferred shares of face value Rs. 100/- at a premium of Rs. 12/- per share. The preference shares are convertible to an equal number of equity shares based on certain events as agreed between the company and CIFC.

During the quarter ended June 30, 2003 the company invested Rs. 0.54 in M-Commerce Ventures Pte Limited, Singapore (“M-Commerce”) for 20 ordinary shares of face value Singapore $ (“S$”) 1/- each fully paid at par and 180 redeemable preference shares of face value S$ 1/- each fully paid for a premium of S$ 1,110. Accordingly, the aggregate investment in M-Commerce as at June 30, 2003 amounts to Rs. 2.65.

Current liabilities include an amount of Rs. 2.94 received from Workadia Inc. towards recovery of investment that is pending clearance from regulatory authorities for setting off against the investment.

1.2.8 Segment reporting

The company’s operations predominantly relate to providing technology and services, delivered to customers operating globally in various industry segments. Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the company are primarily financial services, comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, energy, transportation and logistics companies.

Income and direct expenses in relation to segments are categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover of the segment. Certain expenses such as depreciation, which form a significant component of the total expenses, are not specifically allocable to specific segments, as the underlying services are used interchangeably. The company believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as “unallocated” and directly charged against total income.

Fixed assets used in the company’s business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

Customer relationships are driven based on the location of the respective client. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the East and the West), Ireland and the United Kingdom; and the Rest of the World comprises all other places except, those mentioned above and India.

Geographical revenues are segregated based on the location of the customer who is invoiced, or in relation to which the revenue is otherwise recognized.

Industry segments

Quarter ended June 30, 2003, June 30, 2002 and year ended March 2003

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues		400.97		170.54		156.14		127.38		226.95		1,081.98
		281.85		125.67		116.14		88.56		152.40		764.62
		1,355.94		597.84		543.19		414.54		711.18		3,622.69
Identified operating expenses		178.24		72.76		66.94		45.51		92.49		455.94
		117.07		54.07		38.63		29.23		54.10		293.10
		546.77		243.93		186.18		132.45		264.64		1,373.97
Allocated expenses		102.92		43.78		40.08		32.70		58.26		277.74
		77.38		31.03		28.68		21.87		37.63		196.59
		377.31		157.77		143.72		109.56		188.32		976.68
Segmental operating income		119.81		54.00		49.12		49.17		76.20		348.30
		87.40		40.57		48.83		37.46		60.67		274.93
		431.86		196.14		213.29		172.53		258.22		1,272.04
Unallocable expenses												44.26
												40.48
												188.95

12

Industry segments (contd.)

Quarter ended June 30, 2003, June 30, 2002 and year ended March 2003

	Financial services	Manufacturing	Telecom	Retail	Others	Total
Operating income							304.04
							234.45
							1,083.09
Other income (expense), net							26.08
							24.90
							75.84
Net profit before taxes							330.12
							259.35
							1,158.93
Income taxes							52.00
							42.50
							201.00
Net profit after taxes							278.12
							216.85
							957.93

Geographic segments

Quarter ended June 30, 2003, June 30, 2002 and year ended March 2003

	North America		Europe		India		Rest of the world		Total
Revenues		805.95		190.11		23.33		62.59		1,081.98
		552.56		147.50		14.10		50.46		764.62
		2,637.51		641.58		79.18		264.42		3,622.69
Identifiable operating expenses		348.03		76.83		10.35		20.73		455.94
		216.41		54.41		5.88		16.40		293.10
		1,052.82		224.82		19.79		76.54		1,373.97
Allocated expenses		206.89		48.80		5.99		16.06		277.74
		137.80		36.78		6.04		15.97		196.59
		704.20		169.21		30.01		73.26		976.68
Segmental operating income		251.03		64.48		6.99		25.80		348.30
		198.35		56.31		2.18		18.09		274.93
		880.49		247.55		29.38		114.62		1,272.04
Unallocable expenses										44.26
										40.48
										188.95
Operating income										304.04
										234.45
										1,083.09
Other income (expense), net										26.08
										24.90
										75.84
Net profit before taxes										330.12
										259.35
										1,158.93
Income taxes										52.00
										42.50
										201.00
Net profit after taxes										278.12
										216.85
										957.93

1.2.9 Reconciliation of basic and diluted shares used in computing earnings per share

	Quarter ended June 30,				Year ended
	2003		2002		March 31, 2003
Number of shares considered as basic weighted average shares outstanding		6,62,45,174		6,61,88,530		6,62,11,068
Add: Effect of dilutive issues of shares/stock options		2,34,193		6,07,415		6,05,753
Number of shares considered as weighted average shares and potential shares outstanding		6,64,79,367		6,67,95,945		6,68,16,821

13

Cash Flow Statement for the

			in Rs. crore
			Quarter ended June 30,						Year ended
			2003			2002			March 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax				330.12			259.35			1,158.93
Adjustments to reconcile profit before tax to cash provided
By operating activities
	(Profit)/Loss on sale of fixed assets			(0.01	)		(0.01	)		—
	Depreciation and amortization			44.26			40.48			188.95
	Interest income			(22.75	)		(17.68	)		(78.05	)
	Provisions on long-term investments			6.36			—			23.77
	Exchange differences on translation of foreign currency cash and cash equivalents			3.28			(1.77	)		(2.06	)
Changes in current assets and liabilities
	Sundry debtors			(45.16	)		(76.56	)		(175.41	)
	Loans and advances	1		(9.85	)		(51.59	)		(127.63	)
	Current liabilities and provisions	2		39.01			65.07			158.46
	Income taxes paid	3		(11.06	)		(25.96	)		(232.09	)
NET CASH GENERATED BY OPERATING ACTIVITIES				334.20			191.33			914.87
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on exercise of stock options				1.06			0.40			13.52
Dividends paid during the period/year, including Dividend tax				(108.35	)		(82.73	)		(165.49	)
NET CASH USED IN FINANCING ACTIVITIES				(107.29	)		(82.33	)		(151.97	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress		4		(58.38	)		(53.79	)		(219.26	)
Proceeds on disposal of fixed assets				0.10			0.13			0.33
Investments in securities		5		(100.54	)		(12.52	)		(12.53	)
Interest income				22.75			17.68			78.05
NET CASH USED IN INVESTING ACTIVITIES				(136.07	)		(48.50	)		(153.41	)
Exchange differences on translation of foreign currency cash and cash equivalents				(3.28	)		1.77			2.06
Net (decrease)/increase in cash and cash equivalents during the period/year				87.56			62.27			611.55
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR				1,638.51			1,026.96			1,026.96
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR		6		1,726.07			1,089.23			1,638.51
NOTES ON THE STATEMENT OF CASH FLOWS		7

This is the Cash Flow Statement referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman and Chief Mentor	Chief Executive Officer,	Chief Operating Officer and	Director
		President and Managing Director	Deputy Managing Director
	Marti G. Subrahmanyam	Philip Yeo	Omkar Goswami	Larry Pressler
	Director	Director	Director	Director
	Rama Bijapurkar	Claude Smadja	Sridar A. Iyengar	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
July 10, 2003				Vice President – Finance

14

Schedules to the Statement of Cash Flows

			in Rs. crore
			Quarter ended June 30,						Year ended
			2003			2002			March 31, 2003
1 CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet			942.16			668.59			872.78
	Less: Deposits with financial institutions and body corporate, included in cash and cash equivalents			(352.56	)		(201.91	)		(302.28	)
		Advance income taxes separately considered		(299.24	)		(262.21	)		(289.99	)
				290.36			204.47			280.51
	Less: Opening balance considered			(280.51	)		(152.88	)		(152.88	)
				9.85			51.59			127.63
2 CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet			685.61			509.37			703.23
	Add/ (Less): Provisions separately considered in the Cash Flow Statement:
		Income taxes		(326.53	)		(282.69	)		(274.81	)
		Dividends		—			—			(96.05	)
		Dividend tax		—			—			(12.30	)
				359.08			226.68			320.07
	Less: Non cash transaction – (refer Note 7.3)			—			(24.50	)		(24.50	)
	Less: Opening balance considered			(320.07	)		(137.11	)		(137.11	)
				39.01			65.07			158.46
3 INCOME TAXES PAID
	Charge as per the Profit and Loss Account			52.00			42.50			201.00
	Add: Increase in advance income taxes			9.25			25.96			53.74
	Increase/(Decrease) in Deferred taxes			1.53			0.62			12.59
	Less: Increase/(Decrease) in income tax provision			(51.72	)		(43.12	)		(35.24	)
				11.06			25.96			232.09
4 PURCHASES OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
	As per the Balance Sheet			90.70			139.99			317.87
	Less: Opening Capital work-in-progress			(76.55	)		(150.67	)		(150.67	)
	Less: Non cash transaction – (refer Note 7.3)			—			(24.50	)		(24.50	)
	Add: Closing capital work-in-progress			44.23			88.97			76.56
				58.38			53.79			219.26
5 INVESTMENTS IN SECURITIES
	As per the Balance Sheet			127.38			56.96			33.20
	Add: Provisions on investments			6.36			—			23.77
				133.74			56.96			56.97
	Less: Opening balance considered			(33.20	)		(44.44	)		(44.44	)
				100.54			12.52			12.53
6 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR
	As per the Balance Sheet			1,373.51			887.32			1,336.23
	Add: Deposits with financial institutions and body corporate, included herein			352.56			201.91			302.28
				1,726.07			1,089.23			1,638.51

7 NOTES ON THE STATEMENT OF CASH FLOWS

7.1	Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing, and investing activities of the company are segregated. Cash flows in foreign currencies are accounted at average monthly exchange rates that approximate the actual rates of exchange prevailing at the dates of the transactions.
7.2	The balance of cash and cash equivalents includes Rs. 2.66 as at June 30, 2003 (as at June 30, 2002, Rs. 8.18 and March 31, 2003, Rs. 1.60) and set aside for payment of dividends.
7.3	The cash flows for the year ended March 31, 2003 exclude an agreement to purchase intellectual property for Rs. 24.50, as the intellectual property and its corresponding liability are in substance a non cash transaction.
7.4	The previous year’s/periods’ figures have been recast/ restated, wherever necessary, to conform to the current year’s/periods’ classifications.

15

Consolidated financial statement of Infosys Technologies Limited and its subsidiary

Principles of consolidation

The financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as laid down under the accounting standard on Consolidated Financial Statements issued by the ICAI. The financial statements of the parent company, Infosys and Progeon have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gains/losses. The consolidated financial statements are prepared applying uniform accounting polices in use at Infosys and Progeon.

Management’s Statement on significant accounting policies contained in the audited financial statements.

There are no changes in the accounting policies during the quarter ended June 30, 2003. The significant accounting policies of the company relate to revenue recognition, expenditure, fixed assets and capital work-in-progress, depreciation, retirement benefits to employees – principally gratuity, superannuation and provident fund benefits, research and development, income tax, earning per share, foreign currency transactions and investments.

A complete set of the audited consolidated financial statements is available at www.infosys.com

Auditors’ report to the Board of Directors on the Consolidated Financial Statements of Infosys Technologies Limited and its subsidiary

We have examined the attached Consolidated Balance Sheet of Infosys Technologies Limited (the Company) and its subsidiary Progeon Limited (subsidiary) as at June 30, 2003, the Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the quarter then ended.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with the financial reporting framework generally accepted in India and are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis for our opinion.

We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21- Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of the Company and its subsidiary included in the consolidated financial statements.

On the basis of the information and explanation given to us, and on consideration of the separate audit reports on individual audited financial statements of the Company and its subsidiary, we are of the opinion that:

(i)	the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of the Company and its subsidiary as at June 30, 2003;
(ii)	the Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operations of the Company and its subsidiary for the quarter then ended; and
(iii)	the Consolidated Cash Flow Statement gives a true and fair view of the consolidated cash flows of the Company and its subsidiary for the quarter then ended.

for Bharat S. Raut & Co.
Chartered Accountants

	S. Balasubrahmanyam
Bangalore	Partner
July 10, 2003	Membership No: 53315

16

Consolidated Balance Sheet as at

	in Rs. crore
	June 30, 2003		June 30, 2002		March 31, 2003
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		33.12		33.09		33.12
Reserves and surplus		3,104.35		2,263.25		2,824.37
Preference shares issued by subsidiary		49.00		49.00		49.00
		3,186.47		2,345.34		2,906.49
APPLICATION OF FUNDS
FIXED ASSETS
Original cost		1,371.49		1,098.94		1,279.04
Less: Depreciation and amortization		623.30		431.75		578.54
Net book value		748.19		667.19		700.50
Add: Capital work-in-progress		45.45		89.14		77.39
		793.64		756.33		777.89
INVESTMENTS		115.13		44.71		20.95
DEFERRED TAX ASSETS		38.34		24.84		36.81
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		565.50		413.89		518.65
Cash and bank balances		1,385.42		892.60		1,346.54
Loans and advances		977.52		723.17		913.46
		2,928.44		2,029.66		2,778.65
Less: Current liabilities		357.06		214.53		319.60
Provisions		332.02		295.67		388.21
NET CURRENT ASSETS		2,239.36		1,519.46		2,070.84
		3,186.47		2,345.34		2,906.49

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

The schedules referred to above and the notes thereon form an integral part of the Consolidated Balance Sheet.

This is the Consolidated Balance Sheet referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman and Chief Mentor	Chief Executive Officer,	Chief Operating Officer and	Director
		President and Managing Director	Deputy Managing Director
	Marti G. Subrahmanyam	Philip Yeo	Omkar Goswami	Larry Pressler
	Director	Director	Director	Director
	Rama Bijapurkar	Claude Smadja	Sridar A. Iyengar	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
July 10, 2003				Vice President – Finance

17

Consolidated Profit and Loss Account for the

		in Rs. crore
		Quarter ended June 30,				Year ended
		2003		2002		March 31, 2003
INCOME – Software services, products and business process management
	Overseas		1,071.38		750.62		3,564.36
	Domestic		23.32		14.10		75.62
			1,094.70		764.72		3,639.98
Software development and business process management expenses			579.60		377.74		1,822.96
GROSS PROFIT			515.10		386.98		1,817.02
SELLING AND MARKETING EXPENSES			81.64		55.27		271.73
GENERAL AND ADMINISTRATION EXPENSES			82.98		58.03		275.67
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION			350.48		273.68		1,269.62
Interest			—		—		—
Depreciation and amortization			45.14		40.49		190.34
OPERATING PROFIT AFTER INTEREST AND DEPRECIATION AND AMORTIZATION			305.34		233.19		1,079.28
Other income			31.94		24.94		100.26
Provision for investments			6.36		—		23.77
NET PROFIT BEFORE TAX			330.92		258.13		1,155.77
Provision for taxation			52.00		42.50		201.00
NET PROFIT AFTER TAX			278.92		215.63		954.77
AMOUNT AVAILABLE FOR APPROPRIATION			278.92		215.63		954.77
DIVIDEND
	Interim		—		—		82.76
	Final (subject to deduction of tax if any)		—		—		96.05
	Dividend tax		—		—		12.30
Amount transferred – general reserve			—		—		763.66
Balance in Profit and Loss Account			278.92		215.63		954.77
EARNINGS PER SHARE (Equity shares, par value Rs.5/- each)
	Basic		42.10		32.58		144.20
	Diluted		41.96		32.28		142.89
Number of shares used in computing earnings per share
	Basic		66,245,174		66,188,530		66,211,068
	Diluted		66,479,367		66,795,945		66,816,821

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

The schedules referred to above and the notes thereon form an integral part of the Consolidated Profit and Loss Account.

This is the Consolidated Profit and Loss Account referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman and Chief Mentor	Chief Executive Officer,	Chief Operating Officer and	Director
		President and Managing Director	Deputy Managing Director
	Marti G. Subrahmanyam	Philip Yeo	Omkar Goswami	Larry Pressler
	Director	Director	Director	Director
	Rama Bijapurkar	Claude Smadja	Sridar A. Iyengar	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
July 10, 2003				Vice President – Finance

18

Consolidated Cash Flow Statement for the

		in Rs. crore
		Quarter ended June 30,						Year ended
		2003			2002			March 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax			330.92			258.13			1,155.77
Adjustments to reconcile profit before tax to cash provided
By operating activities
	(Profit)/Loss on sale of fixed assets		(0.01	)		(0.01	)		(0.01	)
	Depreciation and amortization		45.14			40.49			190.34
	Interest income		(23.30	)		(17.71	)		(80.67	)
	Provisions on long-term investments		6.36			—			23.77
	Exchange differences on translation of foreign currency cash and cash equivalents		3.20			(1.77	)		(2.06	)
Changes in current assets and liabilities
	Sundry debtors		(46.85	)		(77.16	)		(181.92	)
	Loans and advances		(9.47	)		(51.14	)		(132.38	)
	Current liabilities and provisions		37.90			65.90			163.04
	Income taxes paid		(11.18	)		(25.96	)		(232.54	)
NET CASH GENERATED BY OPERATING ACTIVITIES			332.71			190.77			903.34
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of preference share capital			—			49.00			49.00
Proceeds on exercise of stock options			1.06			0.40			13.52
Dividends paid during the period/year, including Dividend tax			(108.35	)		(82.73	)		(165.49	)
NET CASH USED IN FINANCING ACTIVITIES			(107.29	)		(33.33	)		(102.97	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress			(61.13	)		(54.20	)		(225.82	)
Proceeds on disposal of fixed assets			0.25			0.13			0.33
Investments in securities			(100.54	)		(0.27	)		(0.27	)
Interest income			23.30			17.71			80.67
NET CASH USED IN INVESTING ACTIVITIES			(138.12	)		(36.63	)		(145.09	)
Exchange differences on translation of foreign currency cash and cash equivalents			(3.20	)		1.77			2.06
Net (decrease)/increase in cash and cash equivalents during the period/year			84.10			122.58			657.34
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR			1,684.30			1,026.96			1,026.96
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR			1,768.40			1,149.54			1,684.30
NOTES ON THE STATEMENT OF CASH FLOWS
This is the Cash Flow Statement referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam Partner	N. R. Narayana Murthy Chairman and Chief Mentor	Nandan M. Nilekani Chief Executive Officer, President and Managing Director	S. Gopalakrishnan Chief Operating Officer and Deputy Managing Director	Deepak M. Satwalekar Director
	Marti G. Subrahmanyam Director	Philip Yeo Director	Omkar Goswami Director	Larry Pressler Director
	Rama Bijapurkar Director	Claude Smadja Director	Sridar A. Iyengar Director	K. Dinesh Director
Bangalore July 10, 2003	S. D. Shibulal Director	T. V. Mohandas Pai Director and Chief Financial Officer	Srinath Batni Director	V. Balakrishnan Company Secretary and Vice President — Finance

19

     Ratio analysis as per Indian GAAP (Non consolidated)

	Quarter ended June 30,				Year ended
	2003		2002		March 31, 2003
Financial performance
Export revenue / total revenue (%)		97.84		98.16		97.81
Domestic revenue / total revenue (%)		2.16		1.84		2.19
Software development expenses / total revenue (%)		52.94		49.36		50.05
Gross profit / total revenue (%)		47.06		50.64		49.95
Selling and marketing expenses / total revenue (%)		7.37		7.20		7.37
General and administration expenses / total revenue (%)		7.50		7.48		7.46
Selling, general and administration expenses / total revenue (%)		14.87		14.68		14.83
Employee costs / total revenue (%)		49.63		45.65		46.30
Operating profit / total revenue (%)		32.19		35.96		35.11
Operating profit after depreciation and Interest / total revenue (%)		28.10		30.66		29.90
Depreciation and amortization / total revenue (%)		4.09		5.29		5.22
Other income / total revenue (%)		3.00		3.26		2.75
Provision for Investments / total revenue (%)		0.59		—		0.66
Profit before tax / total revenue (%)		30.51		33.92		31.99
Tax / total revenue (%)		4.81		5.56		5.55
Tax / PBT (%)		15.75		16.39		17.34
PAT from ordinary activities / total revenue (%)		25.70		28.36		26.44
Capital expenditure / total revenue (%) (LTM)		5.68		9.97		6.05
PAT from ordinary activities / average net worth (%) (LTM)		37.49		42.88		38.78
ROCE (PBIT/Average capital employed) (%) (LTM)		45.23		50.56		46.91
Return on invested capital (%) (LTM) *		76.65		73.49		79.86
Capital output ratio (LTM)		1.45		1.42		1.47
Invested capital output ratio (LTM) *		3.12		2.54		3.18
Balance sheet
Debt-equity ratio		—		—		—
Debtors turnover (Days) (LTM)		52		55		52
Current ratio		4.19		3.87		3.87
Cash and cash equivalents / total assets (%) *		58.16		47.41		57.28
Cash and cash equivalents / total revenue (%) (LTM) *		46.35		39.53		45.23
Depreciation/ average gross block (%) (LTM)		15.65		18.03		16.92
Technology investment / total revenue (%) (LTM)		3.53		3.16		3.62
Year on Year Growth (%) **
Export revenue		41		26		39
Total revenue		42		25		39
Operating profit		27		14		23
Net profit		28		14		19
EPS		28		14		18
Per-share data (period end)
Basic earnings per share from ordinary activities (Rs.)		41.98		32.76		144.68
Basic cash earnings per share from ordinary activities (Rs.)		48.66		38.88		173.22
Book value (Rs.)		473.94		347.12		431.84
Price / earning (LTM)		21.28		26.01		28.01
Price / cash earnings (LTM)		17.90		21.70		23.40
Price / book value		6.91		9.45		9.39
PE / EPS growth		0.76		1.86		1.52
Dividend per share (Rs.)		—		—		27.00

*	Investments in liquid funds have been considered as Cash and Cash equivalents for the purpose of above ratio analysis.
**	Denotes growth compared with figures of the corresponding period in the previous year.
LTM: Last Twelve Months

20

At a glance — US GAAP

	US $ millions, except as otherwise stated
	Quarter ended June 30,						Year ended
	2002			2003			March 31, 2003
For the period
Revenues		156.31			233.26			753.81
Operating income		46.44			64.03			218.64
Operating income / revenues (%)		29.71	%		27.45	%		29.00	%
Net income		42.84			58.27			194.87
Net income / revenues (%)		27.41	%		24.98	%		25.85	%
Basic earnings per equity share ($)		0.65			0.89			2.97
Cash dividend per equity share ($)		0.26			0.31			0.51
Capital expenditure		10.60			13.01			46.71
At the end of the period
Total assets		530.22			771.08			704.31
Property, plant and equipment-net		147.22			165.17			157.19
Cash and cash equivalents		235.47			381.12			354.36
Working capital		303.21			494.14			444.77
Total debt		—			—			—
Stockholders’ equity		469.47			678.36			626.00
Common stock		8.60			8.60			8.60
Market capitalization		4,459.79			4,674.58			5,648.50

Note: Market capitalization is calculated by considering the Indian market price for the shares outstanding at the period / year-end.

21

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended June 30, 2003

Commission File Number 333-72195

Infosys Technologies Limited

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Bangalore, Karnataka, India

(Jurisdiction of incorporation or organization)

Electronics City, Hosur Road, Bangalore, Karnataka, India 560 100 +91-80-852-0261.

(Address of principal executive offices)

Indicate by check mark registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F þ    Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934

Yes o    No þ

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g 3-2(b)

Not applicable

Currency of Presentation and Certain Defined Terms

In this Quarterly Report, references to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “Rs.” or “rupees” or “Indian rupees” are to the legal currency of India. Our financial statements are presented in Indian rupees and translated into U.S. dollars and are prepared in accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP. References to “Indian GAAP” are to Indian Generally Accepted Accounting Principles. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

All references to “we,” “us,” “our,” “Infosys” or the “Company” shall mean Infosys Technologies Limited. “Infosys” is a registered trademark of Infosys Technologies Limited in the United States and India. All other trademarks or tradenames used in this Quarterly Report are the property of their respective owners.

Except as otherwise stated in this Quarterly Report, all translations from Indian Rupees to U.S. dollars are based on the noon buying rate in the City of New York on June 30, 2003, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York which was Rs. 46.40 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Information contained in our website, www.infosys.com, is not part of this Quarterly Report.

Forward-looking Statements May Prove Inaccurate

In addition to historical information, this Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such differences include but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. In addition, readers should carefully review the other information in this Quarterly Report and in the Company’s periodic reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time.

22

Part I – Financial information

Item 1. Financial statements
Consolidated balance sheets

		March 31, 2003 (1)			June 30, 2003
					(Unaudited)
ASSETS
Current Assets
	Cash and cash equivalents	$	354,362,918		$	381,122,431
	Investments in liquid mutual fund units		–			21,548,714
	Trade accounts receivable, net of allowances		109,119,856			121,875,899
	Deferred tax assets		288,541			514,545
	Prepaid expenses and other current assets		24,384,316			25,181,135
	Unbilled revenue		19,702,186			21,338,663
	Total current assets		507,857,817			571,581,387
Property, plant and equipment, net			157,194,190			165,168,590
Intangible assets, net			6,471,236			5,873,532
Deferred tax assets			7,264,885			7,566,810
Investments			4,613,833			3,262,407
Prepaid income taxes			4,452,678			123,229
Other assets			16,454,328			17,506,322
Total assets		$	704,308,967		$	771,082,277
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Accounts payable	$	426,611		$	144,954
	Client deposits		3,208,295			2,902,094
	Other accrued liabilities		46,249,269			53,887,919
	Income taxes payable		–			4,592,757
	Unearned revenue		13,202,115			15,912,616
Total current liabilities			63,086,290			77,440,340
Non-current liabilities			5,217,758			5,280,172
Preferred stock of subsidiary
0.0005% Cumulative Convertible Preference Shares, par value $2 each, 4,375,000 preference shares authorized, issued and outstanding – 4,375,000 preference shares as of June 30, 2003			10,000,000			10,000,000
Stockholders’ Equity
Common stock, $0.16 par value; 100,000,000 equity shares authorized, issued and outstanding – 66,243,078 and 66,249,366 as of March 31, 2003 and June 30, 2003, respectively			8,602,909			8,603,587
	Additional paid-in capital		127,042,751			127,398,522
	Accumulated other comprehensive income		(31,444,835	)		(15,433,919	)
	Deferred stock compensation		(2,817,066	)		(1,745,376	)
Retained earnings			524,621,160			559,538,951
Total stockholders’ equity			626,004,919			678,361,765
Total Liabilities and Stockholders’ Equity		$	704,308,967		$	771,082,277

⁽¹⁾ March 31, 2003 balances were obtained from audited financial statements

Unaudited consolidated statements of income

		Three months ended June 30,
		2002		2003
Revenues		$	156,314,869	$	233,255,636
Cost of revenues (including amortization of stock compensation expenses of $729,994, and $628,907 for the three months ended June 30, 2002 and 2003 respectively			86,004,769		132,902,389
Gross profit			70,310,100		100,353,247
Operating expenses:
	Selling and marketing expenses		11,297,734		17,402,555
	General and administrative expenses		11,859,128		17,724,228
	Amortization of stock compensation expense		513,954		442,783
	Amortization of intangible assets		204,121		749,118
Total operating expenses			23,874,937		36,318,684
Operating income			46,435,163		64,034,563
Other income, net			5,096,520		5,300,780
Income before income taxes			51,531,683		69,335,343
Provision for income taxes			8,687,383		11,064,797
Net income		$	42,844,300	$	58,270,546
Earnings per equity share
	Basic	$	0.65	$	0.89
	Diluted	$	0.64	$	0.88
Weighted equity shares used in computing earnings per equity share
	Basic		65,566,930		65,583,707
	Diluted		66,374,341		66,076,979

See accompanying notes to the unaudited consolidated financial statements

23

Unaudited consolidated statements of stockholders’ equity and comprehensive income

	Common stock				Additional
					paid-in		Comprehensive
	Shares		Par value		capital		income
Balance as of March 31, 2002		66,186,130	$	8,597,001	$	123,079,948
Common stock issued		2,400		245		81,238
Cash dividends declared		—		—		—
Income tax benefit arising on exercise of stock options		—		—		40,843
Amortization of compensation related to stock option grants		—		—		—
Comprehensive income
Net income		—		—		—	$	42,844,300
Other comprehensive income
Translation adjustment		—		—		—		(159,537	)
Comprehensive income							$	42,684,763
Balance as of June 30, 2002		66,188,530	$	8,597,246	$	123,202,029
Balance as of March 31, 2003		66,243,078	$	8,602,909	$	127,042,751
Common stock issued		6,288		678		229,042
Cash dividends declared		—
Income tax benefit arising on exercise of stock options						126,729
Amortization of compensation related to stock option grants
Comprehensive income
Net income							$	58,270,546
Other comprehensive income
Translation adjustment								16,010,916
Comprehensive income							$	74,281,462
Balance as of June 30, 2003		66,249,366	$	8,603,587	$	127,398,522

[Additional columns below]

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

	Accumulated
	other									Total
	comprehensive			Deferred stock			Retained			stockholders’
	income			compensation			earnings			equity
Balance as of March 31, 2002	$	(45,441,148	)	$	(7,620,600	)	$	363,764,165		$	442,379,366
Common stock issued		—			—			—			81,483
Cash dividends declared		—			—			(16,956,889	)		(16,956,889	)
Income tax benefit arising on exercise of stock options		—			—			—			40,843
Amortization of compensation related to stock option grants		—			1,243,948			—			1,243,948
Comprehensive income
Net income		—			—			42,844,300			42,844,300
Other comprehensive income
Translation adjustment		(159,537	)		—			—			(159,537	)
Comprehensive income		—			—			—			—
Balance as of June 30, 2002	$	(45,600,685	)	$	(6,376,652	)	$	389,651,576		$	469,473,514
Balance as of March 31, 2003	$	(31,444,835	)	$	(2,817,066	)	$	524,621,160		$	626,004,919
Common stock issued		—			—			—			229,720
Cash dividends declared								(23,352,755	)		(23,352,755	)
Income tax benefit arising on exercise of stock options											126,729
Amortization of compensation related to stock option grants					1,071,690						1,071,690
Comprehensive income
Net income								58,270,546			58,270,546
Other comprehensive income
Translation adjustment		16,010,916									16,010,916
Comprehensive income
Balance as of June 30, 2003	$	(15,433,919	)	$	(1,745,376	)	$	559,538,951		$	678,361,765

See accompanying notes to the unaudited consolidated financial statements

24

Unaudited consolidated statements of cash flows

	Three months ended June 30,
	2002			2003
Operating Activities:
Net income	$	42,844,300		$	58,270,546
Adjustments to reconcile net income to net cash provided by operating activities
Gain on sale of property, plant and equipment		(3,380	)		(2,128	)
Depreciation		8,073,148			8,873,092
Amortization of intangible assets		204,121			749,118
Provision for investments		—			1,371,070
Deferred tax benefit		(138,794	)		(343,977	)
Amortization of deferred stock compensation expense		1,243,948			1,071,690
Changes in assets and liabilities
Trade accounts receivable		(15,915,743	)		(9,972,987	)
Prepaid expenses and other current assets		(2,539,168	)		(1,688,480	)
Unbilled revenue		(5,948,412	)		(1,142,273	)
Income taxes		3,476,773			9,015,497
Accounts payable		56,260			(288,414	)
Client deposits		(612,993	)		(379,554	)
Unearned revenue		5,789,984			2,359,270
Other accrued liabilities		7,085,996			6,206,445
Net cash provided by operating activities		43,616,040			74,098,915
Investing Activities:
Expenditure on property, plant and equipment		(7,721,009	)		(13,010,698	)
Expenditure on intangible asset		(2,876,526	)		—
Proceeds from sale of property, plant and equipment		28,065			53,209
Loans to employees		(2,561,614	)		844,854
Purchase of investments		(54,378	)		(114,932	)
Investments in liquid mutual fund units		—			(21,551,724	)
Net cash used in investing activities		(13,185,462	)		(33,779,291	)
Financing Activities:
Proceeds from issuance of common stock		81,483			229,720
Proceeds from issuance of preferred stock by subsidiary		10,000,000			—
Payment of dividends		(15,511,483	)		(23,125,050	)
Net cash used in financing activities		(5,430,000	)		(22,895,330	)
Effect of exchange rate changes on cash		(20,149	)		9,335,219
Net increase in cash and cash equivalents during the period		24,980,429			26,759,513
Cash and cash equivalents at the beginning of the period		210,485,940			354,362,918
Cash and cash equivalents at the end of the period	$	235,466,369		$	381,122,431
Supplementary information:
Cash paid towards taxes	$	5,351,346		$	2,055,378
Non cash transaction (see Note 2.5)	$	5,000,000			—

See accompanying notes to the unaudited consolidated financial statements

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1         Company overview and significant accounting policies

1.1      Company overview

Infosys Technologies Limited (“Infosys” or “the Company”) along with its majority owned and controlled subsidiary, Progeon Limited (“Progeon”) is a leading global information technology, or IT, services company. The Company provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The Company provides solutions that span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the Company offers software products for the banking industry and business process management services.

1.2     Basis of preparation of financial statements

The accompanying consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Inter-company balances and transactions are eliminated on consolidation. All amounts are stated in U.S. dollars, except as otherwise specified.

Interim information presented in the consolidated financial statements has been prepared by the management without audit and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair presentation of the financial position, results of operations and cash flows for the periods shown, and is in accordance with GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s annual report on Form 20-F for the fiscal year ended March 31, 2003.

1.3     Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements, and the reported amounts of revenues and expenses during the period. Examples of estimates include accounting for contract costs expected to be incurred to complete software development, allowance for uncollectible accounts receivable, future obligations under employee benefit plans, provisions for post-sales customer support and the useful lives of property, plant and equipment and intangible assets. Actual results could differ from those estimates.

1.4     Revenue recognition

The company derives revenues primarily from software development and related services, licensing of software products and from business process management services. Arrangements with customers for software development and related services are either on a fixed price, fixed timeframe or on a time and material basis. Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Revenue from fixed-price, fixed-time frame contracts is recognized as per the percentage-of-completion method. Guidance has been drawn from paragraph 95 of Statement of Position (SOP) 97-2 to account for revenue from fixed price arrangements for software development and related services in conformity with SOP 81-1. The input (efforts expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Maintenance revenue is recognized ratably over the term of the underlying maintenance agreement.

The company provides its clients with a fixed-period warranty for corrections of errors and telephone support on all its fixed-price, fixed-time frame contracts. Costs associated with such support services are accrued at the time related revenues are recorded and included in cost of revenues. The company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.

In accordance with SOP 97-2, Software Revenue Recognition, license fee revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable, and the collection of the fee is probable. Arrangements to deliver our software products generally have three elements: license, implementation and Annual Technical Services (“ATS”). The company has applied the principles in SOP 97-2 to account for revenue from these multiple element arrangements. Vendor specific objective evidence of fair value (“VSOE”) has been established for ATS. VSOE is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement, the revenue from such contracts are allocated to each component of the contract using the residual method, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of an established VSOE for implementation, the entire arrangement fee for license and implementation is recognised as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed. ATS revenue is recognised ratably over the period in which the services are rendered.

Revenues from business process management and other services are recognized on both, the time-and-material and fixed-price, fixed-time frame bases. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from fixed-price, fixed-time frame contracts is recognized as per the proportional performance method using an output measure of performance.

When the company receives advances for services and products, such amounts are reported as client deposits until all conditions for revenue recognition are met.

1.5     Cash and cash equivalents

The company considers all highly liquid investments with a remaining maturity at the date of purchase / investment of three months or less to be cash equivalents. Cash and cash equivalents comprise cash, cash on deposit with banks, and deposits with corporations.

1.6     Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. The company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:

Buildings	15 years	Plant and equipment	5 years
Furniture and fixtures	5 years	Vehicles	5 years
Computer equipment	2-5 years

The cost of software purchased for internal use is accounted under SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Deposits paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment not put to use before such date are disclosed under “Capital work-in-progress”.

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1.7      Intangible assets

Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the company for its use. Management estimates the useful lives of acquired rights in software applications to range between one through five years.

1.8     Impairment of long-lived assets

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

1.9     Research and development

Research and development costs are expensed as incurred. Software product development costs are expensed as incurred until technological feasibility is achieved.

1.10    Foreign currency translation

The accompanying financial statements are reported in U.S. dollars. The functional currency of the company is the Indian rupee (“Rs.”). The translation of Rs. to U.S. dollars is performed for balance sheet accounts using the exchange rate in effect at the balance sheet date and for revenue and expense accounts using a monthly average exchange rate for the respective periods. The gains or losses resulting from such translation are reported as “Other comprehensive income”, a separate component of stockholders’ equity. The method for translating expenses of overseas operations depends upon the funds used. If the payment is made from a rupee denominated bank account, the exchange rate prevailing on the date of the payment would apply. If the payment is made from a foreign currency, i.e., non-rupee denominated account, the translation into rupees is performed at the average monthly exchange rate.

1.11    Earnings per share

In accordance with Statement of Financial Accounting Standards (“SFAS”) 128, Earnings Per Share, basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, using the treasury stock method for options and warrants, except where the result would be anti-dilutive.

1.12    Income taxes

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

1.13    Fair value of financial instruments

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

1.14    Concentration of risk

Financial instruments that potentially subject the company to concentrations of credit risk consist principally of cash equivalents, trade accounts receivable, investment securities and hedging instruments. By nature, all such financial instruments involve risk, including the credit risk of non-performance by counterparties. In management’s opinion, as of March 31, 2003 and June 30, 2003, there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments, other than the amounts already provided for in the financial statements, if any. Exposure to credit risk is managed through credit approvals, establishing credit limits and monitoring procedures. The company’s cash resources are invested with corporations, financial institutions and banks with high investment grade credit ratings. Limitations are established by the company as to the maximum amount of cash that may be invested with any such single entity.

1.15    Retirement benefits to employees

1.15.1    Gratuity

In accordance with the Payment of Gratuity Act, 1972, Infosys provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”), covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, based upon which, Infosys contributes to the Infosys Technologies Limited Employees’ Gratuity Fund Trust (the “Trust”). Trustees administer contributions made to the Trust and invest in specific designated securities as mandated by law, which generally comprise central and state government bonds and debt instruments of government-owned corporations.

In accordance with the Payment of Gratuity Act, 1972, Progeon provides for gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation.

1.15.2    Superannuation

Apart from being covered under the Gratuity Plan described above, certain employees of Infosys are also participants of a defined contribution plan. The company makes monthly contributions under the superannuation plan (the “Plan”) to the Infosys Technologies Limited Employees Superannuation Fund Trust, based on a specified percentage of each covered employee’s salary. Infosys has no further obligations to the Plan beyond its monthly contributions.

Certain employees of Progeon are also participants of a defined contribution plan. The company makes monthly provisions under the superannuation plan based on a specified percentage of each covered employee’s salary. The company has no further obligations to the superannuation plan beyond its monthly provisions.

1.15.3  Provident fund

Eligible employees also receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Infosys contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remainders of the contributions are made to the Government administered provident fund. There are no further obligations under the provident fund plan beyond its monthly contributions.

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In respect of Progeon, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a Government administered provident fund. The company has no further obligations under the provident fund plan beyond its monthly contributions.

1.16    Investments

The company accounts by the equity method for investments between 20% and 50% or where it is otherwise able to exercise significant influence over the operating and financial policies of the investee. Investment securities in which the company controls less than 20% voting interest are currently classified as “available-for-sale securities”. Non-readily marketable equity securities for which there are no readily determinable fair values are recorded at cost.

Investment securities designated as “available-for-sale” are carried at their fair value. Fair value is based on quoted market prices. Unquoted securities are carried at cost, adjusted for declines in value judged to be other than temporary. Temporary unrealized gains and losses, net of the related tax effect are reported as a separate component of stockholders’ equity until realized. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities are included in the statements of income. The cost of securities sold is based on the specific identification method. Interest and dividend income is recognized when earned.

1.17    Stock-based compensation

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

The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	Three months ended June 30,
	2002			2003
Net income, as reported	$	42,844,300		$	58,270,546
Add: Stock-based employee compensation expense included in reported net income		1,243,948			1,071,690
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(16,289,512	)		(14,843,692	)
Pro forma net income	$	27,798,736		$	44,498,544
Earnings per share:
Basic – as reported		0.65			0.89
Basic – pro forma		0.42			0.68
Diluted – as reported		0.64			0.88
Diluted – pro forma		0.42			0.68

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

	Three months ended June 30,
	2002			2003
Dividend yield %		0.2	%		0.2	%
Expected life	1-5 years			1-5 years
Risk free interest rate		6	%		5.7	%
Volatility		60-75	%		60-75	%

1.18    Dividends

Dividend on common stock are recorded as a liability on the date of declaration by the stockholders.

1.19    Derivative financial instruments

On April 1, 2001, the company adopted SFAS 133, Accounting for Derivative Instruments and Hedging Activities as amended, when the rules became effective for companies with fiscal years ending March 31. The company enters into forward foreign exchange contracts where the counter party is generally a bank. The company purchases forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS 133, as amended. Any derivative that is either not designated hedge, or is so designated but is ineffective per SFAS 133, is marked to market and recognized in earnings immediately.

1.20    Reclassifications

Certain reclassifications have been made to conform prior period data to the current presentations. These reclassifications had no effect on reported earnings.

1.21    Recent accounting pronouncements

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

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin (ARB) 51, that applies to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. The company has assessed the implication of this interpretation and no impact is foreseen.

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

On May 15, 2003, the Financial Accounting Standards Board issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Statement requires issuers to classify as liabilities (or assets in some circumstance) three classes of freestanding financial instruments that embody obligations for the issuer.

The Statement is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The company adopted the provisions of the Statement on July 1, 2003 and on adoption, the company will continue to show the preferred stock of subsidiary outside of stockholders’ equity and will be reflected as part of non-current liabilities.

2       Notes to the consolidated financial statements

2.1     Cash and cash equivalents

The cost and fair values for cash and cash equivalents as of March 31, 2003 and June 30, 2003 are as follows:

	As of
	March 31, 2003		June 30, 2003
Cost and fair values
Cash and bank deposits	$	283,302,326	$	298,582,580
Deposits with corporations		71,060,592		82,539,851
	$	354,362,918	$	381,122,431

Cash and cash equivalents include restricted cash balances in the amount of $336,610 and $572,513 as of March 31, 2003 and June 30, 2003 respectively. The restrictions are primarily on account of unclaimed dividend.

2.2     Trade accounts receivable

Trade accounts receivable as of March 31, 2003 and June 30, 2003, net of allowance for doubtful accounts of $3,010,568 and $3,914,266 respectively, amounted to $109,119,856 and $121,875,899. The age profile of trade accounts receivable, net of allowances is given below.

	(In %)
	As of
	March 31, 2003		June 30, 2003
Period (in days)
0 – 30		65.8		73.5
31 – 60		29.0		11.6
61 – 90		3.9		8.9
More than 90		1.3		6.0
		100.0		100.0

2.3     Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	As of
	March 31, 2003		June 30, 2003
Rent deposits	$	2,856,226	$	2,997,264
Security deposits with service providers		2,814,216		2,368,321
Loans to employees		12,252,004		11,043,613
Prepaid expenses		5,209,907		7,998,185
Other current assets		1,251,963		773,752
	$	24,384,316	$	25,181,135

Other current assets represent advance payments to vendors for the supply of goods and rendering of services and certain costs incurred towards software. Deposits with service providers relate principally to leased telephone lines and electricity supplies.

2.4      Property, plant and equipment – net

Property, plant and equipment consist of the following:

	As of
	March 31, 2003			June 30, 2003
Land	$	9,948,480		$	10,190,760
Buildings		81,114,141			89,983,886
Furniture and fixtures		43,969,763			48,162,625
Computer equipment		77,299,299			83,695,718
Plant and equipment		47,832,904			54,388,594
Vehicles		73,995			75,798
Capital work-in-progress		16,281,831			9,795,252
		276,520,413			296,292,633
Accumulated depreciation		(119,326,223	)		(131,124,043	)
	$	157,194,190		$	165,168,590

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Depreciation expense amounted to $8,073,148 and $8,873,092 for the three months ended June 30, 2002 and 2003 respectively. The amount of third party software expensed during the three months ended June 30, 2002 and 2003 was $3,216,055 and $2,888,825 respectively.

2.5     Intangible assets

During fiscal 2003, the company acquired the intellectual property rights of Trade IQ product from IQ Financial Systems Inc., USA for its banking business unit. The consideration paid amounted to US$ 3.47 million. The consideration has been recorded as an intangible asset, which is being amortized over two years representing management’s estimate of the useful life of the intellectual property.

The company also entered into an agreement with the Aeronautical Development Agency, India (“ADA”) for transferring the intellectual property rights in AUTOLAY, a commercial software application product used in the design of high performance structural systems. The company will pay the committed consideration of US$ 5 million within ten years of the contract date. The ownership of intellectual property in AUTOLAY transfers to the company on remittance of the consideration to ADA. The committed consideration of US$ 5 million is recorded as an intangible asset and is being amortized over five years, which is management’s estimate of the useful life. The amount payable to ADA is disclosed as a non-current liability as of March 31, 2003 and June 30, 2003 and as a non-cash transaction in the consolidated statement of cash flows.

As of June 30, 2003, intangible assets (net of accumulated amortization of $3,209,393) were $5,873,532.

2.6     Investments

The carrying value and the fair values of the Company’s investments are as follows:

	Carrying cost		Fair value
As of March 31, 2003
M-Commerce Ventures Pte Ltd – 80 units, each unit representing 1 Ordinary Share of S$1 each at par and 9 Redeemable Preference Shares of S$1 each at par, with a premium of S$1,110 per Redeemable Preference Share	$	453,863	$	453,863
CiDRA Corporation – 33,333 Series D Convertible Preferred Stock, at $90 each, fully paid, par value $0.01 each		2,999,970		2,999,970
Workadia Inc., USA – 880,000 Series B Preferred Stock at $2.5 each, fully paid, par value $0.0005 each		660,000		660,000
Stratify, Inc. (formerly Purple Yogi Inc.) – 276,243 Series D Convertible Preferred Stock, At $1.81 each fully paid, par value $0.001 each		500,000		500,000
	$	4,613,833	$	4,613,833

	Carrying cost		Fair value
As of June 30, 2003
M-Commerce Ventures Pte Ltd – 100 units, each unit representing 1 Ordinary Share of S$1 each at par and 9 Redeemable Preference Shares of S$1 each at par, with a premium of S$1,110 per Redeemable Preference Share	$	571,760	$	571,760
CiDRA Corporation – 33,333 Series D Convertible Preferred Stock, at $90 each, fully paid, par value $0.01 each		1,925,402		1,925,402
Workadia Inc., USA – 880,000 Series B Preferred Stock at $2.5 each, fully paid, par value $0.0005 each		667,681		667,681
Stratify, Inc. (formerly Purple Yogi Inc.) – 276,243 Series D Convertible Preferred Stock, At $1.81 each fully paid, par value $0.001 each		97,564		97,564
	$	3,262,407	$	3,262,407

An amount of $619,161 received from Workadia Inc. towards recovery of investment is accounted as “other advances received,” pending clearance from regulatory authorities for setting-off against the investment.

2.7     Other assets

Other assets represent the non-current portion of loans to employees.

2.8     Related parties

The company grants loans to employees for acquiring assets such as property and cars. Such loans are repayable over fixed periods ranging from 1 to 100 months. The annual rates of interest at which the loans have been made to employees vary between 0% through 4%. No loans have been made to employees in connection with equity issues. The loans are generally secured by the assets acquired by the employees.

The required repayments of loans by employees are as detailed below.

	As of
	March 31, 2003		June 30, 2003
Year ending March / June
2004	$	12,252,004	$	11,043,613
2005		4,298,780		4,318,398
2006		3,206,683		3,533,739
2007		2,416,202		2,753,456
2008		2,099,781		2,465,040
Thereafter		4,432,882		4,435,689
	$	28,706,332	$	28,549,935

The estimated fair values of related party receivables amounted to $24,422,419 and $24,007,933 as of March 31, 2003 and June 30, 2003 respectively. These amounts have been determined using available market information and appropriate valuation methodologies. Considerable judgment is required to develop these estimates of fair value. Consequently, these estimates are not necessarily indicative of the amounts that the company could realize in the market.

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2.9     Other accrued liabilities

Other accrued liabilities comprise the following:

	As of
	March 31, 2003		June 30, 2003
Accrued compensation to staff	$	25,382,793	$	29,664,576
Accrued dividends		336,610		572,513
Provision for post sales client support		1,015,022		1,075,992
Employee withholding taxes payable		4,964,118		4,844,009
Provision for expenses		12,196,810		15,138,142
Retainage		1,120,938		1,260,077
Others		1,232,978		1,332,610
	$	46,249,269	$	53,887,919

2.10    Stockholders’ equity

Infosys has only one class of capital stock referred to as equity shares. All references in these financial statements to number of shares, per share amounts and market prices of equity shares are retroactively restated to reflect stock splits made. The rights of equity shareholders are set out below.

2.10.1  Voting

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

2.10.2  Dividends

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

2.10.3  Liquidation

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

2.10.4  Stock options

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

2.11    Share capital of Progeon

In April 2002, Progeon issued 12,250,000 equity shares of par value $0.20 per share to its holding company, Infosys, in exchange for an aggregate consideration of $2,500,000 (“First Tranche subscription”). In terms of the stock subscription agreement between Infosys, Citicorp International Finance Corporation (“CIFC”) and Progeon, Infosys is also required to subscribe to an additional 12,250,000 equity shares in Progeon during calendar year 2003.

On June 14, 2002, Progeon issued 4,375,000 0.0005% cumulative convertible preference shares to CIFC at an issue price of $2.28 (equivalent to Rs. 112) per share, in exchange for an aggregate consideration of $10,000,000. Unless earlier converted, pursuant to an agreement between the company and CIFC, these cumulative convertible preference shares shall automatically be converted into equity shares, (i) one year prior to the Initial Public Offering (“IPO”) date or (ii) September 30, 2005 or (iii) at the holder’s option, immediately upon the occurrence of any Liquidity Event; whichever is earlier. The term “Liquidity Event” includes any of a decision of the Board of Directors of the company to make an IPO, merger, reconstruction, capital reorganization or other event which, in the sole opinion of the holder of the convertible preference shares, amounts to an alteration in the capital structure of the company. Each preference share is convertible into one equity share, par value $0.20 each. The dividend on the preference shares for the period ended June 30, 2003 is payable.

Each holder of these cumulative convertible preference shares is entitled to receive notice of, and to attend, any shareholders’ meeting and shall be entitled to vote together with holders of equity shares on any matters that affect their rights as preference shareholders including any resolution for winding up the company or for the repayment or reduction of the company’s share capital.

In the event of any liquidation, dissolution or winding up of the company, either voluntary or involuntary, each holder of the preference shares will be paid a dollar equivalent of Rs. 112 per preference share, as adjusted for stock dividends, combinations, splits, recapitalizations and the like, in preference to any distribution of any assets of the company to the holders of equity shares.

Upon the completion of the distribution described above, the remaining assets and funds of the company available for distribution to shareholders shall be distributed among all holders of preference shares and equity shares based on the number of equity shares held by each of them (assuming a full conversion of all the preference shares).

2.12    Other income, net

Other income, net, consists of the following:

	Three months ended June 30,
	2002		2003
Interest income	$	3,620,516	$	4,963,795
Exchange gains		1,328,421		1,576,781
Provision for investments		—		(1,371,070	)
Others		147,583		131,274
	$	5,096,520	$	5,300,780

Provision for investments include write-downs to the company’s investments in CiDRA Corporation ($1.0 million) and Stratify Inc ($0.4 million). These write- downs were required due to the non-temporary impact of adverse market conditions on these entities’ business models and contemporary transactions on the securities of these entities which have been indicative of their current fair value.

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2.13 Research and development

General and administrative expenses in the accompanying statements of income include research and development expenses of $705,122 and $1,222,577 for June 30, 2002 and 2003 respectively.

2.14 Employees’ Stock Offer Plans (“ESOP”)

In September 1994, the company established the 1994 plan, which provided for the issue of 6,000,000 warrants, as adjusted, to eligible employees. The warrants were issued to an employee welfare trust (the “Trust”). In 1997, in anticipation of a share dividend to be declared by the company, the Trust exercised all warrants held by it and converted them into equity shares. As and when the Trust issued options / stock to eligible employees, the difference between the market price and the exercise price was accounted as deferred stock compensation expense and amortized over the vesting period. Such amortized deferred compensation expense was $1,243,948 and $1,071,690 for the three months ended June 30, 2002 and 2003 respectively. The 1994 plan lapsed in fiscal 2000, and consequently no further shares will be issued to employees under this plan.

1998 Employees Stock Offer Plan (the “1998 Plan”). The company’s 1998 Plan provides for the grant of non-statutory stock options and incentive stock options to employees of the company. The establishment of the 1998 Plan was approved by the board of directors in December 1997 and by the stockholders in January 1998. The Government of India has approved the 1998 Plan, subject to a limit of 1,470,000 equity shares representing 2,940,000 ADS to be issued under the 1998 Plan. Unless terminated sooner, the 1998 Plan will terminate automatically in January 2008. All options under the 1998 Plan will be exercisable for equity shares represented by ADSs. The 1998 Plan is administered by a Compensation Committee comprising five members, all of whom are independent directors on the Board of Directors. All options under the 1998 Plan are exercisable for equity shares represented by ADSs.

1999 Stock Offer Plan (the “1999 Plan”). In fiscal 2000, the company instituted the 1999 Plan. The stockholders and the Board of Directors approved the 1999 Plan in June 1999. The 1999 Plan provides for the issue of 6,600,000 equity shares to employees. The 1999 Plan is administered by a Compensation Committee comprising five members, all of whom are independent directors on the Board of Directors. Under the 1999 Plan, options will be issued to employees at an exercise price that is not less than Fair Market Value (“FMV”). Under the 1999 Plan, options may also be issued to employees at exercise prices that are less than FMV only if specifically approved by the members of the company in a general meeting. All options under the 1999 plan are exercisable for equity shares.

The options under the 1998 Plan and 1999 Plan vest over a period of one through four years and expire 5 years from the date of completion of vesting.

The activity in the warrants / equity shares of the 1994, 1998 and 1999 ESOP in fiscal 2001, 2002 and 2003 are set out below.

	Three months ended June 30,
	2002					2003
	Shares			Weighted		Shares			Weighted
	arising			average		arising			average
	out of options			exercise price		out of options			Exercise price
1994 Option Plan
Outstanding at the beginning of the period		321,400			—		318,200			—
Granted		—			—		—			—
Forfeited		(2,200	)	$	1.15				$	1.15
Exercised							—			—
Outstanding at the end of the period		319,200					318,200
Exercisable at the end of the period		—			—					—
Weighted average fair value of grants
During the period at less than market					—		—			—
1998 Option Plan
Outstanding at the beginning of the period		1,131,247			—		1,251,703
Granted		68,250		$	119		26,900		$	84
Forfeited		(8,333	)	$	122		(55,147	)	$	144
Exercised		(2,400	)	$	34		(6,258	)	$	36
Outstanding at the end of the period		1,188,764					1,217,198
Exercisable at the end of the period		202,893			—		329,238
Weighted – average fair value of options granted during the period				$	31				$	22
1999 Option Plan
Outstanding at the beginning of the period		4,668,815					5,061,171
Granted		66,700		$	67		151,050		$	62
Forfeited		(39,742	)	$	101		(76,430	)	$	96
Exercised		—					(30	)	$	56
Outstanding at the end of the period		4,695,773					5,135,761
Exercisable at the end of the period		594,507			—		1,445,830
Weighted-average fair value of options granted during the period				$	32				$	27

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The following table summarizes information about stock options outstanding as of June 30, 2003

	Options Outstanding						Options Exercisable
Range of	No. of shares		Weighted average		Weighted		No. of shares		Weighted
exercise prices	arising out of		remaining contractual		average		arising out of		average
per share ($)	options		life in years		exercise price		options		exercise price
1994 Plan
1.15		318,200		1.23	$	1.15		—		—
1998 Plan
34 - 50		92,300		3.69	$	34		92,300	$	34
51 - 100		283,709		6.47	$	84		16,708	$	86
101- 150		344,505		6.90	$	125		26,305	$	133
151- 200		354,934		5.38	$	190		131,090	$	189
201- 300		67,075		5.37	$	240		21,045	$	240
301- 400		59,325		4.87	$	324		32,580	$	323
401- 660		15,350		4.67	$	514		9,210	$	514
		1,217,198						329,238
1999 Plan
51 - 100		3,398,825		5.96	$	74		776,460	$	83
101- 150		1,331,596		5.45	$	125		536,650	$	126
151- 200		399,240		5.18	$	164		129,060	$	165
201- 250		6,100		4.76	$	221		3,660	$	221
		5,135,761						1,445,830

Progeon’s 2002 Plan provides for the grant of stock options to employees of the company and was approved by its board of directors and stockholders in June 2002. All options under the 2002 Plan are exercisable for equity shares. The 2002 Plan is administered by a Compensation Committee comprising three members, all of whom are directors of the company. The 2002 Plan provides for the issue of 5,250,000 equity shares to employees, at an exercise price, which shall not be less than FMV. Options may also be issued to employees at exercise prices that are less than FMV only if specifically approved by the members of the company in general meeting. The options issued under the 2002 Plan vest in periods ranging between one through six years, although accelerated vesting based on performance conditions is provided in certain instances. All options granted have been accounted for as a fixed plan. Options to purchase 1,801,175 shares of Progeon, are outstanding as of June 30, 2003. There were no grants, forfeitures or exercises on these grants during the three months ended June 30, 2003. The outstanding options have a weighted average remaining contractual life of 9.09 years and weighted average exercise price of $0.69. No options were exercisable as of June 30, 2003.

2.15 Income taxes

The provision for income taxes comprises:

	Three months ended June 30,
	2002			2003
Current taxes:
Domestic taxes	$	3,326,192		$	3,179,879
Foreign taxes		5,499,985			8,228,895
		8,826,177			11,408,774
Deferred taxes:
Domestic taxes		(10,014	)		11,971
Foreign taxes		(128,780	)		(355,948	)
		(138,794	)		(343,977	)
Aggregate taxes	$	8,687,383		$	11,064,797

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities, and a description of the financial statement items that created these differences are as follows:

	As of
	March 31, 2003			June 30, 2003
Deferred tax assets:
Property, plant and equipment	$	4,719,124		$	5,021,552
Provision for doubtful debts		1,093,701			1,019,590
Investments		2,545,761			2,827,586
		8,358,586			8,868,728
Less: Valuation allowance		(614,004	)		(605,797	)
		7,744,582			8,262,931
Deferred tax liability on exchange gains		(191,156	)		(181,576	)
Net deferred tax assets	$	7,553,426		$	8,081,355

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of the projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that it is more likely than not the company will realize the benefits of those deductible differences, net of the existing valuation allowance at June 30, 2003. The valuation allowance relate to provision for doubtful debts and investments. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

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All deferred tax expenses / (benefits) are allocated to the continuing operations of the company.

The provision for foreign taxes is due to income taxes payable overseas, principally in the United States of America. The company benefits from certain significant tax incentives provided to software firms under Indian tax laws. These incentives presently include: (i) an exemption from payment of Indian corporate income taxes for a period of ten consecutive years of operation of software development facilities designated as “Software Technology Parks” (the “STP Tax Holiday”); and (ii) a tax deduction for profits derived from exporting computer software (the “Export Deduction”). All but one of the company’s software development facilities are located in designated Software Technology Parks (“STP”). The Government of India has recently amended the tax incentives available to companies set up in designated STPs. The period of the STP Tax Holiday available to such companies is restricted to ten consecutive years, beginning from the financial year when the unit started producing computer software or April 1, 1999, whichever is earlier. The Finance Act 2002 provided that the exempt income from an export oriented undertaking, for fiscal 2003 be restricted to 90% of its export income. Additionally, the Export Deduction is being phased out equally over a period of five years starting from fiscal 2000.

The company is subject to a 15% Branch Profit Tax (BPT) in the U.S. to the extent its U.S. branch’s net profit during the year is greater than the increase in the net assets of the company’s U.S. branch during the fiscal year, computed in accordance with the Internal Revenue Code. The company has not triggered the BPT and intends to maintain the current level of its net assets in the U.S., as it is consistent with its business plan. Accordingly, a BPT provision has not been recorded.

2.16 Earnings per share

The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:

	Three months ended June 30,
	2002		2003
Basic earnings per equity share – weighted average number of common shares outstanding excluding unallocated shares of ESOP		65,566,930		65,583,707
Effect of dilutive common equivalent shares – stock options outstanding		807,411		493,272
Diluted earnings per equity share – weighted average number of common shares and common equivalent shares outstanding		66,374,341		66,076,979

Options to purchase 947,549 shares under the 1998 Plan and 3,730,280 shares under the 1999 Plan were not considered for calculating diluted earnings per share for the three months ended June 30, 2003 as their effect was antidilutive.

2.17 Derivative financial instruments

The Company enters into forward foreign exchange contracts where the counter party is generally a bank. The Company considers the risks of non-performance by the counter party as non-material. Infosys held foreign exchange forward contracts of $88,000,000 and $274,500,000 as of March 31, 2003 and June 30, 2003, respectively. The foreign forward exchange contracts mature between one to six months.

2.18 Segment reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The company’s operations predominantly relate to providing IT solutions, delivered to customers located globally, across various industry segments. The Chief Operating Decision Maker evaluates the company’s performance and allocates resources based on an analysis of various performance indicators by industry classes and geographic segmentation of customers. Accordingly, revenues represented along industry classes comprise the principal basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers. The accounting principles consistently used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the summary of significant accounting policies.

Industry segments for the company are primarily financial services comprising enterprises providing banking, finance and insurance services, manufacturing enterprises, enterprises in the telecommunications (“telecom”) and retail industries, and others such as utilities, transportation and logistics companies.

Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom; and the Rest of the World comprising all other places except those mentioned above and India.

Revenue in relation to segments is categorized based on items that are individually identifiable to that segment, while expenditure is categorized in relation to the associated turnover of the segment. Allocated expenses of the geographic segments include expenses incurred for rendering services from the company’s offshore software development centres and on-site expenses. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably. Management believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as “unallocated” and adjusted only against the total income of the company.

Fixed assets used in the company’s business are not identified to any of the reportable segments, as these are used interchangeably between segments. Management believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.

Geographical information on revenue and industry revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.

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2.18.1 Industry segments

Three months ended June 30, 2002

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	57,624,002	$	25,687,049	$	23,741,447	$	18,101,706	$	31,160,665	$	156,314,869
Identifiable operating expenses		23,998,076		11,051,170		7,895,059		5,975,232		11,059,874		59,979,411
Allocated expenses		16,016,037		6,341,160		5,860,865		4,468,626		7,692,390		40,379,078
Segmental operating income		17,609,889		8,294,719		9,985,523		7,657,848		12,408,401		55,956,380
Unallocable expenses												9,521,217
Operating income												46,435,163
Other income, net												5,096,520
Income before income taxes												51,531,683
Provision for income taxes												8,687,383
Net income											$	42,844,300

Three months ended June 30, 2003

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	87,247,069	$	36,365,929	$	34,136,126	$	27,150,488	$	48,356,024	$	233,255,636
Identifiable operating expenses		37,978,884		15,499,398		14,259,625		9,701,134		19,715,236		97,154,277
Allocated expenses		23,603,231		9,228,775		9,379,200		6,890,124		12,271,566		61,372,896
Segmental operating income		25,664,954		11,637,756		10,497,301		10,559,230		16,369,222		74,728,463
Unallocable expenses												10,693,900
Operating income												64,034,563
Other income, net												5,300,780
Income before income taxes												69,335,343
Provision for income taxes												11,064,797
Net income											$	58,270,546

2.18.2 Geographic segments

Three months ended June 30, 2002

	North America		Europe		India		Rest of the World		Total
Revenues	$	112,948,058	$	30,152,941	$	2,880,770	$	10,333,100	$	156,314,869
Identifiable operating expenses		44,304,784		11,120,956		1,202,559		3,351,112		59,979,411
Allocated expenses		28,365,671		7,517,730		1,235,357		3,260,320		40,379,078
Segmental operating income		40,277,603		11,514,255		442,854		3,721,668		55,956,380
Unallocable expenses										9,521,217
Operating income										46,435,163
Other income, net										5,096,520
Income before income taxes										51,531,683
Provision for income taxes										8,687,383
Net income									$	42,844,300

Three months ended June 30, 2003

	North America		Europe		India		Rest of the World		Total
Revenues	$	174,266,453	$	40,677,433	$	4,958,804	$	13,352,946	$	233,255,636
Identifiable operating expenses		74,163,806		16,372,187		2,199,582		4,418,702		97,154,277
Allocated expenses		46,251,045		10,474,781		1,258,422		3,388,648		61,372,896
Segmental operating income		53,851,602		13,830,465		1,500,800		5,545,596		74,728,463
Unallocable expenses										10,693,900
Operating income										64,034,563
Other income, net										5,300,780
Income before income taxes										69,335,343
Provision for income taxes										11,064,797
Net income									$	58,270,546

2.18.3 Significant clients

No clients individually accounted for more than 10% of the revenues in the three months ended June 30, 2002 and 2003.

2.19 Commitments and contingencies

The company has outstanding performance guarantees for various statutory purposes totaling $1,681,044 and $1,640,086 as of March 31, 2003 and June 30, 2003, respectively. These guarantees are generally provided to governmental agencies.

2.20 Litigation

The company is subject to legal proceedings and claims, which have arisen, in the ordinary course of its business. Legal actions, when ultimately concluded and determined, will not, in the opinion of management, have a material effect on the results of operations or the financial position of the company.

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Item 2.       Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Investors are cautioned that this discussion contains forward-looking statements that involve risks and uncertainties. When used in this discussion, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “seek,” “should,” “will” and other similar expressions as they relate to us or our business are intended to identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Factors that could cause or contribute to such differences include those described under the heading “Risk Factors” in this Quarterly Report. Readers are cautioned not to place undue reliance on these forward-looking statements, as they speak only as of the date of this Quarterly Report. The following discussion and analysis should be read in conjunction with our financial statements included herein and the notes thereto.

Overview

We are a leading global IT services company founded in 1981, and headquartered in Bangalore, India. We provide end-to-end business solutions that leverage technology, thus enabling our clients to enhance business performance. Our solutions span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration, package evaluation, and implementation. In addition, we offer software products for the banking industry and we also offer business process management services through our majority-owned subsidiary, Progeon Limited, which typically include offsite customer relationship management, finance and accounting, administration and sales order processing functions.

We completed our initial public offering of equity shares in India in 1993 and our initial public offering of ADSs in the United States in 1999. Our revenues grew from $121.0 million in fiscal 1999 to $753.8 million in fiscal 2003, representing a compound annual growth rate of 58.0%. Our net income grew from $17.5 million, after a one-time stock compensation expense to $194.9 million during the same period, representing a compound annual growth rate of 83.0%. Our revenue growth is attributable to a number of factors, including an increase in the size and number of projects for existing and new clients. In fiscal 2003 and the three months ended June 30, 2003, 91.9% and 97.7% of our revenue came from repeat business, which we define as revenue from a client who also contributed to our revenue during the prior fiscal year. Between June 30, 1999 and June 30, 2003 our total employees grew from approximately 3,940 to approximately 17,100, representing a compound annual growth rate of 44.3%. As of June 30, 2003, we had approximately 17,100 employees. In addition, Progeon Limited had approximately 880 employees as of June 30, 2003.

We use a distributed project management methodology that we refer to as our Global Delivery Model. We divide projects into components that we execute simultaneously at client sites and at our geographically dispersed development centers in India and around the world. Our Global Delivery Model allows us to efficiently execute projects across time zones and development centers, thereby optimizing our cost structure. We also offer a secure and redundant infrastructure for all client data. We earned 73.0% of our total revenues from North America, 17.7% from Europe, 2.1% from India and 7.2% from the rest of the world for fiscal 2003.

Our revenues are generated principally from IT services provided on either a time-and-materials or a fixed-price, fixed-timeframe basis. Revenues from services provided on a time-and-materials basis are recognized as the related services are performed. Revenues from services provided on a fixed-price, fixed-timeframe basis are recognized pursuant to the percentage of completion method. Most of our client contracts, including those that are on a fixed-price, fixed-timeframe, basis can be terminated with or without cause, without penalties and with short notice periods between zero and 90 days. Since we collect revenues on contracts as portions of the contracts are completed, terminated contracts are only subject to collection for portions of the contract completed through the time of termination. Our contracts do not contain specific termination-related penalty provisions. In order to manage and anticipate the risk of early or abrupt contract terminations, we monitor the progress on all contracts and change orders according to their characteristics and the circumstances in which they occur. This includes a focused review of our ability and our client’s ability to perform on the contract, a review of extraordinary conditions that may lead to a contract termination, as well as historical client performance considerations. Since we also bear the risk of cost overruns and inflation with respect to fixed-price, fixed- timeframe projects, our operating results could be adversely affected by inaccurate estimates of contract completion costs and dates, including wage inflation rates and currency exchange rates that may affect cost projections. Losses on contracts, if any, are provided for in full in the period when determined. Although we revise our project completion estimates from time to time, such revisions have not, to date, had a material adverse effect on our operating results or financial condition. We also generate revenue from software application products, including banking software. Such software products represented 4.6% of our total revenues for fiscal 2003 and 3.6% for the three months ended June 30, 2003.

We have also experienced pricing pressure from our clients, especially during the recent economic downturn, which has adversely affected our revenues, margins and gross profits. For example, clients often expect that as we do more business with them, they will receive volume discounts. Additionally, clients may ask for fixed-price arrangements or reduced rates. We attempt to use fixed-price agreements for work where the specifications are complete, so individual rates are not negotiated. We are also adding new services at higher price points and where more value is added for our clients.

Our cost of revenues primarily consists of salary and other compensation expenses, depreciation, overseas travel expenses, cost of software purchased for internal use, subcontracting costs, data communications expenses and computer maintenance. We depreciate our personal computers and servers over two years and mainframe computers over three years. Third party software is written off over the estimated useful life. Cost of revenues also includes amortization of deferred stock compensation expense arising from option grants relating to the 1994 stock option plan which have been accounted for under the intrinsic value method.

We typically assume full project management responsibility for each project that we undertake. Approximately 68.5% of the total billed person months during the three months ended June 30, 2003 was performed at our global development centers in India, and the balance of the work was performed at client sites and global development centers located outside India. The proportion of work performed at our facilities and at client sites varies from quarter to quarter. We charge higher rates and incur higher compensation and other expenses for work performed at client sites and global development centers located outside India. Services performed at a client site or global development centers located outside India typically generate higher revenues per-capita at a lower gross margin than the same services performed at our facilities in India. As a result, our total revenues, cost of revenues and gross profit in absolute terms and as a percentage of revenues fluctuate from quarter to quarter based on the proportion of work performed offshore. Additionally, any increase in work performed at client sites or global development centers located outside India can decrease our gross profits. We hire subcontractors on a limited basis from time to time for our own IT development needs, and we do not perform subcontracted work for other IT service providers. For fiscal 2003 and the three months ended June 30, 2003, approximately 3.8% and 4.3% of our cost of revenues was attributable to subcontracting costs. We do not anticipate that our subcontracting needs will increase significantly as we expand our business.

Revenues and gross profits are also affected by employee utilization rates. We define employee utilization as the proportion of total billed person months to total available person months excluding support personnel. We manage utilization by monitoring project requirements and timetables. The number of consultants assigned to a project will vary according to size, complexity, duration, and demands of the project. An unanticipated termination of a significant project could also cause us to experience lower IT professional utilization resulting in a higher than expected number of unassigned IT professionals. In addition, we do not fully utilize our IT professionals when they are enrolled in training programs, particularly our 14-week training course for new employees. Because a large percentage of new hires begin their initial training in the second fiscal quarter, our utilization rates have historically been lower in the second and third quarters of our fiscal year.

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Selling and marketing expenses represent 5.0%, 5.0%, 7.4% and 7.5% of total revenues for fiscal 2001, 2002, 2003 and the three months ended June 30, 2003. Our selling and marketing expenses primarily consist of expenses relating to salaries of sales and marketing personnel, travel, brand building, sales and marketing offices and telecommunication. We have recently decided to increase our selling and marketing expenses as a percentage of revenues to increase brand awareness among target clients and promote client loyalty and repeat business among existing clients. During fiscal 2003, we redeployed certain employees from our delivery function to sales and marketing. Our general and administrative expenses are comprised of expenses relating to salaries of senior management and other support personnel, legal and other professional fees, telecommunications, utilities and other miscellaneous administrative costs.

Our amortization of stock compensation expense consists of the portion of amortization expenses which have not been included in cost of revenues. The non- cash compensation expense arises from option grants relating to the 1994 stock option plan which have been accounted for under the intrinsic value method.

Our amortization of intangible assets consists of non-cash expenses arising from the acquisition of intellectual property rights. We amortize intellectual property rights over a period of one through five years.

Other income includes interest income, foreign currency exchange gains / losses and provisions for losses on investments.

Our functional currency is the Indian rupee and the financial statements included in this Quarterly Report are reported in U.S. dollars. The translation of rupees to dollars is performed for the balance sheet accounts using the exchange rate in effect at the balance sheet date, and for revenue and expense accounts using a monthly average exchange rate for the respective periods. The gains or losses resulting from such translation are reported as other comprehensive income.

Generally, Indian law requires residents of India to repatriate any foreign currency earnings to India to control the exchange of foreign currency. More specifically, Section 8 of the Foreign Exchange Management Act, or FEMA, requires an Indian company to take all reasonable steps to realize and repatriate into India all foreign exchange earned by the company outside India, within such time periods and in the manner as specified by the Reserve Bank of India, or RBI. The RBI has promulgated guidelines that require the company to repatriate any realized foreign exchange back to India, and either:

• sell it to an authorized dealer for rupees within seven days from the date of receipt of the foreign exchange;

• retain it in a foreign currency account such as an Exchange Earners Foreign Currency, or EEFC, account with an authorized dealer; or

• use it for discharge of debt or liabilities denominated in foreign exchange.

We typically collect our earnings and pay expenses denominated in foreign currencies using a dedicated foreign currency account located in the local country of operation. In order to do this, we are required to, and have obtained, special approval from the RBI to maintain a foreign currency account in overseas countries like the United States. However, the RBI approval is subject to limitations, including a requirement that we repatriate all foreign currency in the account back to India within a reasonable time, except an amount equal to our local monthly operational costs of our overseas branch and personnel. We currently pay such expenses and repatriate the remainder of the foreign currency to India on a regular basis. We have the option to retain those in an EEFC account (foreign currency denominated) or an Indian-rupee-denominated account. We convert substantially all of our foreign currency to rupees to fund operations and expansion activities in India.

Our failure to comply with these regulations could result in RBI enforcement actions against us.

Income taxes

Our net income earned from providing services outside India is subject to tax in the country where we perform the work. Most of our tax paid in countries other than India can be applied as a credit against our Indian tax liability to the extent that the same income is subject to tax in India.

Currently, we benefit from the tax holidays the Government of India gives to the export of IT services from specially designated software technology parks in India. As a result of these incentives, our operations have been subject to relatively lower tax liabilities. These tax incentives include a 10-year tax holiday from Indian corporate income taxes for the operation of most of our Indian facilities and a partial taxable income deduction for profits derived from exported IT services. We can use either of these two tax incentives. As a result of these two tax exemptions, a substantial portion of our pre-tax income has not been subject to significant tax in recent years. These tax incentives resulted in a decrease in our income tax expense of $57.3 million, $67.3 million, $71.9 million and $23.9 million for fiscal 2001, 2002, 2003 and the three months ended June 30, 2003 compared to the effective tax rates that we estimate would have applied if these incentives had not been available, without accounting for double taxation treaty set-offs, if any.

The Finance Act, 2000 phases out the ten-year tax holiday over a ten-year period from fiscal 2000 through fiscal 2009. Accordingly, facilities set up in India on or before March 31, 2000 have a ten-year tax holiday, new facilities set up on or before March 31, 2001 have a nine-year tax holiday and so forth until March 31, 2009. After March 31, 2009, the tax holiday will no longer be available to new facilities. Our current tax holidays expire in stages by 2009. For companies opting for the partial taxable income deduction for profits derived from exported IT services, the Finance Act, 2000 phases out the deduction over five years beginning April 1, 2000.

When our tax holiday and taxable income deduction expire or terminate, our tax expense will materially increase, reducing our profitability. As a result of such tax incentives, our effective tax rate for the three months ended June 30, 2003 was 16.0% and our Indian statutory tax rate for the same period was 35.9%.

Results of Operations

The following table sets forth certain financial information as a percentage of revenues:

										Three Months
	Fiscal									Ended June 30,
	2001			2002			2003			2002			2003
Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues including amortization of stock compensation expenses		52.4			53.8			55.4			55.0			57.0
Gross profit		47.6			46.2			44.6			45.0			43.0
Operating Expenses:
Selling and marketing expenses		5.0			5.0			7.4			7.2			7.5
General and administrative expenses		8.9			8.1			7.7			7.6			7.6
Amortization of stock compensation expenses		0.4			0.3			0.3			0.3			0.2
Amortization of intangible assets		—			—			0.3			0.1			0.3
Total operating expenses		14.3			13.4			15.7			15.2			15.6
Operating income		33.3			32.8			28.9			29.8			27.4
Other income, net		2.3			2.5			2.4			3.3			2.3
Income before income taxes		35.6			35.3			31.3			33.1			29.7
Provision for income taxes		3.7			5.1			5.5			5.6			4.7
Net income		31.9	%		30.2	%		25.8	%		27.5	%		25.0	%

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Results for three months ended June 30, 2003 compared to the three months ended June 30, 2002

Revenues. Our revenues were $233.3 million for the three months ended June 30, 2003, representing an increase of $77.0 million, or 49.3% over revenues of $156.3 million for the three months ended June 30, 2002. This increase was attributable to an increase in billed person months of 56.3%, offset by a 7.0% decrease in prices at which contracts were executed. Revenues continued to increase in most segments of our services. The increase in revenues was attributable, in part, to an increase in business from existing clients and from certain new clients, particularly in the financial services industries and to a lesser extent, from clients in other industries, including utilities and logistics. Our financial services clients comprised 37.4% and 36.9% of revenues for each of the three months ended June 2003 and 2002, while our clients in other industries comprised 20.7% and 19.9% of revenues for each of the three months ended June 30, 2003 and 2002. Sales of our software products represented 3.6% of our total revenues for the three months ended June 30, 2003, as compared to 3.8% for the three months ended June 30, 2002. Revenues from services represented 96.4% of total revenues for the three months ended June 30, 2003, as compared to 96.2% for the three months ended June 30, 2002. Revenues from fixed-price, fixed-timeframe contracts and from time-and-materials contracts represented 35.9% and 64.1% of total revenues for the three months ended June 30, 2003, as compared to 35.5% and 64.5% for the three months ended June 30, 2002. Revenues from North America, Europe, India and the rest of the world represented 74.7%, 17.4%, 2.1% and 5.8% of total revenues for the three months ended June 30, 2003 as compared to 72.3%, 19.3%, 1.8% and 6.6% for the three months ended June 30, 2002.

Cost of Revenues. Our cost of revenues was $132.9 million for the three months ended June 30, 2003, representing an increase of $46.9 million, or 54.5%, over our cost of revenues of $ 86.0 million for the three months ended June 30, 2002. Cost of revenues represented 57.0% and 55.0% of total revenues for the three months ended June 2003 and 2002. This increase in our cost of revenues was partially attributable to increases of approximately $12.1 million in compensation of new hires and approximately $25.9 million in increased existing salaries and larger onsite presence; foreign travel costs of approximately $1.6 million; software purchased for own use approximately of $0.9 million; depreciation expenses of approximately $0.8 million and professional charges of approximately $4.5 million paid to sub-contractors. Cost of revenues includes amortization of stock compensation expense of $0.6 million and $0.7 million for the three months ended June 30, 2003 and 2002.

Gross Profit. As a result of the foregoing, our gross profit was $100.4 million for the three months ended June 30, 2003, representing an increase of $30.1 million, or 42.8%, over our gross profit of $70.3 million for the three months ended June 30, 2002. As a percentage of revenues, gross profit decreased to 43.0% for the three months ended June 30, 2003 from 45.0% for the three months ended June 30, 2002. This decrease was attributable to a 54.5% increase in cost of revenues from the three months ended June 30, 2002 to the three months ended June 30, 2003, offset by a 49.3% increase in revenues in the same period.

As a result of the continued uncertainty and weakness in the global economic and political environment, companies continue to seek to outsource their IT spending offshore to companies like ours and therefore our client base and revenues have continued to grow. However, we continue to experience erosion in our gross profit with significant pricing pressures in our core service offerings, as a result of clients’ needs to reduce their costs and the increased competitive environment among IT companies. We expect these conditions to continue in the next few quarters.

In response to the continued pricing pressures and increased competition for outsourcing clients, we continue to focus on expanding our service offerings into areas with higher and sustainable price margins, on managing our cost structure, and on anticipating and correcting for decreased demand, and skill and pay level imbalances in our personnel. Our immediate measures have included increased management of compensation expenses through headcount management and variable compensation plans, as well as increasing utilization rates or reducing non-deployed or non-billable IT professionals. We also seek to reduce infrastructure and corporate expenses through deferral of certain non-critical expansion initiatives and reductions in our third party vendor pricing plans.

As a result of our efforts to manage our cost structure, our gross profit as a percentage of revenues remained at 43.0% for the three months ended June 30, 2003 and the three months ended March 31, 2003. While we continue to focus on such measures and anticipate they will support our recent erosion in gross profits, we cannot assure you that such measures will continue to have a substantial or significant impact on our gross profits.

Selling and Marketing Expenses. We incurred selling and marketing expenses of $17.4 million in the three months ended June 30, 2003, representing an increase of $6.1 million, or 54.0%, over the $11.3 million spent in the three months ended June 30, 2002. As a percentage of total revenues, selling and marketing expenses were 7.5% and 7.2% for the three months ended June 30, 2003 and 2002. The number of our sales offices increased to 30 as of June 30, 2003 from 28 as of June 30, 2002, and the number of our sales and marketing personnel increased to 275 as of June 30, 2003, from 152 as of June 30, 2002. The increase in selling and marketing expenses is mainly attributable to increases of approximately $4.8 million in personnel costs of selling and marketing employees, and $0.6 million in travel expenses.

General and Administrative Expenses. Our general and administrative expenses were $17.7 million for the three months ended June 30, 2003, representing an increase of $5.8 million, or 48.7%, over general and administrative expenses of $11.9 million for the three months ended June 30, 2002. General and administrative expenses as a percentage of total revenues remained at 7.6% for the three months ended June 30, 2003 and 2002. The increases in general and administrative expenses were primarily attributable to increases of approximately $1.3 million for compensation costs, $0.8 million in telecommunication charges, $0.5 million for office maintenance, $0.7 million for insurance expenses and $0.7 million for provision for bad debts. The factors that affect the fluctuations in our provisions for bad debts and write offs of uncollectible accounts include the financial health and economic environment of our clients. We specifically identify the credit risk and then make the provision. No one client has contributed significantly to a loss, and we have had no significant changes in our collection policies or payment terms.

Amortization of Stock Compensation Expenses. Amortization of stock compensation expenses was $0.4 million and $0.5 million for the three months ended June 30, 2003 and 2002.

Amortization of Intangible Assets. Amortization of intangible assets was $0.8 million for the three months ended June 30, 2003, representing amortization of certain intellectual property rights we acquired through purchases and licenses of software during fiscal 2003. We recorded amortization of intangible assets of $0.2 million during the three months ended June 30, 2002.

Operating Income. Our operating income was $64.0 million for the three months ended June 30, 2003 representing an increase of $17.6 million, or 37.9%, over our operating income of $46.4 million for three months ended June 30, 2002. As a percentage of revenues, operating income decreased to 27.4% for the three months ended June 30, 2003 from 29.8% for the three months ended June 30, 2002.

Other Income. Other income was $5.3 million for the three months ended June 30, 2003 representing an increase of $0.2 million, or 3.9%, over other income of $5.1 million for the three months ended June 30, 2002. Other income includes interest income of $5.0 million and $3.6 million for the three months ended June 30, 2003 and 2002. Other income also includes foreign currency exchange gains of $1.6 million and $1.3 million for the three months ended June 30, 2003 and 2002. The increase in other income was offset by a provision for loss on investments of $1.4 million for the three months ended June 30, 2003.

In the three months ended June 30, 2003, we provided for write downs to our investments in the aggregate amount of approximately $1.4 million. These included approximately $1.0 million for investments in CiDRA Corporation and $0.4 million for Stratify, Inc. These write-downs were required due to the non- temporary impact of adverse market conditions on these entities’ business models and contemporary transactions on the securities of these entities which have been indicative of their current fair value.

Provision for Income Taxes. Our provision for income taxes was $11.1 million for three months ended June 30, 2003, representing an increase of $2.4 million, or 27.6%, over our provision for income taxes of $8.7 million for the three months ended June 30, 2002. Our effective tax rate decreased to 16.0% for the three

38

months ended June 30, 2003 from 16.9% for the three months ended June 30, 2002. The decrease is primarily attributable to a one-time tax on 10% of the profits generated by our operations located in software technology parks in fiscal 2003. These operations are subject to a 100% tax holiday in the current fiscal year.

Net Income. Our net income was $58.3 million for the three months ended June 30, 2003, representing an increase of $15.5 million, or 36.2% over our net income of $42.8 million for the three months ended June 30, 2002. As a percentage of total revenues, net income decreased to 25.0% for the three months ended June 30, 2003 from 27.5% for the three months ended June 30, 2002.

Liquidity and Capital Resources

Our growth has been financed largely by cash generated from operations and, to a lesser extent, from the proceeds from the sale of equity. In 1993, we raised approximately $4.4 million in gross aggregate proceeds from our initial public offering of equity shares in India. In 1994, we raised an additional $7.7 million through private placements of our equity shares with foreign institutional investors, mutual funds, Indian domestic financial institutions and corporations. On March 11, 1999 we raised $70.4 million in gross aggregate proceeds from our initial U.S. public offering of ADSs.

As of June 30, 2003, we had $381.1 million in cash and cash equivalents, $21.5 million invested in liquid mutual funds, $494.1 million in working capital and no outstanding bank borrowings or long term debt. We believe that a sustained reduction in IT spending, a longer sales cycle, and a continued economic downturn in any of the various industry segments in which we operate, could result in a decline in our revenue and negatively impact our liquidity and cash resources. Net cash provided by operating activities was $74.1 million and $43.6 million for the three months ended June 30, 2003 and 2002. Net cash provided by operations consisted primarily of net income and increases in unearned revenues, offset in part by an increase in accounts receivable and unbilled revenues. Accounts receivable as a percentage of the last 12-month revenues represented 14.7% and 14.8% as of June 30, 2003 and 2002.

Prepaid expenses and other current assets increased by $1.7 million during the three months ended June 30, 2003, as compared to a $2.5 million increase during the three months ended June 30, 2002. There has also been an increase in unbilled revenues by $1.1 million and $5.9 million during the three months ended June 30, 2003 and 2002 respectively, as a result of an increase in the proportion of fixed-price, fixed-timeframe projects. Unbilled revenues represent revenues that are recognized but not yet invoiced. Other accrued liabilities increased by $6.2 million and $7.1 million during the three months ended June 30, 2003 and 2002, primarily due to increases in our accrued employee compensation and provisions for expenses.

The increase in unearned revenues was $2.4 million during the three months ended June 30, 2003 compared to $5.8 million during the three months ended June 30, 2002. These changes resulted primarily from advance client billings on fixed-price, fixed-timeframe contracts for which related costs were not yet incurred. The proportion of fixed-price, fixed-timeframe contracts under which we were entitled to bill clients in advance increased to 35.9% for the three months ended June 30, 2003 from 35.5% for the three months ended June 30, 2002.

Net cash used in investing activities was $33.8 million and $13.2 million for the three months ended June 30, 2003 and 2002. Net cash used in investing activities, relating to our acquisition of additional property, plant and equipment for the three months ended June 30, 2003 and 2002, was $13.0 million and $7.7 million. Additionally, we acquired intangible assets in the amount of $2.9 million during the three months ended June 30, 2002. During the three months ended June 30, 2003, we invested $21.6 million in liquid mutual fund units.

We provide various loans primarily to employees in India who are not executive officers or directors, including car loans, home loans, personal computer loans, telephone loans, medical loans, marriage loans, personal loans, salary advances, education loans and loans for rental deposits. All of these loans, except for the housing and car loans, are available to all of our employees, who are not executive officers or directors, in India. Housing and car loans are available only to middle level managers, senior managers and non-executive officers. The loan program is designed to assist our employees and increase employee satisfaction. These loans are generally collateralized against the assets of the loan and the terms of the loans range from 12 to 100 months. In the aggregate, these loans represented approximately $28.7 million and $28.5 million as of March 31, 2003 and June 30, 2003.

Net cash used in financing activities for the three months ended June 30, 2003 was $22.9 million, primarily comprised of $23.1 million of dividend payments. During the three months ended June 30, 2002 net cash used in financing activities was $5.4 million, primarily consisting of $10.0 million raised by the issuance of preferred stock by our subsidiary, offset by dividend payments of $15.5 million. As of June 30, 2003, we had contractual commitments for capital expenditure of $16.0 million. These commitments include approximately $11.8 million in domestic purchases and $4.2 million in imports and overseas commitments for hardware, supplies and services to support our operations generally, which we expect to be completed by December 2003. We estimate additional capital expenditure of approximately $9.7 million will be made for the construction of a business continuity and disaster recovery center to be located in Mauritius, which we expect to be completed by the third calendar quarter of 2003.

We have provided information to the public regarding forward looking guidance on our business operations. This information is consistent with market expectations.

Reconciliation between Indian and U.S. GAAP

All financial information in this Quarterly Report is presented in U.S. GAAP, although we also report for Indian statutory purposes under Indian GAAP. There are material differences between financial statements prepared in Indian and U.S. GAAP. The material differences that affect us are primarily attributable to U.S. GAAP requirements for the:

• accounting for stock-based compensation;

• deferred taxes;

• consolidation of majority owned subsidiaries;

• provision for investments acquired through a non-cash transaction; and

• accounting of foreign exchange forward contracts.

Reconciliation of Net Income

										Three Months
	Year Ended March 31,									Ended June 30,
	2001			2002			2003			2002			2003
Net profit as per Indian GAAP	$	136,837,806		$	169,102,534		$	198,005,024		$	44,338,245		$	59,195,265
Amortization of stock compensation expense		(5,081,795	)		(5,009,772	)		(4,803,534	)		(1,243,948	)		(1,071,690	)
Profit / (Loss) of consolidated subsidiary		—			—			(653,562	)		(249,997	)		159,421
Forward contracts – marked to market		—			—			513,269			—			(26,686	)
Deferred taxes		769,304			373,547			(191,156	)		—			14,236
Provision for retirement benefits to employees		741,000			—			—
Provision for contingency / e-inventing the company (net)		(87,387	)		—			—
Transfer of intellectual property rights (net of tax)		(1,230,824	)		—			—
Provision for investments		—			—			2,000,000
Net income as per U.S. GAAP	$	131,948,104		$	164,466,309		$	194,870,041		$	42,844,300		$	58,270,546

39

Quantitative and Qualitative Disclosures About Market Risk

General

Market risk is the loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market sensitive financial instruments including foreign currency receivables and payables.

Our exposure to market risk is a function of our borrowing activities and revenue generating activities in foreign currency. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss. Most of our exposure to market arises out of our foreign currency accounts receivable.

Risk Management Procedures

We manage market risk through treasury operations. Treasury operation’s objectives and policies are approved by senior management and our audit committee. The activities of treasury operations include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies, if any, and ensuring compliance with market risk limits and policies.

Components of Market Risk

Exchange Rate Risk. Our exposure to market risk arises principally from exchange rate risk. Even though our functional currency is the Indian rupee, we transact a major portion of our business in foreign currencies, particularly the U.S. dollar. The exchange rate between the rupee and the dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are adversely affected as the rupee appreciates against the dollar. For fiscal 2003, 2002 and the three months ended June 30, 2003, our U.S. dollar denominated revenues represented 89.0%, 87.7% and 87.3% of our total revenues. Our exchange rate risk primarily arises from our foreign currency revenues, receivables and payables. We have sought to reduce the effect of exchange rate fluctuations on our operating results by purchasing foreign exchange forward contracts to cover a portion of outstanding accounts receivable. As of March 31, 2003 and 2002 and June 30, 2003, we had outstanding forward contracts in the amount of $88.0 million, $2.0 million and $274.5 million. This increase is primarily attributable to our decision to actively hedge our foreign currency exposure in light of the recent steady appreciation of the Indian rupee against the U.S. dollar. These contracts typically mature within nine months, must be settled on the day of maturity and may be cancelled subject to the payment of any gains or losses in the difference between the contract exchange rate and the market exchange rate on the date of cancellation. We use these instruments only as a hedging mechanism and not for speculative purposes. We may not purchase contracts adequate to insulate ourselves from foreign exchange currency risks. In addition, any such contracts may not perform adequately as a hedging mechanism. We may, in the future, adopt more active hedging policies, and have done so in the past.

Fair Value. The fair value of our market rate risk sensitive instruments approximates their carrying value.

Recent Accounting Pronouncements

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

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB 51, that applies to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. We have assessed the implication of this interpretation and no impact is foreseen.

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

On May 15, 2003, the Financial Accounting Standards Board issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Statement requires issuers to classify as liabilities (or assets in some circumstance) three classes of freestanding financial instruments that embody obligations for the issuer.

The Statement is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. We adopted the provisions of the Statement on July 1, 2003 and on adoption, we will continue to show the preferred stock of subsidiary outside of stockholders’ equity and will be reflected as part of non-current liabilities.

Critical Accounting Policies

We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

We prepare financial statements in conformity with U.S. GAAP which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We primarily make estimates related to contract costs expected to be incurred to complete development of software, allowances for doubtful accounts receivable, our future obligations under employee retirement and benefit plans, useful lives of property, plant and equipment, future income tax liabilities and contingencies and litigation.

We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. These include revenue recognition, as well as accounting for income taxes. Our accounting policy and related procedures for revenue recognition on such contracts and on income taxes are set out below.

Revenue Recognition

We derive our revenues primarily from software development and related services, licensing of software products and from business process management services. We make and use significant management judgments and estimates in connection with the revenue that we recognize in any accounting period. Material differences may result in the amount and timing of our revenue for any period, if we made different judgments or utilized different estimates.

40

Arrangements with customers for software development and related services are either on a fixed price, fixed time frame or on a time and material basis. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Maintenance revenues are recognized ratably over the term of the underlying maintenance arrangement. When the company receives advances for services and products, such amounts are reported as client deposits until all conditions for revenue recognition are met.

Revenue from our fixed price arrangements for software development and related services that involves significant production, modification or customization of the software is accounted in conformity with ARB No. 45, using the guidance in Statement of Position (SOP) 81-1, and AcSEC’s conclusion in paragraph 95 of SOP 97-2. Fixed price arrangements which are similar to “contracts to design, develop, manufacture, or modify complex aerospace or electronic equipment to a buyer’s specification or to provide services related to the performance of such contracts” and “contracts for services performed by architects, engineers, or architectural or engineering design firms” as laid out in Paragraph 13 of SOP 81-1 are also accounted for in conformity with SOP 81-1.

In the above mentioned fixed price arrangements, revenue has been recognized using the percentage-of-completion method. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. In measuring progress towards completion, we have selected a method that is reliable and that best approximates the progress to completion. The input (efforts expended) method has been used to measure progress towards completion as there is a direct relationship between labor hour input and productivity and the method indicates the most reliable measure of progress. However, we evaluate each contract and apply judgment to ensure the existence of a relationship between labor hours input and productivity.

At the end of every reporting period, we evaluate each project for estimated revenue and estimated efforts. Any revisions or updates to existing estimates are made wherever required by obtaining approvals from officers having the requisite authority. Management regularly reviews and evaluates the status of each contract in progress to estimate the profit or loss. As part of the review, detailed actual efforts and a realistic estimate of efforts to complete all phases of the project is compared with the details of the original estimate and the total contract price. To date, we have not had any fixed-price, fixed-timeframe contracts that resulted in a material loss. However, our policy is to establish a provision for losses on a contract as soon as losses become evident. We evaluate change orders according to their characteristics and the circumstances in which they occur. If such change orders are considered by the parties to be a normal element within the original scope of the contract, no change in the contract price is made. Otherwise, the adjustment to the contract price may be routinely negotiated. Contract revenue and costs are adjusted to reflect change orders approved by the client and us regarding both scope and price. Changes are reflected in revenue recognition only after the change order has been approved by both parties. The same principle is also followed for escalation clauses. Costs that are incurred for a specific anticipated contract that will result in no future benefits unless the contract is obtained are not included in contract costs or deferred costs before the signing of the contract. Such costs are deferred only if the costs can be directly associated with a specific anticipated contract and if their recoverability from that contract is determined to be probable.

We provide our clients with a fixed-period warranty for corrections of errors and telephone support on all their fixed-price, fixed-time frame contracts. Costs associated with such support services are accrued at the time related revenues are recorded and included in cost of revenues. We estimate such costs based on historical experience and review estimates on a periodic basis for any material changes in assumptions and likelihood of occurrence.

In accordance with SOP 97-2, Software Revenue Recognition, license fee revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable, and the collection of the fee is probable. Arrangements to deliver our software product generally have three elements: license, implementation and Annual Technical Services, or ATS. The company has applied the principles in SOP 97-2 to account for revenue from these multiple element arrangements. Vendor specific objective evidence of fair value, or VSOE, has been established for ATS. VSOE is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement, the revenue from such contracts are allocated to each component of the contract using the residual method, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of an established VSOE for implementation, the entire arrangement fee for license and implementation is recognized as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed. ATS revenue is recognized ratably over the period in which the services are rendered.

Revenues from business process management and other services are recognized on both the time-and-material and fixed-price, fixed-time frame bases. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from fixed-price, fixed-time frame contracts is recognized as per the proportional performance method using an output measure of performance.

We recognize revenue only on collectibility being probable and hence credit losses do not have an impact on our revenue recognition policy. Fluctuations in our provisions for bad debts and write offs of uncollectible accounts depend on the financial health and economic environment governing our clients. Our provisions are based on specific identification of the credit risk. No one client has contributed significantly to the loss. We have had no significant changes in our collection policies or payment terms.

Income Taxes

As part of our financial reporting process, we are required to estimate our liability for income taxes in each of the tax jurisdictions in which we operate. This process requires us to estimate our actual current tax exposure together with an assessment of temporary differences resulting from differing treatment of items, such as depreciation on property, plant and equipment, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our balance sheet.

We face challenges from domestic and foreign tax authorities regarding the amount of current taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. Based on our evaluation of our tax position and the information presently available to us, we believe we have adequately accrued for probable exposures as of June 30, 2003. To the extent we are able to prevail in matters for which accruals have been established or are required to pay amounts in excess of our reserves, our effective tax rate in a given financial statement period may be materially impacted.

Our deferred tax assets comprise assets arising from basis differences in depreciation on property, plant and equipment, investments for which the ultimate realization of the tax asset may be dependent on the availability of future capital gains, and provisions for doubtful accounts receivable. We assess the likelihood that our deferred tax assets will be recovered from future taxable income. This assessment takes into consideration tax planning strategies, including levels of historical taxable income and assumptions regarding the availability and character of future taxable income over the periods in which the deferred tax assets are deductible. We believe it is more likely than not that we will realize the benefits of those deductible differences, net of the existing valuation differences at June 30, 2003. The ultimate amount of deferred tax assets realized may be materially different from those recorded, as influenced by potential changes in income tax laws in the tax jurisdictions where we operate.

To the extent we believe that realization of a deferred tax asset is not likely, we establish a valuation allowance or increase this allowance in an accounting period and include an expense within the tax provision in our statements of income. As of March 31, 2003 and June 30, 2003, we recorded valuation allowances of $0.6 million and $0.6 million due to uncertainties related to our ability to utilize some of our deferred tax assets comprising provisions for doubtful accounts receivable. In the event that actual results differ from these estimates of valuation allowance or if we adjust these estimates in future periods, we may need to establish an additional valuation allowance, which could materially impact our financial position and results of operations.

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RISK FACTORS

Risks Related to Our Company and Our Industry

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

Our revenues and profitability have grown rapidly in recent years and are likely to vary significantly in the future from quarter to quarter. Therefore, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of our future performance. It is possible that in the future some of our quarterly results of operations may be below the expectations of market analysts and our investors, which could cause the share price of our equity shares and our ADSs to decline significantly.

Factors which affect the fluctuation of our revenues include:

• the size, timing and profitability of significant projects;

• changes in our pricing policies or those of our competitors;

• the proportion of services that we perform outside India as opposed to at our development centers in India;

• the effect of seasonal hiring patterns and the time required to train and productively utilize new employees, particularly information technology, or IT, professionals;

• the size and timing of facilities expansion;

• unanticipated cancellations, contract terminations or deferrals of projects; and

• unanticipated variations in the duration, size and scope of our projects.

A significant part of our total operating expenses, particularly expenses related to personnel and facilities, are fixed in advance of any particular quarter. As a result, unanticipated variations in the number and timing of our projects or employee utilization rates, or the accuracy of our estimates of the resources required to complete ongoing projects, may cause significant variations in our operating results in any particular quarter.

There are also a number of factors other than our performance that are not within our control that could cause fluctuations in our operating results from quarter to quarter. These include:

• the duration of tax holidays or exemptions and the availability of other Government of India incentives;

• currency exchange rate fluctuations, particularly when the rupee appreciates in value against the dollar since the majority of our revenues are in dollars and a significant part of our costs are in rupees; and

• other general economic factors.

We have not been able to sustain our previous profit margins or levels of profitability.

Our net income increased 18.5% in fiscal 2003 as compared to fiscal 2002. Our net income increased 24.6% in fiscal 2002 as compared to fiscal 2001. As we continue to experience declines in demand, pricing pressures for our services, and increased wage pressures in India, we have not been able to sustain our historical levels of profitability. During fiscal 2003, we incurred substantially higher selling and marketing expenses to increase brand awareness among target clients and promote client loyalty and repeat business among existing clients, and we expect to continue to incur substantially higher selling and marketing expenses in the future, which could result in declining profitability. While our Global Delivery Model allows us to manage costs efficiently, as the proportion of our services delivered at client sites increases, we may not be able to keep our operating costs as low in the future.

The current economic downturn has negatively impacted our revenues and operating results.

Spending on IT products and services in most parts of the world has significantly decreased due to a challenging global economic environment. Some of our clients have cancelled, reduced or deferred expenditures for IT services. Pricing pressures from our clients, wage pressures in India and an increase in our sales and marketing expenditures have also negatively impacted our operating results. For example, clients often expect that as we do more business with them, they will receive volume discounts. Additionally, clients may ask for fixed-price arrangements or reduced rates.

If the current economic downturn continues, our utilization and billing rates for our IT professionals could be adversely affected which may result in lower gross and operating profits.

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

We have grown significantly in recent periods. Between June 30, 1999 and June 30, 2003 the number of our total employees grew from approximately 3,940 to approximately 17,100, representing a compound annual growth rate of 44.3%. In addition, in the last four fiscal years we have undertaken major expansions of our existing facilities, as well as the construction of new facilities.

We expect our growth to place significant demands on our management and other resources. It will require us to continue to develop and improve our operational, financial and other internal controls, both in India and elsewhere. In particular, continued growth increases the challenges involved in:

• recruiting, training and retaining sufficient skilled technical, marketing and management personnel;

• adhering to our high quality and process execution standards;

• preserving our culture, values and entrepreneurial environment;

• developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal systems; and

• maintaining high levels of client satisfaction.

Our growth strategy also relies on the expansion of our operations to other parts of the world, including Europe and other parts of Asia. The costs involved in entering these markets may be higher than expected and we may face significant competition in these regions. Our inability to manage growth in these regions may have an adverse effect on our business, results of operations and financial condition.

We may face difficulties in providing end-to-end business solutions for our clients, which could lead to clients discontinuing their work with us, which in turn could harm our business.

Over the past three years, we have been expanding the nature and scope of our engagements by extending the breadth of services we offer. We have recently added new service offerings, such as IT consulting, business process management systems integration and IT outsourcing. The success of these service offerings is dependent, in part, upon continued demand for such services by our existing and new clients and our ability to meet this demand in a cost-competitive and effective manner. In addition, our ability to effectively offer a wider breadth of end-to-end business solutions depends on our ability to attract existing or new clients to these service offerings. To obtain engagements for such end-to-end solutions, we also are more likely to compete with large, well-established international consulting firms, resulting in increased competition and marketing costs. Accordingly, we cannot be certain that our new service offerings will effectively meet client needs or that we will be able to attract existing and new clients to these service offerings.

The increased breadth of our service offerings may result in larger and more complex projects with our clients. This will require us to establish closer relationships with our clients and a thorough understanding of their operations. Our ability to establish such relationships will depend on a number of factors including the proficiency of our IT professionals and our management personnel.

Larger projects may involve multiple engagements or stages, and there is a risk that a client may choose not to retain us for additional stages or may cancel or delay additional planned engagements. These terminations, cancellations or delays may result from the business or financial condition of our clients or the economy generally, as opposed to factors related to the quality of our services. Such cancellations or delays make it difficult to plan for project resource requirements, and

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inaccuracies in such resource planning may have a negative impact on our profitability. While our Global Delivery Model allows us to manage costs efficiently, as the proportion of our services delivered at client sites increases, we may not be able to keep our operating costs as low in the future.

Intense competition in the market for IT services could affect our cost advantages, which could reduce our share of business from clients and decrease our revenues.

The IT services market is highly competitive. Our competitors include large consulting firms, divisions of large multinational technology firms, IT outsourcing firms, Indian IT services firms, software firms and in-house IT departments of large corporations.

The IT services industry is experiencing rapid changes that are affecting the competitive landscape, including recent divestitures and acquisitions that have resulted in consolidation within the industry. These changes may result in larger competitors with significant resources. In addition, some of our competitors have added or announced plans to add cost-competitive offshore capabilities to their service offerings. Many of these competitors are substantially larger than us and have significant experience with international operations, and we may face competition from them in countries in which we currently operate, as well as in countries in which we expect to expand our operations. We also expect additional competition from IT services firms with current operations in other countries, such as China and the Philippines. While we believe that we are well positioned in our markets relative to our competitors, such competitors may be able to offer services using offshore and onshore models that are more effective than ours.

Many of our competitors, including Accenture, EDS and IBM, have significantly greater financial, technical and marketing resources, generate greater revenues and have greater name recognition than we do. We cannot be reasonably certain that we will be able to compete successfully against such competitors, or that we will not lose clients to such competitors. Additionally, we believe that our ability to compete also depends in part on factors outside our control, such as the price at which our competitors offer comparable services, and the extent of our competitors’ responsiveness to their clients’ needs.

Our revenues are highly dependent upon a small number of clients, and the loss of any one of our major clients could significantly impact our business.

We have historically earned, and believe that in the future we will continue to earn, a significant portion of our revenues from a limited number of corporate clients. In the three months ended June 30, 2003, fiscal 2003, and 2002, our largest client accounted for 5.7%, 5.8% and 6.1% of our total revenues, and our five largest clients together accounted for 23.6%, 23.4% and 24.1% of our total revenues. The volume of work we perform for specific clients is likely to vary from year to year, particularly since we historically have not been the exclusive external IT services provider for our clients. Thus, a major client in one year may not provide the same level of revenues in a subsequent year. However, in any given year, a limited number of clients tend to contribute a significant portion of our revenues.

There are a number of factors, other than our performance, that could cause the loss of a client and that may not be predictable. In certain cases, we have significantly reduced the services provided to a client when the client either changed its outsourcing strategy by moving more work in-house or replaced its existing software with packaged software supported by the licensor. Another circumstance which may result in our loss of a client is a reduction in spending on IT services due to a challenging economic environment. If we were to lose one of our major clients or have it significantly reduce its volume of business with us, our revenues and profitability could be reduced.

Our revenues are highly dependent on clients primarily located in the United States, as well as clients concentrated in certain industries, and economic slowdowns, changes in U.S. law and other restrictions or factors that affect the economic health of the United States and these industries may affect our business.

A significant portion of our revenues is derived from clients located in the United States, as well as clients in certain industries. In the three months ended June 30, 2003, fiscal 2003 and 2002, approximately 73.7%, 72.0% and 69.1% of our revenues were derived from the United States. For the same periods, we earned 37.4%, 37.6% and 36.6% of our revenues from the financial services industry, and 15.6%, 16.4% and 17.2% from the manufacturing industry. Consequently, if the current economic slowdown in the United States is prolonged, our clients may reduce or postpone their IT spending significantly, which may in turn lower the demand for our services and negatively affect our revenues and profitability. Further, any significant decrease in the growth of the financial services or other industry segments on which we focus may reduce the demand for our services and negatively affect our revenues and profitability.

Recently, some organizations have expressed concerns about a perceived association between offshore outsourcing and the loss of jobs in the United States. Within the last 12 months, five U.S. states have enacted legislation restricting government agencies from outsourcing their back office processes and IT solutions work to companies outside the United States. It is also possible that U.S. private sector companies that work with these states may be restricted from outsourcing their work related to government contracts. We currently do not have significant contracts with U.S. federal or state government entities, however, there can be no assurance that these restrictions will not extend to private companies, such as our clients. Any changes to existing laws or the enactment of new legislation restricting offshore outsourcing may adversely impact our ability to do business in the United States, particularly if these changes are widespread.

Our success depends in large part upon our highly skilled IT professionals and our ability to attract and retain these personnel.

Our ability to execute projects and to obtain new clients depends largely on our ability to attract, train, motivate and retain highly skilled IT professionals, particularly project managers and other mid-level professionals. If we cannot hire and retain additional qualified personnel, our ability to bid on and obtain new projects, and to continue to expand our business will be impaired and our revenues could decline. We believe that there is significant worldwide competition for IT professionals with the skills necessary to perform the services we offer. We may not be able to hire and retain enough skilled and experienced IT professionals to replace those who leave. Additionally, we may not be able to redeploy and retrain our IT professionals to keep pace with continuing changes in technology, evolving standards and changing client preferences. Our inability to attract and retain IT professionals may have a material adverse effect on our business, results of operations and financial condition.

Our success depends in large part upon our management team and key personnel and our ability to attract and retain them.

We are highly dependent on the senior members of our management team, including the continued efforts of our Chairman, our Chief Executive Officer, our Chief Operating Officer, other executive members of the board and the management council, which consists of executive and other officers. Our future performance will be affected by the continued service of these persons. We do not maintain key man life insurance for any of the senior members of our management team or other key personnel. Competition for senior management in our industry is intense, and we may not be able to retain such senior management personnel or attract and retain new senior management personnel in the future. The loss of any members of our senior management or other key personnel may have a material adverse effect on our business, results of operations and financial condition.

Our failure to complete fixed-price, fixed-timeframe contracts on budget and on time may negatively affect our profitability.

As an element of our business strategy, we offer a portion of our services on a fixed-price, fixed-timeframe basis, rather than on a time-and-materials basis. In the three months ended June 30, 2003, fiscal 2003 and 2002, revenues from fixed-price, fixed-timeframe projects accounted for 35.9%, 36.7% and 31.6% of our total revenues. Although we use our software engineering methodologies and processes and past project experience to reduce the risks associated with estimating, planning and performing fixed-price, fixed-timeframe projects, we bear the risk of cost overruns, completion delays and wage inflation in connection with these projects. If we fail to estimate accurately the resources and time required for a project, future wage inflation rates, or currency exchange rates, or if we fail to complete our contractual obligations within the contracted timeframe, our profitability may suffer.

Our client contracts can typically be terminated without cause and with little or no notice or penalty, which could negatively impact our revenues and profitability.

Our clients typically retain us on a non-exclusive, project-by-project basis. Most of our client contracts, including those that are on a fixed-price, fixed-timeframe basis, can be terminated with or without cause, with between zero and 90 days’ notice and without termination-related penalties. Additionally, our contracts with clients are typically limited to discrete projects without any commitment to a specific volume of business or future work. Our business is dependent on the decisions and actions of our clients, and there are a number of factors relating to our clients that are outside our control that might result in the termination of a project or the loss of a client, including:

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• financial difficulties for a client;

• a change in strategic priorities, resulting in a reduced level of IT spending;

• a demand for price reductions;

• a change in outsourcing strategy by moving more work to client in-house IT departments or to our competitors; and

• the replacement by our clients of existing software with packaged software supported by licensors.

Our client contracts are often conditioned upon our performance, which, if unsatisfactory, could result in less revenue generated than anticipated.

A number of our contracts have incentive-based or other pricing terms that condition some or all of our fees on our ability to meet defined goals. Our failure to meet these goals or a client’s expectations in such performance-based contracts may result in a less profitable or an unprofitable engagement.

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.

The IT services market is characterized by rapid technological change, evolving industry standards, changing client preferences and new product and service introductions. Our future success will depend on our ability to anticipate these advances and develop new product and service offerings to meet client needs. We may not be successful in anticipating or responding to these advances in a timely basis, or, if we do respond, the services or technologies we develop may not be successful in the marketplace. Further, products, services or technologies that are developed by our competitors may render our services non-competitive or obsolete.

Disruptions in telecommunications could harm our service delivery model, which could result in client dissatisfaction and a reduction of our revenues.

A significant element of our Global Delivery Model is to continue to leverage and expand our global development centers. We currently have 26 global development centers located in various countries around the world. Our global development centers are linked with a network architecture that uses multiple service providers and various satellite and optical links with alternate routing. We may not be able to maintain active voice and data communications between our various global development centers and between our global development centers and our clients’ sites at all times. Any significant loss in our ability to communicate could result in a disruption in business, which could hinder our performance or our ability to complete client projects on time. This, in turn, could lead to client dissatisfaction and a material adverse effect on our business, results of operations and financial condition.

We may be liable to our clients for damages caused by system failures, which could damage our reputation and cause us to lose clients.

Many of our contracts involve projects that are critical to the operations of our clients’ businesses, and provide benefits which may be difficult to quantify. Any failure in a client’s system or breaches of security could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to limit our contractual liability for consequential damages in rendering our services, we cannot be assured that the limitations on liability we provide for in our service contracts will be enforceable in all cases, or that they will otherwise be sufficient to protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors or omissions, however, we cannot be assured that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirement, could adversely affect our operating results.

We are investing substantial cash assets in new facilities, and our profitability could be reduced if our business does not grow proportionately.

As of June 30, 2003, we had contractual commitments of approximately $16.0 million for capital expenditure. We estimate additional capital expenditures of approximately $9.7 million for the construction of a business continuity and disaster recovery center to be located in Mauritius. Although we have successfully developed new facilities in the past, we may still encounter cost overruns or project delays in connection with new facilities. Additionally, future financing for additional facilities, whether within India or elsewhere, may not be available on attractive terms or at all. Such expansions will significantly increase our fixed costs. If we are unable to grow our business and revenues proportionately, our profitability will be reduced.

We may be unable to recoup our investment costs to develop our software products.

In the three months ended June 30, 2003, fiscal 2003 and 2002, we earned 3.6%, 4.6% and 4.0% of our total revenue from the sale of software products. The development of our software products requires significant investments. The markets for our primary suite of software products that we call Finacle™ are competitive. Our current software products or any new software products that we develop may not be commercially successful and the costs of developing such new products may not be recouped. Since software product revenues typically occur in periods subsequent to the periods in which the costs are incurred for the development of such software products, delayed revenues may cause periodic fluctuations of our operating results.

Our insiders are significant shareholders, are able to control the election of our board and may have interests which conflict with those of our other shareholders or holders of our ADSs.

Our executive officers and directors, together with members of their immediate families, beneficially owned, in the aggregate, approximately 23.9% of our issued equity shares as of June 30, 2003. As a result, acting together, this group has the ability to exercise significant control over most matters requiring our shareholders’ approval, including the election and removal of directors and significant corporate transactions.

We may engage in acquisitions, strategic investments, strategic partnerships or alliances or other ventures that may or may not be successful.

We may acquire or make strategic investments in complementary businesses, technologies, services or products, or enter into strategic partnerships or alliances with third parties in order to enhance our business. It is possible that we may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially acceptable to us or at all. The inability to identify suitable acquisition targets or investments or the inability to complete such transactions may affect our competitiveness and our growth prospects. If we acquire another company, we could have difficulty in assimilating that company’s personnel, operations, technology and software. In addition, the key personnel of the acquired company may decide not to work for us. In some cases, we could have difficulty in integrating the acquired products, services or technologies into our operations. These difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses. As of the date of this Quarterly Report, we have no agreements to enter into any material acquisition, investment, partnership, alliance or other joint venture transaction. We make strategic investments in new technology start-up companies in order to gain experience in or exploit niche technologies. As of June 30, 2003, we have invested an aggregate amount of approximately $11.3 million in strategic investments. However, our investments may not be successful. The lack of profitability of any of our investments could have a material adverse effect on our operating results. In fiscal 2001, 2003 and the three months ended June 30, 2003, we made a loss provision for $3.5 million, $3.2 million and $1.4 million related to investments in private start-up companies.

Our earnings may be adversely affected if we are required to change our accounting policies with respect to the expensing of stock options.

We do not currently deduct the expense of employee stock option grants from our income based on the fair value method. Regulatory authorities, including the Financial Accounting Standards Board and International Accounting Standards Board, are considering requiring companies to change their accounting policies to record the fair value of stock options issued to employees as an expense. Many companies have or are in the process of voluntarily changing their accounting policies to expense the fair value of stock options. Stock options are an important component of our employee compensation package. If we change our accounting policy with respect to the treatment of employee stock option grants, our earnings could be adversely affected. We have adopted the pro forma disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Had compensation cost for our stock-based compensation plan been determined in a manner consistent with the fair value approach described in SFAS No. 123, our net income as reported would have been reduced to the pro forma amounts of approximately $44.5 million, $137.2 million, $105.2 million and $99.7 million in the three months ended June 30, 2003, fiscal 2003, 2002 and 2001.

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Risks Related to Investments in Indian Companies and International Operations Generally

Our net income would decrease if the Government of India reduces or withdraws tax benefits and other incentives it provides to us.

Currently, we benefit from the tax holidays the Government of India gives to the export of IT services from specially designated software technology parks in India. As a result of these incentives, which include a 10-year tax holiday from Indian corporate income taxes for the operation of most of our Indian facilities and a partial taxable income deduction for profits derived from exported IT services, our operations have been subject to relatively low tax liabilities. These tax incentives resulted in a decrease in our income tax expense of $23.9 million, $71.9 million and $67.3 million for the three months ended June 30, 2003, fiscal 2003 and 2002 compared to the effective tax rates that we estimate would have applied if these incentives had not been available, without accounting for double taxation treaty set-offs, if any.

The Finance Act, 2000 phases out the 10-year tax holiday over a ten-year period from fiscal 2000 through fiscal 2009. Additionally, the Finance Act, 2002 required that ten percent of all income derived from services performed in software technology parks be subject to income tax for a one-year period which ended March 31, 2003. For companies opting for the partial taxable income deduction for profits derived from exported IT services, the Finance Act, 2000 phases out the deduction over five years beginning on April 1, 2000. When our tax holiday and taxable income deduction expire or terminate, our tax expense will materially increase, reducing our profitability.

Wage pressures in India may prevent us from sustaining our competitive advantage and may reduce our profit margins.

Wage costs in India have historically been significantly lower than wage costs in the United States and Europe for comparably skilled professionals, which has been one of our competitive strengths. However, wage increases in India may prevent us from sustaining this competitive advantage and may negatively affect our profit margins. Wages in India are increasing at a faster rate than in the United States, which could result in increased costs for IT professionals, particularly project managers and other mid-level professionals. We may need to increase the levels of our employee compensation more rapidly than in the past to remain competitive. Compensation increases may result in a material adverse effect on our business, results of operations and financial condition.

Terrorist attacks or a war could adversely affect our business, results of operations and financial condition.

Terrorist attacks, such as the attacks of September 11, 2001 in the United States and other acts of violence or war, such as the recent conflict in Iraq, have the potential to have a direct impact on our clients. To the extent that such attacks affect or involve the United States, our business may be significantly impacted, as the majority of our revenues are derived from clients located in the United States. In addition, such attacks may make travel more difficult, may make it more difficult to obtain work visas for many of our IT professionals who are required to work in the United States, and may effectively curtail our ability to deliver our services to our clients. Such obstacles to business may increase our expenses and negatively affect the results of our operations. Many of our clients, in particular for our newer services, such as business process management and IT outsourcing, visit several IT services firms prior to reaching a decision on vendor selection. Terrorist threats, attacks or war could make travel more difficult and delay, postpone or cancel decisions to use our services.

Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our operations and cause our business to suffer.

South Asia has from time to time experienced instances of civil unrest and hostilities among neighboring countries, including between India and Pakistan. In recent years there have been military confrontations between India and Pakistan that have occurred in the region of Kashmir and along the India-Pakistan border. The potential for hostilities between the two countries is higher due to recent terrorist incidents in India, recent troop mobilizations along the border, and the aggravated geopolitical situation in the region. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult and such political tensions could create a greater perception that investments in Indian companies involve higher degrees of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including our equity shares and our ADSs, and on the market for our services.

Restrictions on immigration may affect our ability to compete for and provide services to clients in the United States, which could hamper our growth and cause our revenues to decline.

The vast majority of our employees are Indian nationals. The ability of our IT professionals to work in the United States, Europe and in other countries depends on the ability to obtain the necessary visas and work permits. As of June 30, 2003, the majority of our IT professionals in the United States held H-1B visas (approximately 2,500 persons), allowing the employee to remain in the United States as long as he or she remains an employee of the sponsoring firm, or L-1 visas (approximately 830 persons), allowing for the employee to stay in the United States only temporarily. Although there is no limit to new L-1 visas, there is a limit to the aggregate number of new H-1B visas that the U.S. Immigration and Naturalization Service, or INS, may approve in any government fiscal year. Further, in response to the recent terrorist attacks in the United States, the INS has increased the level of scrutiny in granting visas. This may also lead to limits on the number of L-1 visas granted. The U.S. immigration laws may also require us to meet certain levels of compensation, and to comply with other legal requirements, as a condition to obtaining or maintaining work visas for our IT professionals working in the United States. For example, our compensation expenses increased by approximately $2.6 million for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 to comply with such requirements. Immigration laws in the United States and in other countries are subject to legislative change, as well as to variations in standards of application and enforcement due to political forces and economic conditions. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or monitoring work visas for our IT professionals. Our reliance on work visas for a significant number of IT professionals makes us particularly vulnerable to such changes and variations as it affects our ability to staff projects with IT professionals who are not citizens of the country where the work is to be performed. As a result, we may not be able to obtain a sufficient number of visas for our IT professionals or may encounter delays or additional costs in obtaining or maintaining the condition of such visas.

Changes in the policies of the Government of India or political instability could delay the further liberalization of the Indian economy and adversely affect economic conditions in India generally, which could impact our business and prospects.

Since 1991, successive Indian governments have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant. The current Government of India, formed in October 1999, has announced policies and taken initiatives that support the continued economic liberalization policies that have been pursued by previous governments. However, these liberalization policies may not continue in the future. The rate of economic liberalization could change, and specific laws and policies affecting technology companies, foreign investment, currency exchange and other matters affecting investment in our securities could change as well. A significant change in India’s economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally, and our business in particular.

The current Indian government is a coalition of several parties. The withdrawal of one or more of these parties could result in political instability. Such instability could delay the reform of the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including our equity shares and our ADSs, and on the market for our services.

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

Our functional currency is the Indian rupee although we transact a major portion of our business in foreign currencies and accordingly face foreign currency exposure through our sales in the United States and purchases from overseas suppliers in dollars. Historically, we have held a substantial majority of our cash funds in rupees. Accordingly, changes in exchange rates may have a material adverse effect on our revenues, cost of services sold, gross margin and net income, which may in turn have a negative impact on our business, operating results and financial condition. The exchange rate between the rupee and the dollar has changed substantially in recent years and may fluctuate substantially in the future. We expect that a majority of our revenues will continue to be generated in U.S. dollars for the foreseeable future and that a significant portion of our expenses, including personnel costs, as well as capital and operating expenditures, will continue to be denominated in Indian rupees. Consequently, the results of our operations are adversely affected as the rupee appreciates against the dollar.

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We have sought to reduce the effect of exchange rate fluctuations on our operating results by purchasing foreign exchange forward contracts to cover a portion of outstanding accounts receivable. As of June 30, 2003, we had outstanding forward contracts in the amount of $274.5 million. This increase is primarily attributable to our decision to actively hedge our foreign currency exposure in light of the recent steady appreciation of the Indian rupee against the U.S. dollar. We may not purchase contracts adequate to insulate ourselves from foreign exchange currency risks.

Fluctuations in the exchange rate between the rupee and the dollar will also affect the dollar conversion by Deutsche Bank Trust Company Americas, the Depositary, of any cash dividends paid in rupees on the equity shares represented by the ADSs. In addition, these fluctuations will affect the dollar equivalent of the rupee price of equity shares on the Indian stock exchanges and, as a result, the prices of our ADSs in the United States, as well as the dollar value of the proceeds a holder would receive upon the sale in India of any equity shares withdrawn from the Depositary under the Depositary Agreement. Holders may not be able to convert rupee proceeds into dollars or any other currency, and there is no guarantee of the rate at which any such conversion will occur, if at all.

Our international expansion plans subject us to risks inherent in doing business on an international level.

Currently, we have global development centers in six countries around the world. The majority of our global development centers are located in India. We intend to establish new development facilities, potentially in Southeast Asia, Africa, Latin America and Europe. For example, we intend to increase our presence in China through our recently established representative office in Beijing. Because of our limited experience with facilities outside of India, we are subject to additional risks related to our international expansion strategy, including risks related to complying with a wide variety of national and local laws, restrictions on the import and export of certain technologies and multiple and possibly overlapping tax structures. In addition, we may face competition in other countries from companies that may have more experience with operations in such countries or with international operations generally. We may also face difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture. In addition, our international expansion strategy in China may face difficulty resulting from the outbreak of Severe Acute Respiratory Syndrome, or SARS. Our international expansion plans may not be successful and we may not be able to compete effectively in other countries.

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

We are incorporated under the laws of India and many of our directors and executive officers reside outside the United States. Virtually all of our assets and the assets of many of these persons are located outside the United States. As a result, you may be unable to effect service of process upon us outside India or upon such persons outside their jurisdiction of residence. In addition, you may be unable to enforce against us in courts outside of India, or against these persons outside the jurisdiction of their residence, judgments obtained in courts of the United States, including judgments predicated solely upon the federal securities laws of the United States.

We have been advised by our Indian counsel that the United States and India do not currently have a treaty providing for reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States on civil liability, whether or not predicated solely upon the federal securities laws of the United States, would not be enforceable in India. However, the party in whose favor such final judgment is rendered may bring a new suit in a competent court in India based on a final judgment that has been obtained in the United States. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a foreign judgment in India is required to obtain approval from the Reserve Bank of India under the Foreign Exchange Management Act, 1999, to execute such a judgment or to repatriate any amount recovered.

The laws of India do not protect intellectual property rights to the same extent as those of the United States, and we may be unsuccessful in protecting our intellectual property rights. We may also be subject to third party claims of intellectual property infringement.

We rely on a combination of patent, copyright, trademark and design laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property. However, the laws of India do not protect proprietary rights to the same extent as laws in the United States. Therefore, our efforts to protect our intellectual property may not be adequate. Our competitors may independently develop similar technology or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our products, services or proprietary information.

The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. We may need to litigate to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time consuming and costly. As the number of patents, copyrights and other intellectual property rights in our industry increases, and as the coverage of these rights increase, we believe that companies in our industry will face more frequent infringement claims. Defense against these claims, even if not meritorious, could be expensive and divert our attention and resources from operating our company.

Although we believe that our intellectual property rights do not infringe on the intellectual property rights of any other party, infringement claims may be asserted against us in the future. There are currently no material pending or threatened intellectual property claims against us. However, if we become liable to third parties for infringing their intellectual property rights, we could be required to pay a substantial damage award and be forced to develop non-infringing technology, obtain a license or cease selling the applications or products that contain the infringing technology. We may be unable to develop non-infringing technology or to obtain a license on commercially reasonable terms, or at all.

Our ability to acquire companies organized outside India depends on the approval of the Government of India and / or the Reserve Bank of India and failure to obtain this approval could negatively impact our business.

Generally, the Reserve Bank of India must approve any acquisition by us of any company organized outside of India. The Reserve Bank of India has recently permitted acquisitions of companies organized outside of India without approval where the transaction value is:

• if in cash, up to 100% of the proceeds from an ADS offering; and

• if in stock, up to the greater of $100 million or ten times the acquiring company’s previous fiscal year’s export earnings.

Any required approval from the Reserve Bank of India and the Ministry of Finance of the Government of India or any other government agency may not be obtained. Our failure to obtain approvals for acquisitions of companies organized outside India may restrict our international growth, which could negatively affect our business and prospects.

Indian law limits 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.

Indian law relating to foreign exchange management constrains our ability to raise capital outside India through the issuance of equity or convertible debt securities. Generally, any foreign investment in, or acquisition of, an Indian company requires approval from relevant government authorities in India, including the Reserve Bank of India. There are, however, certain exceptions to this approval requirement for IT companies on which we are able to rely. Changes to such policies may create restrictions on our capital raising abilities. For example, a limit on the foreign equity ownership of Indian IT companies may constrain our ability to seek and obtain additional equity investment by foreign investors. In addition, these restrictions, if applied to us, may prevent us from entering into certain transactions, such as an acquisition by a non-Indian company, which might otherwise be beneficial for us and the holders of our equity shares and ADSs.

Additionally, under current Indian law, the sale of an IT services company can result in the loss of the tax benefits for specially designed software technology parks in India. The potential loss of this tax benefit may discourage others from acquiring us or entering into a transaction with us that is in the best interest of our shareholders.

46

Item 3. Quantitative and Qualitative Disclosure About Market Risk

3.1      Foreign Currency Market Risk

This information is set forth under the caption “Exchange Rate Risk” under Components of Market Risk above, and is incorporated herein by reference.

Item 4. Controls and Procedures

4.1      Evaluation of disclosure controls and procedures.

Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 6-K, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

4.2      Change in internal controls.

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

Part II – Other Information

Item 1.      Legal Proceedings

In the ordinary course of business, we may from time to time become involved in certain legal proceedings. As of the date of this report, we are not a party to any pending material legal proceedings.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3.      Default upon senior securities

None.

Item 4.       Submission of matters to a vote of security holders

a)	The company held its Annual General Meeting of the Shareholders (“AGM”) on June 14, 2003
b)	The following directors retired by rotation at the AGM held on June 14, 2003, were eligible for re-election, and were re-elected by a requisite majority vote:

Srinath Batni
Omkar Goswami Larry Pressler
Rama Bijapurkar

	In addition, Mr. Sridar Iyengar who was appointed as Additional Director on April 10, 2003 was elected at the AGM as Director, liable to retire by rotation.
c)	The following are the other directors whose term of office as a director continues after the AGM:

N. R. Narayana Murthy	Philip Yeo
Nandan M. Nilekani	Claude Smadja
S. Gopalakrishnan	K. Dinesh
Deepak M. Satwalekar	S. D. Shibulal
Prof. Marti G. Subrahmanyam	T. V. Mohandas Pai

Item 5. Other Information

a) The following is a brief description of the matters voted upon at the AGM of the company held on June 14, 2003 along with votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to each matter. The matters to be voted upon were notified to the shareholders on record and all Registered Holders of the American Depositary Receipts (the “ADRs”) who were holding the ADRs as on a record date determined by the Depositary.

47

ORDINARY BUSINESS

				Votes against /		Abstentions / Broker
Brief Description of the matter put to vote		Votes for (1)(2)		Withheld (1)(2)		Non-votes (1)(2)
1.	To receive, consider and adopt the Balance Sheet as at March 31, 2003 and the		291		1		—
	Profit & Loss Account for the year ended on that date and the
	Report of the Directors and the Auditors thereon
2.	To declare a final dividend of Rs. 14.50 per share		291		1		—
3.	To appoint a director in place of Mr. Srinath Batni		28,159,550		67,527		4,597
	who retires by rotation and is eligible for re-election
4.	To appoint a director in place of Mr. Omkar Goswami		28,159,548		47,807		14,597
	who retires by rotation and is eligible for re-election
5.	To appoint a director in place of Mr. Larry Pressler		28,152,361		54,858		14,580
	who retires by rotation and is eligible for re-election
6.	To appoint a director in place of Ms. Rama Bijapurkar		28,152,205		55,071		14,580
	who retires by rotation and is eligible for re-election
7.	To appoint Auditors to hold office from the conclusion of this meeting		291		1		—
	until the conclusion of the next Annual General Meeting and to fix their remuneration
SPECIAL BUSINESS
8.	To consider appointing Mr. Sridar Iyengar, as a		28,152,133		54,897		14,793
	Director of the company, liable to retire by rotation
9.	To consider deleting Article 107 of the Articles		291		1		—
	of Association

1.	Under the Indian Companies Act 1956, voting is by show of hands unless a poll is demanded by a member or members present in person, or by proxy holding at least one-tenth of the total shares entitled to vote on the resolution or by those holding paid-up capital of at least Rs. 50,000. Under the Articles of the company member present by proxy shall be entitled to vote only on a poll but not on a show of hands, unless such member is a body corporate present by a representative in which case such proxy shall have a vote on the show of hand as if he were a member.
2.	Under the Indian Companies Act and as per the Articles of the company, on a show of hands every member present in person shall have one vote and upon a poll the voting rights of every member whether present in person or by proxy, shall be in proportion to his share of the paid-up capital of the company.
3.	For Items nos. 1, 2, 7 and 9 the votes represent the number of votes in a show of hands. No poll was demanded on these items at the AGM.
4.	For Items 3, 4, 5, 6 and 8 the votes represent the votes cast on a poll.

Item 6. Exhibits and reports

Infosys filed no reports on Form 8-K during the quarter ended June 30, 2003

EXHIBIT INDEX

Exhibit Number	Description of Document
99.1	Certification of Chief Executive Officer and Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act.
99.2	Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly organized.

Dated : July 15, 2003	INFOSYS TECHNOLOGIES LIMITED
	/s/ Nandan M. Nilekani
	Nandan M. Nilekani
	Chief Executive Officer, President
	and Managing Director

48

Exhibit 99.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Nandan M. Nilekani, Chief Executive Officer, President and Managing Director of Infosys Technologies Limited, certify that:

1.	I have reviewed this quarterly report on Form 6-K of Infosys Technologies Limited;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

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

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

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

	/s/ Nandan M. Nilekani
	Chief Executive Officer, President and
Date : July 15, 2003	Managing Director

CHIEF FINANCIAL OFFICER CERTIFICATION

I, T. V. Mohandas Pai, Chief Financial Officer and Head-Finance and Administration of Infosys Technologies Limited, certify that:

1.	I have reviewed this quarterly report on Form 6-K of Infosys Technologies Limited;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

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

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

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

Date : July 15, 2003 /s/ T. V. Mohandas Pai
Chief Financial Officer and
Director - Finance and Administration

Exhibit 99.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION
1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Nandan M. Nilekani, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Infosys Technologies Limited on Form 6-K for the quarterly period ended June 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 6-K fairly presents in all material respects the financial condition and results of operations of Infosys Technologies Limited.

/s/ Nandan M. Nilekani
Nandan M. Nilekani
CHIEF EXECUTIVE OFFICER

I, T. V. Mohandas Pai, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Infosys Technologies Limited on Form 6-K for the quarterly period ended June 30, 2003, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 6-K fairly presents in all material respects the financial condition and results of operations of Infosys Technologies Limited.

/s/ T. V. Mohandas Pai
T. V. Mohandas Pai
CHIEF FINANCIAL OFFICER

49

Shareholder information

1.	Registered office	Electronics City, Hosur Road, Bangalore 560 100, India. Tel.: +91-80-852-0261, Fax: +91-80-852-0362 Website: www.infosys.com
2.	Listing on stock exchanges	In India:     Bangalore Stock Exchange Ltd. (BgSE), the Stock Exchange,
		Mumbai (BSE), and the National Stock Exchange of India Ltd. (NSE).
		Outside India: NASDAQ National Market in the US.
3.	Par value of equity shares	Rs. 5/- each fully paid-up
4.	Registrar and share transfer agents Share transfers in physical form and other communication regarding share Certificate dividends, change of address, etc. may be addressed to:	Karvy Consultants Limited, Registrars and Share Transfer Agents; T.K.N. Complex, No. 51/2, Vanivilas Road, Opposite National College, Basavanagudi; Bangalore 560 004, India. Tel.: +91-80-662-1184, Fax: +91-80-662-1169 E-mail: kumars@karvy.com

5. Stock market data relating to shares listed in India

a.	The company’s market capitalization is included in the computation of the BSE-30 Sensitive Index (Sensex), the BSE Dollex and S&P CNX NIFTY Index.
b.	Monthly high and low quotations as well as the volume of shares traded at BSE, NSE and the Bangalore Stock Exchange for the quarter ended June 30, 2003 are:

	BSE						NSE						BgSE
	High		Low		Volume		High		Low		Volume		High		Low		Volume
	Rs.		Rs.		Nos.		Rs.		Rs.		Nos.		Rs.		Rs.		Nos.
April, 2003		4,399		2,420		1,04,97,862		4,400		2,653		2,54,29,765		—		—		—
May		3,069		2,572		73,29,229		3,070		2,571		2,05,38,831		—		—		—
June		3,345		2,695		56,40,234		3,349		2,700		1,64,55,903		—		—		—
Total						2,34,67,325						6,24,24,499		—		—		—

Volume traded to average shares outstanding (%) *

Quarter ended June 30, 2003	36.62	%	97.41	%
Quarter ended June 30, 2002	21.93	%	44.98	%

* The number of shares outstanding is 6,40,82,238. American Depositary Shares (ADSs) have been excluded for the purpose of this calculation.

6.	Share transfer system
	Shares sent for physical transfer are effected after giving a notice of 15 days to the seller for sale confirmation. The share transfer committee of the company meets as often as required. The total number of shares transferred in physical form during the three-month ended June 30, 2003 was 52, (quarter ended June 30, 2002-Nil).
7.	Investor services – Complaints Received

	Quarter Ended
		June 30, 2003				June 30, 2002
Nature of complaints		Received		Attended to		Received		Attended to
Non-receipt of share certificates			—		—		—		—
Non-receipt of bonus share/split shares			—		—		1		1
Letters from stock exchanges, SEBI, etc			—		—		—		—
Dividend Payments*			47		47		29		29
Total			47		47		30		30

	The company has attended to most of the investors’ grievances/correspondences within a period of 10 days from the date of receipt of the same, during the quarter ended June 30, 2003 except in cases that are constrained by disputes or legal impediments.
	* One complaint relating to dividend payment which was pending in the beginning of the quarter and resolved during the quarter is not included above.
8.	Legal Proceedings
	There are some pending cases relating to disputes over title to shares, in which the company has been made a party. However, these cases are not material in nature.
9.	Categories of shareholders as on June 30, 2003

Category	No. of shareholders		Voting strength (%)		No. of shares held
Individuals/Trust		83,891		17.62		1,16,73,256
Companies		3,473		1.25		8,25,949
FIIs		338		40.00		2,64,99,097
OCBs and NRIs		904		0.87		5,79,752
Founders and their families		23		28.42		1,88,27,595
Mutual funds, Banks, FIs		220		8.57		56,76,589
Equity shares underlying American Depositary Shares*		1		3.27		21,67,128
Total		88,850		100		6,62,49,366

* Held by beneficial owners outside India.

50

10.	Financial calendar (tentative and subject to change)
	Financial reporting for quarter ending September 30, 2003	October 10, 2003
	Interim dividend payment (if any)	November 2003
	Financial reporting for quarter ending December 31, 2003	January 09, 2004
	Financial results for year ending March 31, 2004	April 13, 2004
	Annual General Meeting for year ending March 31, 2004	June 2004
11.	Investors’ correspondence in India
	For investor matters:	For queries relating to financial statements:
	V. Balakrishnan,	T. V. Mohandas Pai,
	Company Secretary and Vice President – Finance;	Director (F&A) and CFO;
	Investors’ Service Cell;	Infosys Technologies Limited;
	Infosys Technologies Limited;	Electronics City, Hosur Road;
	Electronics City, Hosur Road;	Bangalore 560 100, India.
	Bangalore 560 100, India	Tel.: +91-80-852-0396, Fax: +91-80-852-0362
	Tel.: +91-80-852-0440, Fax: +91-80-852-0754	E-mail: mdpai@infosys.com
	E-mail: balakv@infosys.com

12. Stock exchange codes

Reuters code	Bridge code	Bloomberg code
INFY.BO (BSE)	IN;INF (BSE)	INFO IN (BSE)
INFY.NS (NSE)	IN;INFN (NSE)	NINFO IN (NSE)
INFY.O (NASDAQ)	US;INFY (NASDAQ)

13. Stock market data relating to American Depositary Shares (ADSs)

a.	ADS listed at:	NASDAQ National Market in the US
b.	Ratio of ADS to equity shares:	2 ADS for one equity share
c.	ADS symbol:	INFY
d.	The American Depositary Shares issued under the ADS program of the company were listed on the NASDAQ National Market in the US on March 11, 1999. The monthly high and low quotations as well as the volume of ADSs traded at the NASDAQ National Market for the quarter ended June 30, 2003 are:

	High				Low				Volume
	$		Rs.		$		Rs.		Nos.
April, 2003		65.50		3,102.74		38.51		1,824.22		64,09,197
May, 2003		44.90		2,113.44		40.20		1,892.21		31,58,502
June, 2003		56.01		2,598.86		44.30		2,055.52		24,91,699
										1,20,59,398

Note: 2 ADS = 1 equity share. US$ has been converted into Indian rupees at the monthly closing rates. The number of ADSs outstanding as on June 30, 2003 was 4,334,256. The percentage of volume traded to the total float was 278%.

e.	Investor correspondence
	In US:	In India:
	P. R. Ganapathy,	V. Balakrishnan,
	Investor Relations Officer;	Company Secretary and Vice President – Finance;
	Infosys Technologies Limited;	Infosys Technologies Limited;
	34760 Campus Drive, Fremont CA 94555, USA.	Electronics City, Hosur Road;
	Tel.: +1-510-742-3030, Fax: +1-510-742-2930	Bangalore 560 100, India.
	Mobile: +1-510-872-4412	Tel.: +91-80-852-0440, Fax: +91-80-852-0754
	E-mail: guns@infosys.com	E-mail: balakv@infosys.com

14.	ECS mandate
	The company has received complaints regarding non-receipt of dividend warrants. All shareholders are requested to update their bank account details with their respective depositories urgently. This would enable the company to service its investors better. A copy of the ECS mandate form is provided elsewhere in the report. The ECS mandate form duly filled-up should be sent to the depository participant with whom the shareholders maintains his/her demat account.
15.	Change of address
	The company has received complaints regarding non-receipt of dividend warrants and other corporate communications. All shareholders are requested to update their current address with their respective depositories immediately. This would enable the company to service its investors better.

51

Infosys Technologies Limited

United States

Addison
15305 Dallas Parkway
Suite 210
Addison, TX 75001
Tel : 972 770 0450
Fax: 972 770 0490

Atlanta
400 Galleria Parkway
Suite 1490
Atlanta, GA 30339
Tel : 770 980 7955
Fax: 770 980 7956

Bellevue
205, 108 Avenue A/E
Suite 550
Bellevue, WA 98004
Tel : 425 452 5300
Fax: 425 452 8440

Berkeley Heights
Two Connell Drive
Suite 4100
Berkeley Heights
New Jersey 07922
Tel : 908 286 3100
Fax: 908 286 3125

Charlotte
900, West Trade Street
Charlotte 28202

Fremont
34760 Campus Drive
Fremont, CA 94555
Tel : 510 742 3000
Fax: 510 742 3090

Lake Forest
1 Spectrum Pointe Drive
Suite 350
Lake Forest, CA 92630
Tel : 949 455 9161
Fax: 949 609 0694

Lisle
2300 Cabot Drive
Suite 250
Lisle, IL 60532
Tel : 630 482 5000
Fax: 630 505 9144

Ohio
6631, Suite E
Commerce Parkway
Dublin, Ohio, 43017
Tel : 614 923 3375
Fax: 614 923 3384

Phoenix
10851 N Black Canyon Fwy
Suite 830
Phoenix, AZ 85029
Tel : 602 944 4855
Fax: 602 944 4879

Quincy
Two Adams Place
Quincy, MA 02169
Tel : 781 356 3100
Fax: 781 356 3150

Troy
100 Liberty Center
Suite 200
West Big Beaver
Troy, MI 48084
Tel : 248 524 0320
Fax: 248 524 0321

Argentina
Republica, Arabe Siria 3149
Piso 7’27’
1425 Capital Federal
Buenos Aires
Tel : 5411 480 20025

Australia
Level 9, 114 Albert Road
South Melbourne, VIC 3025
Tel : 61 3 9685 1600
Fax: 61 3 9685 1699

Level 4, 90 Mount Street
North Sydney, NSW 2060
Tel : 61 2 9954 0036
Fax: 61 2 8904 1344

Belgium
Drève Richelle 161
Building N, 1410 Waterloo
Tel : 32 2 352 87 18
Fax: 32 2 352 88 44

Canada
5140 Yonge Street
Suite 1400
Toronto, Ontario M2N 6L7
Tel : 416 224 7439
Fax: 416 224 7474

China
Beijing Representative Office
14th Floor, IBM Tower
Pacific Century Place
2A Workers Stadium Road North
Chaoyang District
Beijing 100027
Tel : 86 10 6539 1095, 1063
Fax: 86 10 6539 1060

France
12 Avenue de I’Arche
Faubourg de l’Arche
92419 Courbevoie Cedex
Paris
Tel : 331 46 91 84 56
Fax: 331 46 91 88 00

Germany
TOPAS 1
Mergenthalerallee 77
65760 Eschborn/Frankfurt
Tel : 49 6196 9694 0
Fax: 49 6196 9694 200

Hong Kong
16F Cheung Kong Centre
2 Queen’s Road Central
Central, Hong Kong
Tel : 852 2297 2231
Fax: 852 2297 0066

Japan
Izumi Garden Wing 2F
1-6-3, Roppongi, Minato-ku
Tokyo 106-0032
Tel : 81 3 5545 3251
Fax: 81 3 5545 3252

Mauritius
2nd & 3rd Floor
Hassmal Shopping Centre
Corner Remono & Queen St.
Rose Hill, Mauritius

Scandinavia
Stureplan 4C, 4tr
114 35, Stockholm
Tel : 46 8 463 1112
Fax: 46 8 463 1114

Singapore
30, Raffles Place
#23-00 Caltex House
Singapore 048622
Tel : 65 6233 6820
Fax: 65 6233 6905

Switzerland
Dreikönigstrasse 31A
8002 Zurich
Tel : 41 1 208 3905
Fax: 41 1 208 3500

The Netherlands
Newtonlaan 115
3584 BH Utrecht
Tel : 31 (0) 30 210 6462
Fax: 31 (0) 30 210 6860

United Kingdom
Emerald House
15 Lansdowne Road
Croydon, Surrey CR0 2BX
Tel :44 208 774 3364
Fax: 44 208 774 3302

United Arab Emirates
Y-45, P.O. Box 8230
Sharjah Airport International
Free Zone (SAIF Zone)
Sharjah
Tel : 971 6 5571 068
Fax: 971 6 5571 056

India
Bangalore
Electronics City, Hosur Road
Bangalore 560 100
Tel : 91 80 8520261
Fax: 91 80 8520362

Reddy Building
K-310, 1st Main, 5th Block,
Koramangala
Bangalore 560 095
Tel : 91 80 5532591 / 92
Fax: 91 80 5530391

Pavithra Complex
#1, 27th Main, 2nd Cross
1st Stage, BTM Layout
Bangalore 560 068
Tel : 91 80 6680182-85
Fax: 91 80 6680181

Infosys Towers
No. 27, Bannerghatta Road
3rd Phase, J. P. Nagar
Bangalore 560 076
Tel : 91 80 6588668
Fax: 91 80 6588676

Bhubaneswar
Plot No. E/4, Info City
Bhubaneswar 751 024, Orissa
Tel : 91 674 2320001-32
Fax: 91 674 2320100

Chennai
No.138
Old Mahabalipuram Road
Sholinganallur
Chennai 600 119
Tel : 91 44 24509530 / 40
Fax: 91 44 24500390

Hyderabad
Survey No. 210,
Manikonda Village
Lingampally
Rangareddy (Dist)
Hyderabad 500 019
Tel : 91 40 23005222
Fax: 91 40 23005223

Mangalore
Kuloor Ferry Road, Kottara
Mangalore 575 006
Tel :91 824 2451485-88
Fax: 91 824 2451504

Mohali (Chandigarh)
B 100, Industrial Area
Phase 8
Mohali (SAS Nagar) 160 059
Punjab
Tel : 91 172 390510
        91 172 257191 / 92
Fax: 91 172 257193

Mumbai
85-C Wing, 8th Floor
Mittal Towers
Nariman Point
Mumbai 400 021
Tel : 91 22 22882911/14
Fax: 91 22 22846489

Mysore
No. 350
Hebbal Electronics City
Hootagalli
Mysore 571 186
Tel : 91 821 404101
Fax: 91 821 404200

New Delhi
K30, Green Park Main
Behind Green Park Market
New Delhi 110 066
Tel : 91 11 26514829-30

Fax: 91 11 26853366

Pune
Plot No. 1
Pune Infotech Park
At Post Hinjawadi
Taluka Mulshi
Pune 411 027
Tel : 91 20 2932800 / 01

Fax: 91 20 2932832

Bankers ICICI Bank Ltd. Bank of America	Visit Infosys at www.infosys.com
Company Secretary	Call us at
V. Balakrishnan	within the U.S. 1-800-ITL INFO
Auditors Bharat S. Raut and Co. Chartered Accountants	outside the U.S. 91-80-8520261
Independent Auditors (US GAAP) KPMG

(C)  2003 Infosys Technologies Limited, Bangalore, India.

Infosys acknowledges the proprietary rights in the trademarks and product names of other companies mentioned in the document.

52

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly organized.

INFOSYS TECHNOLOGIES LIMITED

/s/ Nandan M. Nilekani
Nandan M. Nilekani

Chief Executive Officer, President

and Managing Director

Dated: August 8, 2003

INDEX TO EXHIBITS

Exhibits

3.1 Articles of Association of Registrant, as amended.

EX-3.1 3 f92150exv3w1.txt EXHIBIT 3.1 EXHIBIT 3.1 THE COMPANIES ACT, 1956 COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF INFOSYS TECHNOLOGIES LIMITED CONSTITUTION TABLE A NOT TO APPLY BUT COMPANY TO BE GOVERNED BY THESE ARTICLES 1. No regulations contained in Table A in the first Schedule to the Companies Act, 1956 shall apply to this Company, but the regulations for the management of this Company and for the observance of the members thereof and their representatives, shall, subject to any exercise of the statutory powers of the Company with reference to the repeal or alteration of, or addition to, its regulations by Special Resolution, as prescribed by the Companies Act, 1956, be such as are contained in these Articles. INTERPRETATION INTERPRETATION CLAUSE 2. 1) In the Interpretation of these Articles, unless repugnant to the subject or context :- "THE ACT" AND THE SAID ACT" "The Act" or the said Act" and reference to any section or provision thereof respectively means and includes the Companies Act, 1956 (1 of 1956) and any statutory modification or re-enactment thereof for the time being in force, and reference to the section or provisions of the said Act or such statutory modification. "AUDITORS" "Auditors" means and includes those persons appointed as such for the time being by the Company. "BOARD" "Board" or "Board of Directors means a meeting of the Directors duly called and constituted, or as the case may be, the Directors assembled at the Board or the Directors of the Company collectively. "CAPITAL" "Capital" means the share capital for the time being raised or authorised to be raised for the purpose of the Company. 2 "THE COMPANY" OR "THIS COMPANY" "The Company" or This Company" means INFOSYS TECHNOLOGIES LIMITED. "DIRECTORS" "Directors" means the Directors for the time being of the Company or as the case may be the Directors assembled at a Board. "DIVIDEND" "Dividend" includes bonus. "GENDERS" Words imparting the masculine gender also include the feminine gender. "IN WRITING" "In writing" and "written" include printing or lithography or any other modes of representing or reproducing words in visible form. "MONTH" "Month" means calendar month. "OFFICE" "Office" means the Registered Office for the time being of the Company. "PAID UP" "Paid up" includes credited as paid-up. "PERSONS" "Persons" includes corporations as well as individuals. "THE REGISTRAR" "The Registrar" means the Registrar of Companies of the State in which the office of the Company if for the time being situate. "Seal" "Seal" means the common seal for the time being of the Company. "SINGULAR NUMBER" Words importing the singular number include where the context admits or requires, the plural number and vice versa. "YEAR" AND "FINANCIAL YEAR" "Year" means the calendar year and "Financial Year" shall have the meaning assigned thereto by Section 2(17) of the Act. "THESE PRESENTS" "These Presents" means these articles as modified from time to time. a) "Beneficial owner" shall mean beneficial owner as defined in Clause(a) of sub-section( 1) of Section 2 of the Depositories Act, 1996. Depositories Act, 1996 shall include any statutory modification or re-enactment thereof and Depository shall mean a Depository as defined under Clause(e) of sub-section (1) of Section 2 of the Depositories Act, 1996. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6, 1998. b) "Shareholder" or "Member means the duly registered holder of the shares from time to time and includes the subscribers to the Memorandum of Association of the Company and the beneficial owner(s) as defined in clause(a) of sub-section(1) of Section 2 of the Depositories Act, 1996. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,1998. 2) Unless the context otherwise requires words and expressions contained in the Articles shall bear the same meaning as in the Act. 3 3) The marginal notes used in these Articles shall not affect the construction hereof. Save as aforesaid, any words or expressions defined in the Act, shall, if not inconsistent with the subject or context, bear the same meaning in these Articles. CAPITAL AND INCREASE AND REDUCTION OF CAPITAL 3. The Authorised Share Capital of the Company is Rs. 50,00,00,000 (Rupees fifty crores only) divided into 10,00,00,000 (Ten crores only) equity shares of Rs. 5 each (Rupees Five only) with powers to increase or reduce the same in accordance with the provisions of the Companies Act, 1956. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON DECEMBER 29, 1999. The company shall be entitled to dematerialize its existing shares, rematerialize its shares held in the Depositories and/or to offer its fresh shares in a dematerialized form pursuant to the Depositories Act, 1996 and the rules framed thereunder, if any. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6, 1998. INCREASE OF CAPITAL OF THE COMPANY AND HOW CARRIED INTO EFFECT 4. The Company in General Meeting, may from time to time, increase its capital by the creation of new shares, such increase to be of such aggregate amount and to be divided into shares of such amounts as the resolution shall prescribe. Subject to the provisions of the act, any shares of the original or increased capital shall be issued upon such terms and conditions and with such rights and privileges annexed thereto, as the General Meeting resolving upon the creation thereof shall prescribe and if no direction be given, as the Directors shall determine and in particular, such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the Company and with a right of voting at General Meetings of the Company, in conformity with Sections 87 and 88 of the Act. Whenever the capital of the Company has been increased under the provisions of these Articles, the Directors shall comply with the provisions of Section 97 of the Act. ALLOTMENT OTHERWISE THAN FOR CASH 5. Subject to the provisions of the Act and these Articles, the Directors may allot and issue shares in the capital of the Company as payment or part-payment for any property or assets of any kind whatsoever, sold or to be sold or transferred to be transferred or for goods or machinery supplied or to be supplied or for services rendered or to be rendered or for technical assistance or know-how made or to be made available to the Company or the conduct of its business and shares which may be so allotted may be issued as fully or partly paid-up otherwise than in cash and if so issued, shall be deemed to be fully or partly paid as the case may be. ADDITIONAL CAPITAL TO FORM PART OF EXISTING CAPITAL 6. Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares, shall be considered as part of the existing capital, and shall be subject to the provisions herein contained, with reference to the payment of calls and instalments, forfeiture, lien, surrender, transfer and transmission, voting and otherwise. REDEEMABLE PREFERENCE SHARES 7. Subject to the provisions of Section 80 of the Act, the Company shall have the power to issue Preferential Shares which are or at the option of the Company are to be liable to be redeemed and the resolution authorising such issue shall prescribe the manner, terms and conditions of redemption. 4 REDUCTION OF CAPITAL 8. The Company may (subject to the provisions of Sections 78, 80, 100 to 105 inclusive, of the Act) from time to time by Special Resolution, reduce its capital and any Capital Redemption Reserve Account or Share Premium Account in any manner for the time being authorised by law, and in particular, capital may be paid off on the footing that it may be called up again or otherwise. This Article is not to derogate from any power the Company would have if it were omitted. VARIATION OF RIGHTS 9. If at any time the share capital is divided into different classes of shares, all or any of the rights and privileges attached to the shares of any class may subject to the provisions of Sections 106 and 107 be varied, commuted, affected, dealt with or abrogated with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a Special Resolution at a separate meeting of the holders of the issued shares of that class. ISSUE OF FURTHER PARI PASSU SHARES NOT TO AFFECT THE RIGHT OF SHARES ALREADY ISSUED 10. The rights conferred upon the holders of the shares of any class issued with preferred or any other rights shall not, unless, otherwise expressly provided by the terms of issue of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. SUB-DIVISION AND CONSOLIDATION OF SHARES 11. Subject to the provisions of Section 94 of the Act, the Company in General Meeting may from time to time, sub-divide or consolidate its shares, or any of them, and the resolution whereby any share is sub-divided, may determine that, as between the holders of the shares resulting from such sub-division one or more of such shares shall have some preference or special advantage as regards dividend, capital or otherwise over or as compared with the other or others. Subject as aforesaid the Company in General Meeting may also cancel shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of shares so cancelled. The cancellation of shares in pursuance of this Article shall not be deemed to be a reduction of the share capital. 11A. The Directors are hereby authorized to issue Equity Shares or Debentures (whether or not convertible into equity shares) for offer and allotment to such of the officers, employees and workers of the Company as the Directors may select or the trustees of such trust as may be set up for the benefit of the officers, employees and workers in accordance with the terms and conditions of such scheme, plan or proposal as the Directors may formulate. Subject to the consent of the Stock Exchanges and of the Securities Exchange Board of India, the Directors may impose the condition that the shares in or debentures of the Company so allotted shall not be transferable for a specified period. SHARES AND CERTIFICATES SHARES TO BE NUMBERED PROGRESSIVELY AND NO SHARES TO BE SUB-DIVIDED 12. The shares in the capital shall be numbered progressively according to their several denominations and except in the manner hereinbefore mentioned no share shall be sub-divided. Every forfeited or surrendered share shall continue to bear the number by which the same was originally distinguished. SHARES AT THE DISPOSAL OF THE DIRECTORS 13. Subject to the provisions of these Articles and the Act, the shares in the capital of the Company for the time being (including any shares forming part of any increased capital of the Company) shall be under the control of the Directors who may issue, allot or otherwise dispose of the 5 same or any one of them to such persons in such proportion and on such terms and conditions and either at a premium or at par or (subject to compliance with the provisions of the Act) at a discount and at such times as they may from time to time think fit and proper and with the sanction of the Company in General Meeting to give to any person the option to call for or allotted shares of any class of the Company either at par or at premium or subject as aforesaid at a discount during such time and for such consideration and such option being exercisable at such times as the Directors think fit; and any shares which may be so allotted may be issued as fully paid-up shares and if so issued shall be deemed to be fully paid-up shares. The Board shall cause to be filed the returns as to allotment provided for in Section 75 of the Act. Provided that the option or right to call of shares not be given to any person except with the sanction of the company in the General Meeting. ACCEPTANCE OF SHARES 14. Any application signed by, or on behalf of, an applicant for shares in the Company followed by an allotment of any shares therein, shall be an acceptance of shares within the meaning of these Articles; and every person who thus or otherwise accepts any shares and whose name is entered in its Register of Members shall, for the purpose of these Articles, be a member of the Company. DEPOSIT AND CALL, ETC. TO BE A DEBT PAYABLE IMMEDIATELY 15. The money (if any) which the Directors shall, on the allotment of any shares being made by them, require or direct to be paid by way of deposits, call or otherwise, in respect of any shares allotted by them, shall, immediately on the inscription of the name of the allottee in the Register of Members as the holder of such shares, become a debt due to and recoverable by the Company from the allottee thereof and shall be paid by him accordingly. LIABILITY OF MEMBERS 16. Every member, or his heirs, executors, administrators or other representatives, shall pay to the Company the portion of the capital represented by his share or shares, which may, for the time being, remain unpaid thereon, in such amounts, at such time or times, and in such manner as the Directors shall, from time to time, in accordance with the Company's Regulations require or fix for the payment thereof. SHARE CERTIFICATE 17 a) The share certificates shall be issued in market lots and where share certificates are issued in either more or less than market lots, sub-division or consolidation of share certificates into market lots shall be done free of charge. b) Any two or more joint allottees of a share shall, for the purposes of this Article, be treated as a single Member, and the certificate of any share which may be the subject of joint ownership, may be delivered to any one of such joint owners on behalf of all of them. For any further certificate the Board shall be entitled but shall not be bound, to prescribe a charge not exceeding Rupee One. The Company shall comply with the provisions of Section 113 of the Act. c) Directors may sign a share certificate by affixing their signature thereon by means of any machine, equipment or other mechanical means, such as engraving in metal or lithography, but not by means of a rubber stamp, provided that the Director shall be responsible for the safe custody of such machine, equipment or other material used for the purpose. RENEWAL OF SHARE CERTIFICATE 18. a) No fee shall be charged for issue of new share certificates in replacement of those which are old, decrepit, worn-out or where the cages on the reverse of the share certificates for recording transfers have been fully utilised. 6 b) When a new share certificate has been issued in pursuance of Clause (a) of this Article, it shall state on the face of it and against the stub or counterfoil to the effect that it is "Issued in lieu of Share Certificate No................. sub-divided/replaced/on consolidation of shares." c) If a share certificate is lost or destroyed, a new certificate in lieu thereof shall be issued only with the prior consent of the Board and on payment of such fee, not exceeding Rupees two as the Board may from time to time fix, and on such terms, if any, as to evidence and indemnity as to payment of such out-of-pocket expenses incurred by the Company in investigating evidence, as the Board thinks fit. d) When a new share certificate has been issued in pursuance of Clause (c) of this Article, it shall state on the face of it and against the stub or counterfoil to the effect that it is "a duplicate issued in lieu of share certificate No.........". The word "duplicate" shall be stamped or punched in bold letters across the face of the share certificate. e) Where a new share certificate has been issued in pursuance of Clause (a) or Clause (c) of this Article, particulars of every such share certificate shall be entered in a Register of Renewed and Duplicate Certificates indicating against the name or names of the person or persons to whom the Certificate is issued the number and date of issue of the share certificate in lieu of which the new certificate is issued, and the necessary changes indicated in Register of Members by suitable cross reference in the "Remarks" column. f) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on the authority or a resolution of the Board. The blank forms shall be consecutively machine numbered and the forms and blocks, engravings, facsimiles and hues relating to the printing of such forms shall be kept in the custody of the Secretary or such other person as the Board may appoint for the purposes; and the Secretary or the other person aforesaid shall be responsible for rendering an account of these forms to the Board. g) The Managing Director of the Company for the time being or, if the Company has no Managing Director, every Director of the Company shall be responsible for the maintenance, preservation and safe custody of all books and documents relating to the issue of share certificates except the blank forms of share certificates referred to in sub-clause (f). h) All books referred to in sub-clause (g) shall be preserved in good order permanently. i) The Shares in the Capital of the Company shall be numbered progressively according to their several denominations, provided however, that the provisions relating to progressive numbering shall not apply to the shares of the Company which are dematerialized or may be dematerialized in future or issued in future in dematerialized form. Except in the manner hereinbefore mentioned, no share shall be sub-divided. Every forfeited or surrendered share held in material form shall continue to bear the number by which the same was originally distinguished. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6, 1998. DELIVERY OF SHARE/DEBENTURE CERTIFICATES 19. The Company shall within three months after the allotment of any of its shares or debentures or debenture-stock and within one month after the application for the registration of the transfer of any such shares or debentures or debenture-stock, complete and have ready for delivery the certificates of all shares, debentures or debenture stock allotted or transferred unless the conditions of issue of shares or debentures or debenture-stock otherwise provided. The expression "transfer" for the purpose of this Article means, a transfer duly stamped and otherwise valid and does not include any transfer which the Company is for any reason entitled to refuse to register and does not register. 7 LIABILITY OF JOINT HOLDERS 20. If any share stands out in the names of two or more persons all the joint holders of the share shall be severally as well as jointly liable for the payment of all deposits, instalments, and calls due in respect of such shares, and for all incidents thereof according to the Company's Regulations, but the person first named in the Register shall, as regards receipt of dividend or bonus or service of notice, and all or any other matters connected with the company, except voting at meetings and the transfer of the shares, and any other matter by the said Act or herein otherwise provided, be deemed the sole holder thereof. REGISTERED HOLDER ONLY THE OWNER OF THE SHARES 21. Except as ordered by a Court of competent jurisdiction or by law required, the Company shall be entitled to treat the person whose name appears on the Register of Members as the holder of any share or whose name appears as the beneficial owner of shares in the records of the Depository, as the absolute owner thereof and accordingly shall not be bound to recognise any benami, trust or equity or equitable, contingent or other claim to or interest in such share on the part of any other person whether or not he shall have express or implied notice thereof. The Board shall be entitled at their discretion to register any shares in the joint names of any two or more persons, or the survivor or survivors of them. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6, 1998. SHARE CERTIFICATE FOR JOINT MEMBERS 22. The Company shall not be bound to register more than three persons as the joint holders of any share except in the case of executors or trustees of a deceased member and in respect of a share held jointly by several persons the Company shall not be bound to issue more than one certificate and delivery of a certificate for a share to any one of the several joint holders shall be sufficient delivery to all such holders. FRACTIONAL CERTIFICATES 23. The Company may issue such fractional coupons as the Board may approve in respect of any of the shares of the Company on such terms as the Board thinks fit as to the period within which the fractional coupons are to be converted into share certificates. UNDERWRITING AND BROKERAGE - COMMISSION MAY BE PAID 24. Subject to the provisions of Section 76 of the Act, the Company may at any time pay a commission to any person, in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares or debentures of the Company, or procuring, or agreeing to procure subscriptions (whether absolute or conditional) for any shares or debentures in the Company; But so that the commission shall not exceed in case of shares five percent of the price at which the shares are issued and in case of debentures two and a half percent of the price at which the debentures are issued. BROKERAGE 25. The Company may pay a reasonable sum for brokerage. INTEREST OUT OF CAPITAL - INTEREST MAY BE PAID OUT OF CAPITAL 26. Where any shares are issued for purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any land, which cannot be made profitable for a lengthy period, the Company may pay interest on so much of that share capital as is for the time being paid up for the period, at the rate and subject to the conditions and restrictions provided by Section 208 of the Act and may charge the same to capital as part of the cost of construction of the works or buildings or provision of plant. 8 CALLS DIRECTORS MAY MAKE CALLS 27. The Board may form time to time, subject to the terms on which any shares may have been issued and subject to the conditions of allotment, by a resolution passed at a meeting of the Board (and not by circular resolution) make such calls as it thinks fit upon the Members in respect of all monies unpaid on the shares held by them respectively and each member shall pay the amount of every call so made on him to the person or persons and at the time and place appointed by the Board. A call may be made payable by instalments. NOTICE OF CALLS 28. Thirty days notice in writing of any call shall be given by the Company specifying the time and place of payment, and the person or persons to whom such calls shall be made. CALLS TO DATE FROM RESOLUTION 29. A call shall be deemed to have been made at the time when the resolution authorising such call was passed at a meeting of the Board. CALL MAY BE REVOKED 30. A call may be revoked or postponed at the discretion of the Board. LIABILITY OF JOINT HOLDERS 31. A joint-holder of a share shall be jointly and severally liable to pay all calls in respect thereof. DIRECTORS MAY EXTEND TIME 32. The Board may, from time to time at its discretion, extend the time fixed for payment of any call, and may extend such time as to all or any of the members who from residence at a distance or other cause, the Board may deem fairly entitled to such extension save as a matter of grace and favour. OVERDUE CALLS TO CARRY INTEREST 33. If any member fails to pay any call due from him on the day appointed for payment thereof, or any such extension thereof as aforesaid, he shall be liable to pay interest on the same from the day appointed for the payment thereof to the time of actual payment at such rate as shall from time to time be fixed by the Board but nothing in this Article shall render it obligatory for the Board to demand or recover any interest from any such member and the Board shall be at liberty to waive payment of such interest either wholly or in part. SUMS DEEMED TO BE CALLS 34. Any sum which by the terms of issue of a share become payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium shall for the purposes of these Articles be deemed to be a call duly made and payable on the date on which by the terms of issue of the same becomes payable, and in the case of non-payment all the relevant provisions of theses Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 9 PART PAYMENT ON ACCOUNT OF CALL ETC. NOT TO PRECLUDE FORFEITURE 35. Neither a judgement nor a decree in favour of the company for calls or other moneys due in respect of any shares nor any part payment or satisfaction thereunder nor the receipt by the company of a portion of any money which shall from time to time be due from any member to the company in respect of his shares, either by way of principal or interest, nor any indulgence granted by the Company in respect of payment of any such money, shall preclude the company from thereafter. PROOF ON TRIAL OR SUIT FOR MONEY ON SHARES 36. On the trial or hearing of any action or suit brought by the Company against any member or his legal representative to recover any moneys claimed to be due to the company for any call or other sum in respect of his shares, it shall be sufficient to prove - a) that the name of the Member, in respect of whose shares the money is ought to be recovered, appears entered in the Register of Members as the holder or one of the holders, at or subsequent to the date at which the money sought to be recovered is alleged to have become due, on the said shares; b) that the resolution making the call is duly recorded in the minutes books, and c) that notice of such call was duly given to the Member or his legal representatives issued in pursuance of these Articles; and that it shall not be necessary to prove the appointment of the Directors who made such call, nor that a quorum of Directors was present at the Board at which such call was made, nor that the meeting at which such call was made was duly convened or constituted nor any other matter whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt and the same shall be recovered by the company against the Member or his representative from whom it is ought to be recovered, unless it shall be proved, on behalf of such Member or his representatives against the company that the name of such Member was improperly inserted in the Register or that the money sought to be recovered has actually been paid. PAYMENT OF UNPAID SHARE CAPITAL IN ADVANCE 37. a) The Board may if it thinks fit, subject to the provisions of the Act, agree to and receive from any Member willing to advance the same, either in money or moneys worth the whole or any part of the amount remaining unpaid on the shares held by him beyond the sum actually called up and upon the moneys so paid or satisfied in advance, or so much thereof, as from time to time and at any time thereafter exceeds the amount of the calls then made upon and due in respect of the shares on account of which such advances have been made, the Board may pay or allow interest at such rate as the Member paying such advance and the Board agree upon; provided always that if at any time after the payment of any such money the rate of interest so agreed to be paid to any such Member appears to the Board to be excessive, it shall be lawful for the Board from time to time to repay to such Member so much of such money as shall then exceed the amount of the calls made upon such shares, unless there be an express agreement to the contrary; and after such repayment such member shall be liable to pay, and such shares shall be charged with the payment of all future calls as if no such advance had been; provided also that if at any time after the payment of any money so paid in advance, the company shall go into liquidation, either voluntary or otherwise, before the full amount of the money so advanced shall have become due by the members to the Company, on instalments or calls, or in any other manner, the maker of such advance shall be entitled ( as between himself and the other Members) to receive back from the Company the full 10 balance of such moneys rightly due to him by the Company in priority to any payment to members on account of capital. b) No Member paying any such sum in advance shall be entitled to any voting rights, dividend or right to participate in profits in respect of money so advanced by him until the same would but for such payment become presently payable. FORFEITURE AND SURRENDER OF AND LIEN ON SHARES IF MONEY PAYABLE ON SHARE NOT PAID NOTICE TO BE GIVEN TO MEMBERS 38. If any Member fails to pay any call or instalment of call on or before the day appointed for the payment of the same or any such extension thereof as aforesaid, the Board may, at any time thereafter, during such time as the call or instalment remains unpaid, give notice to him requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. TERMS OF NOTICE 39. The notice shall name a day (not being earlier than the expiry of fourteen days from the date of service of notice) and a place or places on and at which such call or instalment and such interest thereon at such rate as the Directors shall determine from the day on which such call or instalment ought to have been paid and expenses as aforesaid are to be paid. The notice shall also state that, in the event of the non-payment at or before the time and the place appointed, the share in respect of which the call was made or instalment is payable will be liable to be forfeited. IN DEFAULT OF PAYMENT, SHARES MAY BE FORFEITED 40. If the requirements of any such notice as aforesaid are not complied with, every or any share in respect of which such notice has been given, may at any time thereafter, but before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends and bonuses declared in respect of the forfeited shares and not actually paid before the forfeiture. NOTICE OF FORFEITURE 41. When any share shall have been so forfeited, notice of the forfeiture shall be given to the Member in whose name it stood immediately prior to the forfeiture or to any of his legal representatives, or to any of the persons entitled to the shares by transmission and an entry of the forfeiture, with the date thereof, shall forthwith be made in the Register of Members but no forfeiture, shall be in any manner invalidated by any omission or neglect to give such notice or to make such entry as aforesaid. FORFEITED SHARES TO BECOME PROPERTY OF THE COMPANY AND MAY BE SOLD, ETC. 42. Any share so forfeited shall be deemed to be the property of the Company and may be sold, re-alloted or otherwise disposed of, either to the original holder thereof or to any other person, upon such terms and in such manner as the Board shall think fit. MEMBERS STILL LIABLE TO PAY MONEY DUE NOTWITHSTANDING THE FORFEITURE 43. Any member whose shares have been forfeited shall, notwithstanding the forfeiture, be liable to pay, and shall forthwith pay to the Company on demand all calls, amounts, instalments, 11 interest and expenses owing upon or in respect of such shares at the time of the forfeiture, together with interest thereon from the time of the forfeiture until payment, at such rate as the Board may determine and the Board may enforce the payment thereof if it thinks fit. EFFECT OF FORFEITURE 44. The forfeiture of a share shall involve extinction, at the time of the forfeiture, of all interest in and of all claims and demands against the Company, in respect of the share, and all other rights incidental to the share, except only such of those rights as by these Articles are expressly saved. SURRENDER OF SHARES 45. The Directors may subject to the provisions of the Act, accept a surrender of any shares from or by any Member desirous of surrendering them on such terms as they think fit. EVIDENCE OF FORFEITURE 46. A declaration in writing that the declarant is a Director or Secretary of the Company and that a share in the Company has been duly forfeited in accordance with these Articles on the date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. COMPANY'S LIEN ON SHARES 47. The Company shall have a first and paramount lien upon all the shares, not being fully paid-up shares, registered in the name of each Member (whether solely or jointly with another or others), and upon the proceeds of sale thereof, for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such shares and no equitable interest in any share shall be created except upon the footing and condition that Article 21 hereof is to have full effect. Any such lien shall extend to all dividends from time to time declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the Company's lien if any on such shares. The Board of Directors may at any time declare any shares to be exempt, wholly or partially from the provisions of this Article. LIEN ENFORCED BY SALE 48. For the purpose of enforcing such lien, the Directors may sell the shares subject thereto in such manner as they think fit and for that purpose may cause to be issued a duplicate certificate in respect of such shares and may authorise one of their member or some other person to execute a transfer thereof on behalf of and in the name of such member. No such sale shall be made until such time as the moneys in respect of which such lien exists or some part thereof is presently payable or the liability in respect of which such lien exists is liable to be presently fulfilled or discharged and until notice in writing of the intention to sell shall have been served on such Member, or his heirs, executors, administrators, or other representatives or upon the persons (if any) entitled by transmission to the shares or any one or more of such heirs, executors, administrators, representatives or persons, and default shall have been made by him or them in payment, fulfilment or discharge of such debts, liabilities or engagements for fourteen days after such notice, APPLICATION OF SALE PROCEEDS 49. The net proceeds of any such sale after payment of the costs of such sale shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue (if any) 12 paid to such Member, or any of his heirs, executors, administrators, representatives or assigns or any of the persons (if any) entitled by transmission to the shares sold. VALIDITY OF SALE UNDER ARTICLES 50. Upon any sale after forfeiture, or for enforcing a lien in purported exercise of the powers hereinbefore given, the Board may appoint some person to execute an instrument of transfer of the shares sold and cause the purchaser's name to be entered in the Register in respect of the Shares sold and the purchaser shall not be bound to see to the regularity of the proceedings, or to the application of the purchase money and after his name has been entered in the Register in respect of such shares, the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only in and against the Company exclusively. CANCELLATION OF SHARE CERTIFICATE IN RESPECT OF FORFEITED SHARES 51. Upon any sale, re-allotment or other disposal under the provisions of the preceding Articles, the certificate or certificates originally issued in respect of the relative shares shall (unless the same shall on demand by the Company have been previously surrendered to it by the defaulting Member) stand cancelled and become null and void and of no effect, and the Directors shall be entitled to issue a new certificate or certificates in respect of the said shares to the person or persons entitled thereto. POWER TO ANNUL FORFEITURE 52. The Board may at any time before any share so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit. TRANSFER AND TRANSMISSION OF SHARES REGISTER OF TRANSFERS 53. The Company shall keep a Register of Transfers and shall have recorded therein fairly and distinctly particulars of every transfer or transmission of any share held in material form. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,1998. FORM OF TRANSFER 54. Shares in the Company shall be transferred by an instrument in writing in such form as prescribed under Section 108 of the Companies Act, 1956, or under rules made thereunder from time to time. TO BE EXECUTED BY TRANSFEROR AND TRANSFEREE 55. The instrument of transfer duly stamped and executed by the transferor and the transferee shall be delivered to the Company in accordance with the provisions of the Act. The instrument of transfer shall be accompanied by such evidence as the Board may require to prove the title of the transferor and his right to transfer the shares and every registered instrument of transfer shall remain in the custody of the Company until destroyed by an order of the Board. The transferor shall be deemed to be the holder of such shares until the name of the transferee shall have been entered in the Register of Members in respect thereof. Before the registration of a transfer, the certificate or certificates of the shares must be delivered to the Company. 55A. In the case of transfer or transmission of shares or other marketable Securities where the Company has not issued any certificates and where such shares or securities are being held in any electronic and fungible form in a Depository, the provisions of the Depositories Act, 1996 shall apply. RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY 6,1998. 13 DIRECTORS MAY REFUSE TO REGISTER TRANSFERS 56. Subject to the provisions of Section 111 of the Act, the Board, may at its own absolute and uncontrolled discretion, and without assigning any reason, decline to register or acknowledge any transfer of shares whether fully paid or not, (notwithstanding that the proposed transferee be already a Member), but in such cases it shall, within one month from the date on which the instrument of transfer was lodged with the Company, send to the transferee and the transferor notice of refusal to register such transfer. Provided that registration of a transfer shall not be refused on the ground that the transferor being either alone or jointly with any other person or persons indebted to the Company on any account whatsoever except on shares. REFUSAL TO REGISTER TRANSFER 57. In particular and without prejudice to the generality of the above powers, the Board may subject to the provisions of Section 111 of the Companies Act, 1956 decline to register in exceptional circumstances when it is felt that the transferee is not a desirable person from the larger point of view of the interest of the Company as a whole subject to the provisions of the clause (c) of subsection (4) of Section 22A of the Securities Contract (Regulation) Act. SUB-DIVISION/CONSOLIDATION IN MARKETABLE LOTS ONLY 58. Transfer of shares in whatever lot should not be refused, though there would be no objection to the company refusing to split a share certificate into several scrips of any small denominations or to consider a proposal for transfer of shares comprised in a share certificate to several parties, involving such splitting, if on the face of it such splitting/transfer appears to be unreasonable or without a genuine need. The Company should not, therefore, refuse transfer of shares in violation of the Stock Exchange listing requirements on the ground that the number of shares to be transferred is less than any specified number. DEATH OF ONE OR MORE JOINT HOLDERS OF SHARES 59. In case of the death of any one or more of the persons named in the Register of Members as the joint holders of any share, the survivor or survivors shall be the only persons recognised by the Company as having any title to or interest in such share, but nothing herein contained shall be taken to release the estate or a deceased joint-holder for any liability on shares held by him jointly with any other person. TITLE TO SHARES OF DECEASED MEMBER 60. The executors or administrators or holders of a Succession Certificate or the legal representatives of a deceased Member (not being one of two or more joint-holders) shall be the only person recognised by the Company as having any title to the shares registered in the name of such Member, and the Company shall not be bound to recognise such executors or administrators or holders of a Succession Certificate or the legal representatives unless such executors or administrators or legal representatives shall have first obtained Probate or Letter of Administration or Succession Certificate, as the case may be, from a duly constituted court in the Union of India provided that in case where the Board in its absolute discretion think fit, the Board may dispense with production of Probate or Letters of Administration or Succession Certificate, upon such terms as to Indemnity or otherwise as the Board in its absolute discretion may think necessary and under Article 59 register the name of any person who claims to be absolutely entitled to shares standing in the name of a deceased Member, as a Member. 14 NO TRANSFER TO INSOLVENT, ETC. 61. No share shall in any circumstances, be transferred to any insolvent or person of unsound mind. REGISTRATION OF PERSON ENTITLED TO SHARES OTHERWISE THAN BY TRANSFER 62. Subject to the provisions of the Act and Articles 59 end 60 any person becoming entitled to shares in consequences of death, lunacy, bankruptcy or insolvency of any Member, or by any lawful means other than by a transfer in accordance with these Articles, may with the consent of the Board (which it shall not be under any obligation to give) upon producing such evidence that he sustains the character in respect of which he proposes to act under this Article, or of his title, as the Board thinks sufficient, either be registered himself as the holder of the shares or elect to have some persons nominated by him and approved by the Board, registered as such holder; provided nevertheless, that if such person shall elect to have his nominee registered, he shall testify the election by executing in favour of his nominee an instrument of transfer in accordance with the provisions herein contained and until he does so he shall not be freed from any liability in respect of the shares. PERSONS ENTITLED MAY RECEIVE DIVIDENDS WITHOUT BEING REGISTERED AS MEMBERS 63. A person entitled to a share by transmission shall, subject to the right of the Directors to retain such dividends or money as hereinafter provided be entitled to receive, and may give a discharge for any dividends or other moneys payable in respect of the shares. FEE ON TRANSFER OR TRANSMISSION 64. No fee shall be charged for transfer and, transmission of Shares or for registration of any of power of attorney, probate, letter of administration or other similar documents. THE COMPANY NOT LIABLE FOR DISREGARD OF A NOTICE PROHIBITING REGISTRATION OF A TRANSFER 65. The Company shall incur no liability or responsibility whatever in consequence of its registering or giving effect to any transfer of shares made or purporting to be made by any apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of a person or persons having or claiming any equitable right, title or interest to or in the said shares, notwithstanding that the Company may have any notice of such equitable right, title or interest or notice prohibiting registration of such transfer and may have entered such notice or referred thereto, in any book of the company, and the Company shall not be bound or required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or interest, or be under any liability whatsoever for refusing or neglecting so to do, though it may have been entered or referred to in some book of the company, but the company shall nevertheless be at liberty to regard and attend to any such notice, and give effect thereto if the Board shall so think fit. BORROWING POWERS POWER TO BORROW 66. Subject to the provisions of Sections 58A, 292 and 293 of the Act and of these Articles, the Board may, from time to time at its discretion, by a resolution passed at a Meeting of the Board, accept deposits from Members, either in advance of call or otherwise, and generally raise or borrow or secure the payment of any sum or sums of money for the purposes of the company provided however, where the moneys to be borrowed together with the moneys already borrowed (apart from temporary loans obtained from the Company's bankers in the 15 ordinary course of business) exceed the aggregate of the paid up capital of the Company and its free reserves (that is to say, reserves not set apart for any specific purpose) the Board shall not borrow such moneys without the consent of the Company in General Meeting. THE PAYMENT OR REPAYMENT OF MONIES BORROWED 67. The payment or repayment of moneys borrowed as aforesaid may be secured in such manner and upon such terms and conditions in all respects as the Board may think fit, and in particular by a resolution passed at a meeting of the Board (and not by Circular Resolution) by the issue of debentures of the Company, charged upon all or any part of the property of the Company (both present and future) including its uncalled capital for the time being, and debentures, and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued. TERMS OF ISSUE OF DEBENTURES 68. Any debentures, debenture-stock or other securities may be issued at a discount, premium or otherwise and maybe issued on condition that they or any part of them shall be convertible into shares of any denomination, and with any privileges and conditions as to redemption, surrender, drawing, allotment of shares and attending (but not voting at) General Meetings, appointment of Directors and otherwise. Debentures with a right to conversion or allotment of shares shall be issued only with the consent of the Company in General Meeting. REGISTER OF MORTGAGES, ETC. TO BE KEPT 69. The Board shall cause a proper register to be kept in accordance with the provisions of Section 143 of the Act of all mortgages, debentures and charges specifically affecting the property of the Company; and shall cause the requirements of Sections 118, 125, and 127 to 144 (both inclusive) of the Act, in that behalf to be duly complied with (within the time prescribed by the said sections or such extensions thereof as may be permitted by the Company Law Board or the Court or the Registrar as the case may be) so far as they fail to be complied with by the Board. REGISTER AND INDEX OF DEBENTURE HOLDERS 70. The Company shall, if any time it issues debentures, keep a Register and Index of Debenture holders in accordance with Section 152 of the Act. the company shall have the power to keep in any State or Country outside India a Branch Register of Debenture-holders resident in that State or Country SHARE WARRANT POWER TO ISSUE SHARE WARRANTS 71. The Company may issue share warrants subject to, and in accordance with the provisions of sections 114 and 115, and accordingly the Board may in its discretion, with respect to any share which is fully paid-up on application in writing signed by the persons registered as holder of the share, and authenticated, by such evidence (if any) as the Board may, from time to time, require as to the identity of the person signing the application, and on receiving the certificate (if any) of the share, and the amount of the stamp duty on the warrant and such fee as the Board may from time to time require, issue a share warrant. 16 DEPOSIT OF SHARE WARRANT 72. 1) The bearer of a share warrant may at any time deposit the warrant at the office of the Company, and so long as the warrant remains so deposited, the depositor shall have the same right of signing a requisition for calling a meeting of the Company, and of attending, and voting and exercising the other privileges of a Member at any meeting held after the expiry of two clear days from the time of deposit as if his name were inserted in the Register of Members as the holder of the share included in the deposited warrant. 2) Not more then one person shall be recognised as depositor of the share warrant, 3) The Company shall, on two days' written notice, return the deposited share warrant to the depositor. PRIVILEGES AND DISABILITIES OF THE HOLDERS OF SHARE WARRANT 73. 1) Subject as herein otherwise expressly provided, no person shall, as bearer of a share warrant sign a requisition for calling a meeting of the Company, or attend or vote or exercise any other privileges of a Member at a meeting of the Company, or be entitled to receive any notices from the Company. 2) The bearer of a share warrant shall be entitled in all other respects to the same privileges and advantages as if he was named in the Register of Members as the holder of the share included in the warrant, and shall be a Member of the Company. ISSUE OF NEW SHARE WARRANT OR COUPON 74. The Board may, from time to time, make rules as to the terms on which (if it shall think fit) a new share warrant or coupon may be issued by way of renewal in case of defacement, loss or destruction. CONVERSION OF SHARE INTO STOCK AND RECONVERSION SHARES MAY BE CONVERTED INTO STOCK 75. The Company in General Meeting may convert any paid-up shares into stock; and when any shares have been converted into stock, the several holders of such stock may thenceforth transfer their respective interest therein, or any part of such interest, in the said manner and subject to the same Regulations as, and subject to which shares from which the stock arose might have been transferred if no such conversion had taken place, or as near thereto as circumstance will admit. The Company may at any time reconvert any stock into paid-up shares of any denomination. RIGHT OF STOCKHOLDERS 76. The holders of stock shall, according to the amount of stock held by them, have the same right, privileges and advantages as regards dividends, voting at meetings of the Company, and other matters, as if they held the shares from which the stock arose, but no such privilege advantage (except participation in the dividends and profits of the Company and in the assets on winding-up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage. 17 MEMBERS' MEETINGS ANNUAL GENERAL MEETING 77. Annual General Meeting of the company may be convened subject to Section 166 and Section 210 of the Act by giving not less than 21 days notice in writing. Subject to the provisions of Section 171 (2) a meeting may be convened after giving a shorter notice. EXTRA ORDINARY GENERAL MEETING 78. The Board may, whenever it thinks fit, call an Extraordinary General Meeting and it shall do so upon a requisition in writing by any Member or Members holding in the aggregate not less than one tenth of such of the paid-up capital; as at that date carried the right of voting in regard to the matter in respect of which the requisition has been made. REQUISITION OF MEMBERS TO STATE OBJECTS OF MEETING 79. Any valid requisition so made by the Members must state the object or objects of the meeting proposed to be called, and must be signed by the requisitionists and be deposited at the office; provided that such requisition may consist of several documents in like form each signed by one or more requisitionists. ON RECEIPT OF REQUISITION, DIRECTORS TO CALL MEETING AND IN DEFAULT REQUISITIONISTS MAY DO SO 80. Upon the receipt of any such requisition, the Board shall forthwith call an Extraordinary General Meeting; and if it does not proceed within twenty-one days from the date of the requisition being deposited at the Office to cause a meeting to be called on a day not later than forty-five days from the date of deposit of the requisition, the requisitionists, or such of their number as represent either a majority in value of the paid-up, share capital held by all of them or not less than one-tenth of such of the paid-up share capital of the Company as is referred to in Section 169 (4) of the Act, whichever is less, may themselves call the meeting, but in either case any meeting so called shall be held within three months from the date of deposit of the requisition as aforesaid. MEETING CALLED BY REQUISITIONISTS 81. Any meeting called under the foregoing Articles by the requisitionists shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board. QUORUM AT GENERAL MEETING 82. Five members present in person shall be a quorum for a General Meeting. BODY CORPORATE PERSONALLY PRESENT 83. A body corporate being a member shall be deemed to be personally present if it is represented in accordance with Section 187 of the Act. IF QUORUM NOT PRESENT MEETING TO BE DISSOLVED OR ADJOURNED 84. If, at the expiration of half an hour from the time appointed for holding a meeting of the Company, a quorum shall not be present, the meeting it convened by or upon the requisition of Members, shall stand dissolved, but in any other case the meeting shall stand adjourned to 18 the same day in the next week or if that day is a public holiday until the next succeeding day which is not a public holiday at the same time and place or to such other day at such other time and place within the city or town in which the Office of the Company is situate as the Board may determine, and if at such adjourned meeting a quorum is not present at the expiration of half an hour from the time appointed for holding the meeting, the Members present shall be a quorum, and may transact, the business for which the meeting was called. 85. The Chairman (if any) of the Directors shall be entitled to take the chair at every General Meeting, whether Annual or Extraordinary. If there be no such Chairman of the Directors, or if at any meeting he shall not be present within fifteen minutes of the time appointed for holding such meeting then the members presents shall elect another Director as Chairman and if no Director be present or if all Directors present decline to take the Chair, then the members present shall elect one of their members to be the Chairman. BUSINESS CONFINED TO ELECTION OF CHAIRMAN WHILST CHAIR VACANT 86. No business shall be discussed at any General Meeting except the election of a Chairman, whilst the chair is vacant. CHAIRMAN WITH CONSENT MAY ADJOURN MEETING 87. The Chairman with the consent of the meeting may adjourn any meeting from time to time and from place to place within the city or town in which the office of the Company is situated for the time being but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. QUESTION AT GENERAL MEETING HOW DECIDED 88. At any General Meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by a member or members present in person or by proxy and holding shares in the Company which confer a power to vote on the resolution not being less than 1/10th of the total voting power in respect of the Resolution or on which an aggregate sum of not less than Rs. 50,000/- has been paid up. The demand for a poll may be withdrawn at any time by the person or persons who made the demand. CHAIRMAN'S CASTING VOTE 89. In the case of any equality of votes, the Chairman shall both on a show of hands and at a poll (if any) have a casting vote in addition to the votes to which he may be entitled as a Member. DEMAND FOR POLL NOT TO PREVENT TRANSACTION OF OTHER BUSINESS 90. The demand for a poll except on the question of the election of the Chairman and of an adjournment shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll has been demanded. MEMBER IN ARREARS NOT TO VOTE 91. No member shall be entitled to vote either personally or by proxy at any General Meeting or meeting of a class of shareholders either upon a show of hands or upon a poll in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the Company has, and has exercised, any right of lien. 19 NUMBER OF VOTES TO WHICH MEMBER ENTITLED 92. Subject to the provisions of these Articles and without prejudice to any special privileges or restrictions as to voting for the time being attached to any class of shares for the time being forming part of the capital of the Company, every member, not disqualified by the last preceding Article shall be entitled to be present and to speak and vote at such meeting, and on a show of hands every member present in person shall have one vote and upon a poll the voting rights of every member whether present in person or by proxy, shall be in proportion to his share of the paid-up equity capital of the Company. CASTING OF VOTES BY A MEMBER ENTITLED TO MORE THAN ONE VOTE 93. On as poll taken at a meeting of the Company, a member entitled to more than one vote, or his proxy, or other person entitled to vote for him as the case may be, need not, if he votes, use all his votes or cast in the same way all the votes he uses. VOTES OF MEMBERS OF UNSOUND MIND AND MINORS 94. A member of unsound mind or in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hand or on a poll, by his committee or other legal guardian, and any such committee or guardian may, on a poll vote by proxy. If any member be a minor, the votes in respect of his share or shares shall be by his guardian or any of his guardians, if more than one, to be elected in case of dispute by the Chairman of the meeting. VOTES OF JOINT MEMBERS 95. If there be joint registered holders of any shares, any one of such persons may vote at any meeting or may appoint another person (whether a Member or not) as his proxy in respect of such shares as if he were solely entitled therein but the proxy so appointed shall not have any right to speak at the meeting and, if more than one of such joint-holders be present at any meeting, that one of the said person so present whose name stands higher on the Register shall alone be entitled to speak and to vote in respect of such shares, but the other or others of the joint-holders shall be entitled to be present at the meeting. Several executors or administrators of a deceased member in whose names share stand shall for the purpose of these Articles be deemed joint holders thereof. VOTING IN PERSON OR BY PROXY 96. Subject to the provisions of these Articles votes may be given either personally or by proxy. A body corporate being a member may vote either by a proxy or by a representative duly authorised in accordance with Section 187 of the Act and such representative shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as the body could exercise if it ware an individual member. VOTES IN RESPECT OF SHARES OF DECEASED OR INSOLVENT MEMBERS 97. Any person entitled under Article 62 to transfer any shares may vote at any General Meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that 48 hours, at least, before the time of holding the meeting or adjourned meeting as the case may be at which he proposed to vote he shall satisfy the Directors of his right to transfer such shares and give such indemnity (if any) as the Directors may require or the Directors shall have previously admitted his right to vote at such meeting in respect thereof. 20 APPOINTMENT OF PROXY 98. Every proxy (whether a member or not) shall be appointed in writing under the hand of the appointer or his attorney, or if such appointer is a corporation under the common seal of such corporation, or be signed by an officer or an Attorney duly authorised by it and any committee or guardian may appoint such proxy. The proxy so appointed shall not have any right to speak at the meeting. PROXY EITHER FOR A SPECIFIED MEETING OR FOR SPECIFIED PERIOD 99. An instrument of proxy may appoint a proxy either for purpose of a particular meeting specified in the instrument and any adjournment thereof or it may appoint for the purposes of every meeting of the Company, or of every meeting to be held before the data specified in the instrument and any adjournment of any such meeting. NO PROXY EXCEPT FOR A BODY CORPORATE TO VOTE ON A SHOW OF HANDS 100. A member present by proxy shall be entitled to vote only on a poll but not on a show of hands, unless such member is a body corporate present by a representative in which case such proxy shall have a vote on the show of hand as if he were a member. DEPOSIT OF INSTRUMENT OF PROXY 101. The instrument appointing a proxy and the Power of Attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority shall be deposited at the office not later than forty eight hours before the time for holding the meeting at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of twelve months from the date of its execution. FORM OF PROXY 102. Every instrument of proxy whether for a specified meeting otherwise shall, as nearly as circumstances will admit, be in any of the forms set out in Schedule 1X of the Act. VALIDITY OF VOTES GIVEN BY PROXY NOTWITHSTANDING DEATH OF MEMBER 103. A vote given in accordance within the norms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the Principal, or revocation of the proxy or of any power of attorney under which such proxy was signed, or the transfer of the share in respect of which the vote is given, provided that no intimation in writing of the death or insanity, revocation or transfer shall have been received at the office before the meeting. TIME FOR OBJECTION TO VOTE 104. No objection shall be made to the validity of any vote; except at any meeting or poll at which such vote shall be tendered and every vote, whether given personally or by proxy, not disallowed at such meeting or poll shall be deemed valid for all purposes of such meeting or poll whatsoever. Article 107 deleted WE7 June 14 2003. [STAMP: IFOSYS TECHNOLOGIES LIMITED * BANGALORE] 21 CHAIRMAN OF ANY MEETING TO BE THE JUDGE OF VALIDITY OF VOTE 105. The Chairman of any meeting shall be the sole judge of the validity of every vote tendered at such meeting. The Chairman present at the taking of a poll shall be the sole judge of the validity of every vote tendered at such poll. DIRECTORS NUMBER OF DIRECTORS 108. Until otherwise determined by the company in a General Meeting and subject to the provisions of Section 252 of the Act, the number of directors (excluding Debenture Directors and Directors appointed under Article 111 hereof and Alternate Directors) shall not be less than three nor more than eighteen. RESOLUTION PASSED AT THE ANNUAL GENERAL MEETING HELD ON MAY 27, 2000. NON-RETIRING DIRECTORS 107. If and so long as Mr. N.R. Narayana Murthy and/or his relatives shall hold not less than 5% of the issued equity share capital of the Company, Mr. N.R. Narayana Murthy shall be the Managing Director of the Company and shall not be liable to retire by rotation. 108. The Board may appoint, from time to time, one or more of their members to be the Managing Director or Joint Managing Director or Wholetime Director or Deputy Managing Director or Manager of the Company on such terms and on such remuneration (whether by way of salary or commission, or partly in one and partly in another) as they may think fit and the directors so appointed shall not while holding that office, be subject to retirement by rotation or taken into account in determining the rotation of retirement of directors, but their appointment shall be subject to determination ipso facto if they cease from any cause to be a director or if the company in General Meeting resolve that their tenure of the office Managing Director or Joint Managing Director or Wholetime Director or Deputy Managing Director or Manager be determined. 109. Subject to the provisions of the Act, the Directors, may from time to time entrust and confer upon e Managing Director for the time being such of the power exercisable upon such terms and conditions and with such restrictions they may think fit either collaterally with or to the exclusion of and in substitution for all or any of their own powers and from time to time revoke, withdraw, alter or vary all or any of such powers. APPOINTMENT OF SPECIAL DIRECTORS 110. On behalf of the Company, whenever Directors enter into a contract with any Government, Central, State or Local, any Bank or Financial institution or any person or persons (hereinafter referred to as "the appointer") for borrowing any money or for providing any guarantee or security or for technical collaboration or assistance or for underwriting or entering into any other arrangement whatsoever the Directors shall have, subject to the provisions of Section 255 of the Act, the power to agree that such appointer shall have right to appoint or nominate by notice in writing addressed to the Company one or more Directors on the Board for such period and upon such conditions as may be mentioned in the agreement and that such Director or Directors may not be liable to retire by rotation nor be required to hold any qualification shares. The Directors may also agree that any such Director of Directors may be removed from time to time by the appointer entitled to appoint or nominate them and the appointer may appoint another or others in his or their place and also fill in any vacancy which may occur as a result of any such Director or Directors ceasing to hold that office for any reason whatsoever. The Directors appointed or nominated under this Article shall be entitled to exercise and enjoy all or any of the rights and privileges exercised and enjoyed by the 21 22 Directors of the Company including payment of remuneration and travelling expenses to such Director of Directors as may be agreed by the Company with the appointer. DEBENTURE DIRECTORS 111. If it is provided by any Trust Deed, security or otherwise, in connection with any issue of debentures of the Company that any person or persons shall have power to nominate a Director or Directors of the Company, then in the case of any and every such issue of debentures, the person or persons having such power may exercise such power from time to time and appoint a Director or Directors accordingly. Any Director so appointed is herein referred to as "Debenture Director". A Debenture Director may be removed from office at any time by the person or persons in whom for the time being is vested the power under which he was appointed and another director may be appointed in his place. A debenture director shall not be bound to hold any qualification shares. A debenture director shall not if so agreed by the company be liable to retire by rotation; but shall automatically cease to hold office as a director if and when the debentures are fully discharged. NOMINEE DIRECTORS 112. Nominee Directors: So long as any moneys remain owing by the Company to The Industrial Development Bank of India, Industrial Finance Corporation of India, The Industrial Credit and Investment Corporation of India Limited. The Industrial Reconstruction Corporation of India Limited, Life Insurance Corporation of India, General Insurance Corporation of India, National Insurance Company Limited, The Oriental Fire & General Insurance Company Limited, The New India Assurance Company Limited, United India Insurance Company Ltd., Karnataka State Industrial Investment and Development Corporation Ltd., or any State Financial Corporation or any Financial Institution owned or controlled by the Central Government or any State Government or the Reserve Bank of India or by two or more of them by Central Government themselves (each of the above and Unit Trust of India are hereinafter referred to as the Corporation) out of any loans/debentures, assistance granted by them to the Company or so long as the Corporation holds or continues to hold Debentures/Shares in the Company as a result of any guarantee furnished by the Corporation on behalf of the Company and remaining outstanding the Corporation shall have a right to appoint from time to time, any person as Director, Wholetime or non-Wholetime (which Director or Directors, is/are hereinafter referred to as `Nominee Director/s') on the Board of the Company and to remove from such office any person or persons so appointed and to appoint any person in his or their places. The Board shall have no power to remove from the office of the Nominee Directors. At the option of the Corporation such Nominee Director/s shall not be liable to retirement by rotation. Subject as aforesaid, Nominee Director/s shall be entitled to the same rights and privileges and be subject to the same obligations as any other Directors of the Company. PERIOD OF HOLDING OF OFFICE BY NOMINEE DIRECTORS 113. The Nominee Director/s so appointed shall hold the said office only so long as any moneys remain owing by the Company to the Corporation or so long as the Corporation holds or continues to hold Debentures/shares in the Company as a result of underwriting or by direct subscription or private placement or the liability of the Company arising out of the guarantee is outstanding and the Nominee Director/s so appointed in exercise of the said powers shall ipso facto vacate such office immediately the moneys owing by the Company to the Corporation are paid off or on the Corporation ceasing to hold Debentures/shares in the Company or on the satisfaction of liability of the Company arising out of any guarantee furnished by the Corporation. 23 CO-OPTION OF DIRECTORS 114. Directors shall have power at any time and from time to time to co-opt, any other person as a director either to fill a casual vacancy or as an additional director, so that the total number of directors shall not at any time exceed the maximum fixed. Any director appointed to fill a casual vacancy shall hold office only up to the date up to which the director in whose place he has been place would have held the office if it had not been vacated. Any additional director shall hold office only up to the date of next Annual General Meeting of the Company but shall be eligible for re-election at such meeting. ALTERNATE DIRECTORS 115. The Board may appoint an alternate director to act for a director (hereinafter called "original director" during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held. An alternate director appointed under this Article shall not hold office as such for a period longer than that permissible to the original director and shall vacate office if and when the original director returns to the State aforesaid. If the term of office of original director is determined before he so returns to the State aforesaid any provision for automatic re-appointment of retiring directors in default of another appointment shall apply to the original and not to the alternate director. QUALIFICATION SHARES OF DIRECTORS 116. A Director shall not be required to hold any qualification shares. REMUNERATION OF DIRECTORS 117. The remuneration of Directors and Executives of the Company, including the fees payable to the Directors of the Company in attending the Meeting of the Board or the Committees of the Board, shall be determined by the Board of Directors from time to time, provided that the sitting fees payable to the Directors as aforesaid shall be within the maximum limits of such fees that may be prescribed under the proviso to Section 310 of the Companies Act, 1956. DIRECTORS' TRAVELLING EXPENSES 118. In addition to the remuneration payable to them, the Directors shall be entitled to be paid all travelling, hotel and other incidental expenses properly incurred by them in attending and returning from meetings of the Board of Directors or any Committee thereof or General Meetings or in connection with the business of the Company. The rules in this regard may be framed by the board of Directors from time to time. SPECIAL REMUNERATION FOR PERFORMING EXTRA SERVICES 119. If any Director be called upon to perform extra services or special exertions or efforts (which expression shall include work done by a Director as a Member of any committee formed by the Director(s) the Board may arrange with such Directors for such special remuneration for such extra services or special exertions or efforts either by a fixed sum or otherwise as may be determined by the Board and such remuneration may be either in addition to or in substitution for his remuneration, subject to provisions of the Act and confirmation by the Company in General Meeting. DIRECTORS MAY ACT NOTWITHSTANDING ANY VACANCY 120. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board 24 of Directors, the continuing Director or Directors may act for the purpose of increasing the number of Directors to that fixed for a quorum or for summoning a General Meeting but for no other purpose. TERMS OF OFFICE OF DIRECTORS 121. Not less than two-thirds of the total number of Directors shall be persons whose period of office is liable to determination by retirement of Directors by rotation. RETIREMENT OF DIRECTORS BY ROTATION 122. At every annual general meeting of the Company one-third of such of the Directors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then the number nearest to one third, shall retire from office. ASCERTAINMENT OF DIRECTORS TO RETIRE 123. The Directors to retire by rotation under the foregoing article shall be those who have been longest in office since their last appointment, but as between persons who become Directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot. A retiring Director shall be eligible for re-election. COMPANY TO APPOINT SUCCESSORS 124. The Company, at the annual general meeting at which a Director retires in manner aforesaid, may, fill up the vacated office by electing the retiring Director or some other person thereto. PROVISIONS IN DEFAULT OF APPOINTMENT 125. a) If the place of the retiring Director is not so filled up and the meeting has not expressly resolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday at the same time and place. b) If at the adjourned meeting also, the place of the retiring Director is not filled up and that meeting also has not expressly resolved not to fill the vacancy, the retiring Director shall be deemed to have been re-appointed at the adjourned meeting, unless:- i) at the meeting or at the previous meeting a resolution for the re-appointment of such Director has been put to the meeting and lost; ii) the retiring Direction has, by his notice in writing addressed to the Company or its Board of Directors expressed his unwillingness to be so re-appointed; iii) he is not qualified or is disqualified for appointment; iv) a resolution, whether special or ordinary is required for the appointment or re-appointment by virtue of any provisions of the Act: or v) the provision to sub-section (2) of Section 263 is applicable to the case. 25 COMPANY MAY INCREASE OR REDUCE NUMBER OF DIRECTORS 126. Subject to Sections 252, 256 and 259 of the Act, the Company in general meeting may from time to time, increase or reduce the number of Directors, within the limits fixed in that behalf by these Articles. REMOVAL DIRECTORS 127. The Company may (subject to the provisions of Section 284 of the Act) remove any Director before the expiration of his period of office and appoint another person in his stead. PROCEEDINGS OF THE BOARD OF DIRECTORS MEETING OF DIRECTORS 128. The Directors may meet together as a Board for the dispatch of business from time to time and shall so meet at least once in every three calendar months and at least four such meetings shall be held in every year. The Directors may adjourn and otherwise regulate their meetings as they may think fit. NOTICE OF THE BOARD MEETINGS 129. Notice of every meeting of the Board shall be given in writing to every Director for the time being in India and at his address in India to every other Director. QUORUM 130. Subject to Section 287 of the Act, the quorum for a meeting of the Board shall be one-third of its total strength (excluding Directors, if any, whose places may be vacant at the time, and any fraction contained in that one-third being rounded off as one), or two Directors whichever is higher. Provided that where at any time the number of interested Directors exceeds or is equal to two-thirds of the total strength, the number of the remaining Directors, that is to say, the number of the Directors who are not interested present at the meeting being not less than two, shall be the quorum during such meeting. ADJOURNMENT OF MEETINGS FOR WANT TO QUORUM 131. If a meeting of the Board could not be held for want of quorum, then the meeting shall automatically stand adjourned to such other time as may be fixed by the Chairman. SECRETARY TO CALL BOARD MEETING 132. The Secretary shall, and when directed by any Director to do so, convene a meeting of the Board by giving a notice in writing to every other Director. CHAIRMAN OF DIRECTORS 133. The Directors shall choose one of their number to be the Chairman of the Directors who shall hold such office until the Directors otherwise determine. If at any meeting the Chairman of the Directors shall not be present at the time appointed for holding the same, the Directors present shall choose some one of their member to be the Chairman of such meeting. 26 QUESTIONS HOW DECIDED 134. Question arising at any meeting of the Board shall be decided by a majority of votes and in the case of an equality of votes the Chairman shall have second or a casting vote. POWER OF BOARD MEETING 135. A meeting of the Board for the time being at which a quorum is present, shall be competent to exercise all or any of the authorities, power and discretions which by or under the Act or the Articles of the Company are for the being vested in or exercisable by the Board generally. APPOINTMENT OF SUB-COMMITTEE 136. The Board may appoint from time to time a sub-committee consisting of one or more Director(s) and or one or more senior executive(s) of the Company to deal with matters relating to transfer / transmission of shares / debentures and such other matters incidental thereto with such powers and duties, as the Board deems fit. DIRECTORS MAY APPOINT COMMITTEES 137. Subject to the restrictions contained in Section 292 of the Act, the Board may delegate any of its powers to committees of the Board consisting of such members of its body as it thinks fit, and it may from time to time revoke and discharge any such committee of the Board either wholly or in part, and either as to persons or purposes but every committee of the Board so formed shall in the exercise of the powers so delegated, confirm to any Regulations that may from time to time be imposed on it by the Board. All acts done by any such committee of the Board in conformity with such Regulations and in fulfillment of the purpose of their appointment but not otherwise shall have the like force and effect as if done by the Board. MEETING OF COMMITTEE HOW TO BE GOVERNED 138. The meeting and proceedings of any such committee of the Board consisting of two or more members shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Directors so far as the same are applicable thereto and are not superseded by any Regulations made by the Directors under the last preceding Article. The provisions of Article 134 shall mutatis mutandis apply to the meeting of such committee. CIRCULAR RESOLUTION 139. No resolution shall be deemed to have been duly passed by the Board or by a Committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the Directors or to all the members of the committee then in India (not being less in number than the quorum fixed for a meeting of the Board or Committee, as the case may be), and to all other Directors or members of the Committee, at their usual address in India and has been approved by such of the Directors of members of the Committee as are then in India, or by a majority of such of them as are entitled to vote on the resolution. VALIDITY OF DIRECTORS ACTS 140. All acts done by any meeting of the Board or by a Committee or by a sub- committee of the Board, or by any person acting as a Director shall notwithstanding that it shall afterwards be discovered that there was some defect in the appointment of such Directors, or persons acting as aforesaid, or that they or any of them were disqualified or had vacated office or that 27 the appointment of any of them were disqualified or had vacated office or that the appointment of any of them had been terminated by virtue of any provisions contained in the Act or in these Articles, be as valid as if every such persons had been duly appointed and was qualified to be a Director and had not vacated his office or his appointment had not been terminated. Provided that nothing in this Article shall be deemed to give validity to acts done by a Director after his appointment has been shown to the Company to be invalid or to have terminated. POWERS OF DIRECTORS 141. The business of the Company shall be managed by the Board of Directors, who may exercise all such powers of the Company and do all such acts and things as are not, by the Act, or any other Act or by the Memorandum or by the Articles of the Company required to be exercised by the Company in General Meeting subject nevertheless to the Regulations of these Articles to the provisions of the Act, or any other Act and to such Regulations being not inconsistent with the aforesaid Regulations or provisions as may be prescribed by the Company in General Meeting but no Regulation made by the Company in General Meeting shall invalidate any prior act of the Board which would have been valid if that Regulation had not been made. Provided that the Board of Directors shall not except with the consent of the Company in General Meeting. a. sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the Company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking; b. remit or give time for the repayment of, any debt by a Director; c. invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the compulsory acquisition of any such undertaking as is referred to in Clause (a) or of any premises or properties used for any such undertaking and without which it cannot be carried on or can be carried on only with difficulty or only after a considerable time; d. borrows moneys, where the moneys to be borrowed together with the moneys already borrowed by the company (apart from temporary loans obtained from the company's Bankers in the ordinary course of business) will exceed the aggregate of the paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purposes. Provided further that the powers specified in Section 292 of the Act shall be exercised only at meetings of the Board unless the same be delegated to the extent therein stated; or e. contribute to Charitable and other funds not directly relating to the business of the Company or the welfare of its employees any amounts, the aggregate of which will in any financial year exceed Rupees Fifty Thousand only or five percent of its average net profit as determined in accordance with the provisions of Sections 349 and 350 of the Act during the three financial years immediately preceding, whichever is greater. CERTAIN POWERS TO BE EXERCISED BY THE BOARD ONLY AT MEETINGS 142. The Board of Directors of the Company shall exercise the following powers on behalf of the Company and it shall do so only by means of resolutions passed at meetings of the Board:- a. The power to make calls on share holders in respect of money unpaid on their shares; b. The power to issue debentures; 28 c. The power to borrow money otherwise than on debentures d. The power to invest the funds of the Company; e. The power to make loans; Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of Directors, the Manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e) of this Article to the extent specified in sub-sections (2), (3) and (4) respectively of Section 292 of the Act, on such condition as the Board may prescribe in respect of dealings between the company and its bankers, the exercise by the company of the powers specified in Clause (c) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day to day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of. CERTAIN POWERS OF THE BOARD 143. Without prejudice to the general powers conferred by the last preceding Article and so as not in any way to limit or restrict these powers, and without prejudice to the other powers conferred by these Articles, but subject to the restrictions contained in the last preceding Article, it is hereby declared that the Directors shall have the following powers, that is to say power: 1) To pay the costs, charges and expenses preliminary and incidental to the promotion, formation, establishment and registration of the company. PAYMENT OUT OF CAPITAL 2) To pay and charge to the capital account of the company any commission or interest lawfully payable thereout under the provisions of Sections 76 and 208 of the Act. TO ACQUIRE PROPERTY 3) Subject to Sections 292 and 297 of the Act to purchase or otherwise acquire for the Company any property, rights, privileges which the Company is authorised to acquire, at or for such price or consideration and generally on such terms and conditions as they think fit, and in any such purchase or other acquisition to accept such title as the Directors may believe or may be advised to be reasonably satisfactory. TO PAY FOR PROPERTY, ETC. 4) At their discretion and subject to the provision of the Act, to pay for any property, rights, or privileges acquired or services rendered in the Company either wholly or partially, in cash or in shares, bonds, debentures, mortgages, or other securities of the such amount credited as paid up thereon as may be agreed upon and any such bonds; debentures, mortgages or other securities may be either, specifically charged upon all or any part of the property to the Company and its uncalled capital or not so charged. TO SECURE CONTRACTS 5) To secure the fulfilment of any contracts or engagements entered into by the Company by mortgage or charge of all or any of the property of the Company and its uncalled capital for the time being or in such manner as they may think fit. 29 TO ACCEPT SURRENDER OF SHARES 6) To accept from any member, as far as may be permissible by law, a surrender of his shares or any part thereof, on such terms and conditions as shall be agreed. TO APPOINT TRUSTEES 7) To appoint any person to accept and to hold in trust for the Company any property belonging to the Company, or in which it is interested, or for any other purposes; and to execute and do all such deeds and things as may be required in relation to any such trust, and to provide for the remuneration of such trustee or trustees. TO BRING AND DEFEND ACTIONS 8) To institute, conduct, defend, compound, or abandon any legal proceedings by or against the Company or its officers or otherwise payment or satisfaction of any debts due, and of any claims or demands by or against the Company, and to refer any differences to arbitration, and observe and perform any awards made thereon. TO ACT IN INSOLVENCY MATTERS 9) To act on behalf of the Company in all matters relating to bankrupts and insolvents. TO GIVE RECEIPTS 10) To make and give receipts, releases and other discharges for moneys payable to the Company, and for the claims and demands of the Company. TO INVEST MONEYS 11) Subject to the provisions of Sections 292, 293 (1)(c), 295, 370 and 372 of the Act, to invest, deposit and deal with any moneys of the Company not immediately required for the purpose thereof, upon such security (not being shares of this Company), or without security and in such manner as they may think fit, and from time to time to vary or realise such investments. Save as provided in Section 49 of the Act, all investments shall be made and held in the Company's own name. TO PROVIDE FOR PERSONAL LIABILITIES 12) To execute in the name and on behalf of the Company in favour of any Director or other person who may incur or be about to incur any personal liability whether as principal or surety; for the benefit of the Company such mortgages of the Company's property (present and future) as they think fit; and any such mortgage may contain a power of sale, and such other powers, provisions, covenants and agreements as shall be agreed upon. TO AUTHORISE ACCEPTANCES 13) To determine from time to time who shall be entitled to sign, on the Company's behalf, bills, notes, receipts, acceptances, endorsements, cheques, dividend warrants, releases, contracts and documents and to give necessary authority for such purpose. TO DISTRIBUTE BONUS 14) To distribute by way of bonus amongst the staff of the Company a share in the profits of the Company, and to give to any officer or other person employed by the Company 30 a commission on the profits of any particular business or transaction and to charge such bonus or commission as part of the working expenses of the Company. TO PROVIDE FOR WELFARE OF EMPLOYEES 15) To provide for the welfare of Directors or Ex-Directors or employees or ex-employees of the Company and their wives, widows and families or the dependants or connections of such persons by building or contributing to the building of houses, dwellings or chawls or by grants of moneys, pensions, gratuities, allowances, bonus or other payments; or by creating and from time to time subscribing or contributing to provident and other associations, institutions or funds or trusts and by providing or subscribing or contributing towards places of instruction and recreation, hospitals and dispensaries, medical and other attendance and other assistance as the Board shall think fit, and subject to the provisions of Section 293 (1)(e) of the Act. To subscribe or contribute or otherwise to assist or to guarantee money to any charitable, benevolent, religious, scientific, national or other institutions or objects which shall have any moral or other claim to support or aid by the Company either by reason of locality of operation, or of public and general utility or otherwise. TO CREATE RESERVE FUND 16) Before recommending any dividend to set aside, out of the profits of the Company such sums as they may think proper for depreciation or to a Depreciation Fund or to an Insurance Fund or as a Reserve Fund or Sinking Fund or any special fund to meet contingencies or to repay debentures or debenture-stock, or for special dividends or for equalising dividends or for repairing, improving, extending and maintaining any of the property of the Company and for such other purposes (including the purposes referred to in the preceding clause), as the Board may in their absolute discretion think conducive to the interest of the Company, and subject to Section 292 of the Act, to invest the several sums so set aside or so much thereof as required to be invested, upon such investments (other than shares of the Company) as they think fit, and from time to time to deal with and vary such investments and dispose of and apply and expend all or any part thereof for the benefit of the Company, in such manner and for such purposes as the Board in their absolute discretion, think, conducive to the interest of the company notwithstanding that the matters to which the Board apply or upon which they expend the same, or any part thereof, may be matters to or upon which the capital moneys of the company might rightly be applied or expended, and to divide the reserve fund into such special funds as the Board may think fit with full power to transfer the whole or any portion of the Reserve Fund into such special funds as the Board may think fit, with full power to transfer the whole or any portion of a Reserve Fund or division of a Reserve Fund and with full power to employ the assets constituting all or any of the above funds, including the Depreciation Fund, in the business of the company or in the purchase or repayment of debentures or debenture-stock, and without being bound to keep the same separate from the other assets and without being bound to pay interest on the same with power however to the Board at their discretion to pay or allow to the credit of such funds interest at such rate as the Board may think proper. TO APPOINT MANAGERS ETC. 17) To appoint, and at their discretion remove or suspend such general managers, secretaries, assistants, supervisors, clerks, agents and servants for permanent, temporary or special services as they may from time to time think fit, and to determine their powers and duties and fix their salaries, or emoluments or remuneration, and to require security in such instances and to such amount as they may think fit. And also from time to time to provide for the management and transaction of the affairs of the company in any specified locality in India or elsewhere in such manner as they think fit. 31 TO COMPLY WITH LOCAL LAWS 18) To comply with requirements of any local law which in their opinion it shall in the interest of the Company be necessary or expedient to comply with. TO APPOINT LOCAL BOARD 19) From time to time and at any time to establish any Local Board for managing any of the affairs of the Company in any specified locality in India or elsewhere and to appoint any persons to be Members of such Local Boards, and to fix their remuneration. TO DELEGATE POWERS 20) Subject to Section 292 of the Act, from time to time and at any time to delegate to any persons so appointed any of the powers; authorities and discretions for the time being vested in the Board, other than their power to make call or to make loans or borrow moneys and to authorise the members for the time being of any such Local Board, or any of them, to fill up any vacancies therein and to act notwithstanding vacancies, and any such appointment or delegation may be made on such terms, and subject to such conditions as the Board may think fit, and the Board may at any time remove any persons so appointed and may annul any such delegation. TO AUTHORISE BY POWER OF ATTORNEY 21) At any time and from time to time by Power of Attorney under the Seal of the Company, to appoint any person or persons to be the Attorney or Attorneys of the Company, for such purposes and with such powers, authorities, and discretions (not exceeding those vested in or exercisable by the Board under these presents and excluding the power to make calls and excluding also except in the limits authorised by the Board, the power to make loans and borrow moneys) and for such period and subject to such conditions as the Board may from time to time think fit, and any such appointment may (if the Board thinks fit) be made in favour of the members of any local board, established as aforesaid or in favour of any company or the shareholders, directors, nominees or managers of any company or firm or otherwise in favour of any fluctuating body of persons whether nominated directly, or indirectly by the Board and any such Power of Attorney may contain such powers for the protection or convenience of persons dealing with such Attorneys as the Board may think fit, and may contain Powers enabling any such delegates or Attorneys as aforesaid to sub-delegate all or any of the Powers, authorities and discretions for the time-being vested in them. TO NEGOTIATE 22) Subject to Section 294 and 297 of the Act for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company to enter into all such negotiations and contracts and rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they may consider expedient. TO MAKE AND VARY REGULATIONS 23) From time to time make, vary or repeal bye-laws for the regulation of the business of the Company, its officers and servants. 32 AMENDMENTS TO ACCOUNTS 24) The director shall, if they consider it to be necessary and in the interest of the company, be entitled to amend the Audited Accounts of the company of any financial year which have been laid before the Company in General Meeting. The amendments to the Accounts effected by the directors in pursuance of this Article shall be placed before the members in General Meeting for their consideration and approval. TO FORMULATE SCHEMES, ETC. 25) The directors may formulate, create, institute or setup such schemes, trusts, plans or proposals as they may deem fit for the purpose of providing incentive to the officers, employees and workers of the company, including without limiting the generality of the foregoing, formulation of schemes for the subscription by the officers, employees and workers to shares in, or debentures of, the company. SIGNING OF CHEQUES 144. All cheques, promissory notes, drafts, bills of exchange, and other negotiable instruments, and all receipts for moneys paid by the company, shall be signed, drawn, accepted or otherwise executed as the case may be, in such manner as the directors shall from time to time by resolution determine. FOREIGN REGISTER 145. The company may exercise the powers conferred upon the company by Sections 157 and 158 of the Act with regard to the keeping of branch registers of members or debenture holders residing in any State or Country outside India, and the directors may (subject to the provisions of those Sections) make and vary such Regulations as they may think fit respecting the keeping of any such register. DECLARATION OF SECRECY 146. Every director including Managing, Wholetime, Debenture or Special Director, Manager, Secretary, Treasurer, Trustees for the time being of the company, member or Debenture holder, member of a committee, officer, servant, agent, accountant or any other person employed in or about the company business shall if so required by the Board of Directors before entering upon his duties, sign a declaration pledging himself to observe strict secrecy respecting all transactions of the company with its customers and the state of accounts with individuals and all manufacturing, technical and business information of the company, except when required so to do by the Board or by any meeting or by a Court of law and except so far as may be necessary in order to comply with any of the provisions in these Articles contained. SECRECY OF WORKS AND INFORMATION 147. No member or other person (not being a director) shall be entitled to visit or inspect any works of the company without the permission of the directors or to require discovery of any information concerning the business trading or customers of the Company, or any matter which is or may be in the nature of a trade secret, mystery of trade, secret process, or any other matter which may relate to the conduct of the business of the Company and which in the opinion of the Directors, it would be inexpedient in the interest of the Company to disclose. 33 PROHIBITION OF SIMULTANEOUS APPOINTMENT OF MANAGING DIRECTOR AND MANAGER 148. The Company shall not appoint or employ at the same time more than one of the following categories of management personnel namely: a. Managing Director and b. Manager SECRETARY 149. The Directors shall from time to time appoint a Secretary and at their discretion remove any such Secretary to perform any functions, which by the Act are to be performed by the Secretary and to execute any other ministerial or administrative duties, which may from time to time be assigned to the Secretary by the Directors. The Director may also at any time appoint any person or persons (who need not be the Secretary) to keep the registers required to be kept by the Company. THE SEAL, ITS CUSTODY AND USE 150. a. The Board shall provide a Common Seal for the purposes of the Company and shall have power from time to time to destroy the same and substitute a new seal in lieu thereof and the Board shall provide for the safe custody of the Seal for the time being and the Seal shall never be used except by the authority of the Board or a Committee of the Board previously given. b. The Company shall also be at liberty to have an official Seal in accordance with Section 50 of the Act, for use in any territory, district or place outside India. DEED HOW EXECUTED 151. Every Deed Or Other instrument, to which the Seal of the Company is required to be affixed, shall unless the same is executed by a duly constituted attorney be signed by one Director or some other person appointed by the Board for the purpose provided that in respect of the Share Certificate the Seal shall be affixed in accordance with Rule 6 of the Companies (Issue of Share Certificates) Rules, 1960. DIVISION OF PROFITS 152. The profits of the Company, subject to any special rights relating thereto created or authorised to be created by these Articles, shall be divisible among the Members in proportion to the amount of capital paid-up or credited as paid-up and to the period during the year for which the capital is paid-up on the shares held by them respectively. THE COMPANY IN GENERAL MEETING MAY DECLARE DIVIDENDS 153. Subject to the provisions of Section 205 of the Companies Act, 1956 the Company in General Meeting may declare dividends, to be paid to its Members according to their respective rights but no dividends shall exceed the amount recommended by the Board, but the Company in General Meeting may declare a smaller dividend. INTERIM DIVIDEND 154. The Board may, from time to time, pay to the members such interim dividend as in their judgement the position of the Company justifies. 34 CAPITAL PAID-UP IN ADVANCE CARRYING INTEREST NOT TO EARN DIVIDEND 155. Where capital is paid in advance of calls, such capital may carry interest but shall not be in respect thereof confer a right to dividend or participate in profits. DIVIDEND TO BE PAID PRO-RATA 156. a. Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect whereof dividend is paid but if and so long as nothing is paid upon any shares in the Company, dividends may be declared and paid according to the amounts of the shares. b. No amount paid or credited as paid on shares in advance of calls shall be treated for the purpose of this regulation as paid on shares. c. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but if any shares is issued on terms providing that it shall rank for dividend as from a particular date such shares shall rank for dividend accordingly. RETENTION OF DIVIDENDS UNTIL COMPLETION OF TRANSFER UNDER ARTICLE 62 157. The Board may retain the dividends payable upon shares in respect of which any person is, under Article 62 entitled to become a Member, which any person under that Article is entitled to transfer, until such person shall become a member in respect of such shares or shall duly transfer the same. DIVIDEND, ETC. TO JOINT-HOLDERS 158. Any one of the several persons who are registered as the joint-holders of any share may give effectual receipts for all dividends or bonus and payment on account of dividends or bonus or other moneys payable in respect of such shares. NO MEMBER TO RECEIVE DIVIDEND WHILST INDEBTED TO THE COMPANY AND COMPANY'S RIGHT TO REIMBURSEMENT THEREOF 159. No member shall be entitled to receive payment of any interest or dividend in respect of his share or shares, whilst any money may be due or owing from him to the Company in respect of such share or shares or otherwise howsoever either alone or jointly with any other person or persons; and the Board may deduct from the interest or dividend payable to any member all sums of money so due from him to the Company. TRANSFER OF SHARES TO BE REGISTERED 160. A transfer of shares shall not pass the right to any dividend declared thereon before the registration of the transfer. MANNER OF PAYMENT OF DIVIDEND 161. Unless otherwise directed, any dividend may be paid by cheque or warrant or by a pay slip or receipt having the force of a cheque or warrant sent through the post to the registered address of member or person entitled or in case of joint holder to that one of them first named in the Register in respect of joint holder. Every such cheque or warrant shall be made 35 payable to the order of the person to whom it is sent. The company shall not be responsible for any cheque or warrant or pay slip or receipt lost in transmission or for any dividend lost to the member or person entitled thereto by the forged signature of any pay slip or receipt or the fraudulent recovery of the dividend by any other means. INTEREST ON DIVIDENDS 162. No unpaid dividend shall bear interest as against the Company. No unclaimed dividend shall be forfeited by the Board unless the claim thereto becomes barred by law and the Company shall comply with all the provisions of Section 205A of the Act in respect of unpaid or unclaimed dividend. DIVIDEND AND CALL TOGETHER 163. Any General Meeting declaring a dividend may on the recommendation of the Directors make a call on the Members of such amount as the meeting fixes, but so that the call on each member shall not exceed the dividend payable to him and so that the call may be made payable at the same time as the dividend and the dividend may, if so arranged between the Company and the Members, be set off against the call. CAPITALISATION OF PROFITS 164. 1) The Company in General Meeting may, upon the recommendation of the Board, resolve;- a) that it is desirable to capitalise any part of the amount for the time being standing to the credit of any of the company's reserve accounts or to the credit of the profit and loss account, or otherwise available for distribution; and b) that such sum be accordingly set free for distribution in the manner specified in clause (2) amongst the members who would have been entitled thereto, if distributed by way of dividend and in the same proportions. 2) The sum aforesaid shall not be paid in cash but shall be applied, subject to the provisions contained in clause (3), either in or towards:- i) paying up any amounts for the time being unpaid on any shares held by such member respectively; ii) paying up in full, unissued shares of the company to be allotted and distributed, credited as fully paid up to and amongst such members in the proportions aforesaid; or iii) partly in the way specified in sub-clause (i) and partly in that specified in sub-clause(ii). 3) A share premium account and a capital redemption reserve account may, for the purpose of this Regulation, only be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares. 4) The Board shall give effect to the resolution passed by the Company in pursuance of this Regulation. 165. 1) Whenever such a resolution as aforesaid shall have been passed, the Board shall:- 36 a) make all appropriation and application of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid shares, if any; and b) generally do all acts and things required to give effect thereto. 2) The Board shall have full power:- a) to make such provision, by the issue of fractional certificates or by payment in cash or otherwise, as it thinks fit, for the case of shares or debentures becoming distributable in fraction; and also b) to authorise any person to enter, on behalf of all the members entitled thereto, into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares to which they may be entitled upon such capitalisation or (as the case may require) for the payment of by the company on their behalf by the application thereto of their respective proportion of the profits resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares. 3) Any agreement made under such authority shall be effective and binding on all such members. BOARD REPORT 166. There shall be attached to every such balance sheet a report of the Board as to the state of the Company's affairs and as to the amounts, if any, which it proposes to carry to any reserves in such balance sheet and the amount, if any, which it recommends should be paid by way of dividend, and material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the company to which the balance sheet relates and the date of the report. The Board's report shall so far as is material for the appreciation of the state of the Company's affairs by its members and will not in the Board's opinion be harmful to the business of the company or any of its subsidiaries, deal with any changes which have occurred during the financial year in the nature of the Company's business, in the Company's subsidiaries or in the nature of the business carried on by them and generally in the classes of business in which the company has an interest and any other information as may be required by Section 217 of the Act. The Board shall also give the fullest information and explanations in its report aforesaid or in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditor's report. The Board's report and any addendum thereto shall be signed by its Chairman if he is authorised in that behalf by the Board; and when he is not so authorised, shall be signed by not less than two Directors. SIGNING OF BALANCE SHEET 167. The profit and loss account and balance sheet shall be signed by the Secretary if any, and by not less than two Directors, one of whom shall be a Managing Director if there is one provided that if there is only one Director present in India at the time, the profit and loss account and balance sheet shall be signed by such Director but in such a case there shall be attached to the profit and loss account and balance sheet a statement signed by such Director explaining the reason for non-compliance with the aforesaid provision requiring the signature of Directors. The profit and loss account shall be annexed to the balance sheet and the auditor's report (including the auditor's separate, special or supplementary report, if any), shall be attached thereto, and such report shall be read before the Company in general meeting and shall be open to inspection by any member. 37 RIGHTS OF MEMBERS TO COPIES OF BALANCE SHEETS AND AUDITOR'S REPORT 168. The Company shall comply with the requirement of Section 219 of the Act. DOCUMENTS AND NOTICES SERVICE OF DOCUMENTS OR NOTICES ON MEMBERS BY THE COMPANY 169. A document or notice may be served or given by the Company on any member either personally or by sending it by post to him to his registered address, or (if he has no registered address in India) to the address supplied by him to the Company for serving documents or notices on him. MANNER OF SERVICE OF DOCUMENTS OR NOTICES 170. Where a document or notice is sent by the post, service of the document or notice shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the documents or notice, provided that where a member has intimated to the Company in advance that documents or notices should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the Company a sum sufficient to defray the expenses of doing so, service of the document or notice shall not be deemed to be effected unless it is sent in the manner intimated by the Member and such service shall be deemed to have been effected in the case of notice of a Meeting at the expiration of forty-eight hours after the letter containing the document or notice is posted and in any other case at the time of which the letter would be delivered in the ordinary course of post. BY ADVERTISEMENT 171. A document or notice advertised in a newspaper circulating in the city in which the office of the Company is situated shall be deemed to be duly served or sent on the day on which the Advertisement appears on or to every Members who has no registered address in India and has not supplied to the Company an address within India for the serving of documents on or the sending of notice to him. ON PERSONAL REPRESENTATIVES, ETC. 172. A document or notice may be served or given by the Company on or to persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name or by the title of representative of the deceased, or assignee of the insolvent or by any like description, at the address (if any) in India supplied for the purpose by the persons claiming to be so entitled or (until such an address) has been so supplied by serving the documents or notice in any manner in which the same might have been given if the death or insolvency had not occurred. ON JOINT-HOLDERS 173. A document or notice may be served or given by the Company to the joint holders of share by serving or giving the document or notice on or to the joint holder named first in the register of members in respect of the share. 38 TO WHOM DOCUMENT OR NOTICES MUST BE SERVED OR GIVEN 174. Documents or notices of every General Meeting shall be served or given in some manner hereinbefore authorised on or to (a) every Member, (b) every person entitled to a share in consequence of the death or insolvency of a member and (c) the Auditor/s for the time being of the Company. MEMBERS BOUND BY DOCUMENTS OR NOTICES SERVED ON OR GIVEN TO PREVIOUS HOLDERS 175. Every person, who, by operation of law, transfer or other means whatsoever, shall become entitled to any share shall be bound by every document or notice in respect of such share, which prior to his name and address being entered on the Register of Members, shall have been duly served on or given to the person from whom he derives his title to such share. DOCUMENTS OR NOTICES BY COMPANY AND SIGNATURE THEREOF 176. Any document or notice to be served or given by the Company may be signed by a Director or some person duly authorised by the Board of Directors for such purposes and the signature thereto may be written, printed or lithographed. SERVICE OF DOCUMENTS OR NOTICE BY MEMBER 177. All documents or notices to be served or given by Members on or to the Company or any officer at the office by post under a Certificate of Posting or by Registered Post, or by leaving it at the office. WINDING UP DISTRIBUTION OF ASSETS 178. The Liquidator on any winding up (whether voluntary and supervision or compulsory) may with the sanction of a Special Resolution, but subject to the rights attached to any preference share capital, divide among the contributories in specie any part of the assets of the Company and may, with the like sanction, vest any part of the assets of the Company in trustees upon such trusts for the benefit of the contributors, as the liquidator, with the like sanction shall think fit. INDEMNITY AND RESPONSIBILITY OFFICER'S AND OTHERS RIGHT TO INDEMNITY 179. Every officer or agent for the time being of the Company shall be indemnified out of the assets of the Company against all liability incurred by him in relation to the business of the company in defending any proceedings whether civil or criminal in which judgement is given in his favour or in which he is acquitted or in connection with any application under Section 633 of the Act in which relief is granted to him by the Court. DIRECTORS, MANAGERS ETC. NOT LIABLE FOR ACTS OF OTHERS 180. Subject to provisions of Section 201 of the Act no Director, Manager or other Officer of the Company shall be liable for the act, receipts, neglects of any other director or officer or for joining in any receipts or other act for conformity or for any loss or expenses happening to the company through the insufficiency or deficiency of title to any property acquired by order of the directors, for and on behalf of the company or for the insufficiency or deficiency of any 39 security in or upon which any of the moneys of the company shall be invested or for any loss or damage arising from bankruptcy, insolvency or tortious act of any person with whom any moneys, securities, or effects shall be deposited or for any loss occasioned by an error of judgement or oversight on his part, or for any other loss, damages or misfortunes whatever which shall happen in the execution of the duties of this officer or in relation thereto unless the same happens through his own dishonesty. We the several persons whose names and address are subscribed below are desirous of being formed into a Company in pursuance of this Articles of Association and we respectively agree to take the number of shares in the Capital of the Company set opposite to our respective names.

- ---------------------------------------------------------------------------------- Signature, Name, Address, Number of Equity Signature, Name, Address, description and occupation of Shares taken by each description and occupation Subscribers Subscriber of Witness - ---------------------------------------------------------------------------------- Nagavara Ramarao Narayana Murthy 1 (Son of Nagavara Ramarao) (One equity) Flat 6, Padmanabhan Apartment, 1126/2, Shivajinagar, Pune - 411 016. Consultant Nadathur Srinivasa Raghavan 1 (Son of N. Sarangapani) (One equity) 5, 'Ravikripa', Station Road, Matunga (C. R.), Bombay - 400 019. Consultant Senapathy Gopalakrishnan 1 VIPUL DEVENDRA (Son of P. G. Senapathy) (One equity) KINKHABWALA Krishna Vihar, Kalapalayam Lane, (S/o Devendra Vithaldas Pathenchanthai, Kinkhabwala) Trivandrum - 695 001. 14, Thakurdwar Road, Zaveri Building, Bombay - 400 - 002 Service Consultant Nandan Mohan Nilekani 1 (Son of M. R. Nilekani) (One equity) 37, Saraswatput, Dharwar - 580 002. KARNATAKA Consultant -------------------- 4 (Four equity) - --------------------------------------------------------------------------------

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EX-3.1

                                                                     EXHIBIT 3.1

                             THE COMPANIES ACT, 1956

                            COMPANY LIMITED BY SHARES

                             ARTICLES OF ASSOCIATION

                                       OF

                          INFOSYS TECHNOLOGIES LIMITED

                                  CONSTITUTION

         TABLE A NOT TO APPLY BUT COMPANY TO BE GOVERNED BY THESE ARTICLES

1.       No regulations contained in Table A in the first Schedule to the
         Companies Act, 1956 shall apply to this Company, but the regulations
         for the management of this Company and for the observance of the
         members thereof and their representatives, shall, subject to any
         exercise of the statutory powers of the Company with reference to the
         repeal or alteration of, or addition to, its regulations by Special
         Resolution, as prescribed by the Companies Act, 1956, be such as are
         contained in these Articles.

                                 INTERPRETATION

         INTERPRETATION CLAUSE

2.       1)       In the Interpretation of these Articles, unless repugnant to
                  the subject or context :-

                  "THE ACT" AND THE SAID ACT"

                  "The Act" or the said Act" and reference to any section or
                  provision thereof respectively means and includes the
                  Companies Act, 1956 (1 of 1956) and any statutory
                  modification or re-enactment thereof for the time being in
                  force, and reference to the section or provisions of the said
                  Act or such statutory modification.

                  "AUDITORS"

                  "Auditors" means and includes those persons appointed as such
                  for the time being by the Company.

                  "BOARD"

                  "Board" or "Board of Directors means a meeting of the
                  Directors duly called and constituted, or as the case may be,
                  the Directors assembled at the Board or the Directors of the
                  Company collectively.

                  "CAPITAL"

                  "Capital" means the share capital for the time being raised or
                  authorised to be raised for the purpose of the Company.



                                       2

                  "THE COMPANY" OR "THIS COMPANY"

                  "The Company" or This Company" means INFOSYS TECHNOLOGIES
                  LIMITED.

                  "DIRECTORS"

                  "Directors" means the Directors for the time being of the
                  Company or as the case may be the Directors assembled at a
                  Board.

                  "DIVIDEND"

                  "Dividend" includes bonus.

                  "GENDERS"

                  Words imparting the masculine gender also include the feminine
                  gender.

                  "IN WRITING"

                  "In writing" and "written" include printing or lithography or
                  any other modes of representing or reproducing words in
                  visible form.

                  "MONTH"

                  "Month" means calendar month.

                  "OFFICE"

                  "Office" means the Registered Office for the time being of the
                  Company.

                  "PAID UP"

                  "Paid up" includes credited as paid-up.

                  "PERSONS"

                  "Persons" includes corporations as well as individuals.

                  "THE REGISTRAR"

                  "The Registrar" means the Registrar of Companies of the State
                  in which the office of the Company if for the time being
                  situate.

                  "Seal"

                  "Seal" means the common seal for the time being of the
                  Company.

                  "SINGULAR NUMBER"

                  Words importing the singular number include where the context
                  admits or requires, the plural number and vice versa.

                  "YEAR" AND "FINANCIAL YEAR"

                  "Year" means the calendar year and "Financial Year" shall
                  have the meaning assigned thereto by Section 2(17) of the Act.

                  "THESE PRESENTS"

                  "These Presents" means these articles as modified from time
                  to time.

                  a)       "Beneficial owner" shall mean beneficial owner as
                           defined in Clause(a) of sub-section( 1) of Section 2
                           of the Depositories Act, 1996. Depositories Act, 1996
                           shall include any statutory modification or
                           re-enactment thereof and Depository shall mean a
                           Depository as defined under Clause(e) of
                           sub-section (1) of Section 2 of the Depositories Act,
                           1996.

                           RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL
                           MEETING HELD ON JANUARY 6, 1998.

                  b)      "Shareholder" or "Member means the duly registered
                           holder of the shares from time to time and includes
                           the subscribers to the Memorandum of Association of
                           the Company and the beneficial owner(s) as defined
                           in clause(a) of sub-section(1) of Section 2 of the
                           Depositories Act, 1996.

                           RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL
                           MEETING HELD ON JANUARY 6,1998.

2)       Unless the context otherwise requires words and expressions contained
         in the Articles shall bear the same meaning as in the Act.



                                        3

3)       The marginal notes used in these Articles shall not affect the
         construction hereof. Save as aforesaid, any words or expressions
         defined in the Act, shall, if not inconsistent with the subject or
         context, bear the same meaning in these Articles.

                  CAPITAL AND INCREASE AND REDUCTION OF CAPITAL

3.       The Authorised Share Capital of the Company is Rs. 50,00,00,000 (Rupees
         fifty crores only) divided into 10,00,00,000 (Ten crores only) equity
         shares of Rs. 5 each (Rupees Five only) with powers to increase or
         reduce the same in accordance with the provisions of the Companies Act,
         1956.
         RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON DECEMBER
         29, 1999.

         The company shall be entitled to dematerialize its existing shares,
         rematerialize its shares held in the Depositories and/or to offer its
         fresh shares in a dematerialized form pursuant to the Depositories Act,
         1996 and the rules framed thereunder, if any.
         RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY
         6, 1998.

         INCREASE OF CAPITAL OF THE COMPANY AND HOW CARRIED INTO EFFECT

4.       The Company in General Meeting, may from time to time, increase its
         capital by the creation of new shares, such increase to be of such
         aggregate amount and to be divided into shares of such amounts as the
         resolution shall prescribe. Subject to the provisions of the act, any
         shares of the original or increased capital shall be issued upon such
         terms and conditions and with such rights and privileges annexed
         thereto, as the General Meeting resolving upon the creation thereof
         shall prescribe and if no direction be given, as the Directors shall
         determine and in particular, such shares may be issued with a
         preferential or qualified right to dividends, and in the distribution
         of assets of the Company and with a right of voting at General Meetings
         of the Company, in conformity with Sections 87 and 88 of the Act.
         Whenever the capital of the Company has been increased under the
         provisions of these Articles, the Directors shall comply with the
         provisions of Section 97 of the Act.

         ALLOTMENT OTHERWISE THAN FOR CASH

5.       Subject to the provisions of the Act and these Articles, the Directors
         may allot and issue shares in the capital of the Company as payment or
         part-payment for any property or assets of any kind whatsoever, sold or
         to be sold or transferred to be transferred or for goods or machinery
         supplied or to be supplied or for services rendered or to be rendered
         or for technical assistance or know-how made or to be made available to
         the Company or the conduct of its business and shares which may be so
         allotted may be issued as fully or partly paid-up otherwise than in
         cash and if so issued, shall be deemed to be fully or partly paid as
         the case may be.

         ADDITIONAL CAPITAL TO FORM PART OF EXISTING CAPITAL

6.       Except so far as otherwise provided by the conditions of issue or by
         these presents, any capital raised by the creation of new shares, shall
         be considered as part of the existing capital, and shall be subject to
         the provisions herein contained, with reference to the payment of calls
         and instalments, forfeiture, lien, surrender, transfer and
         transmission, voting and otherwise.

         REDEEMABLE PREFERENCE SHARES

7.       Subject to the provisions of Section 80 of the Act, the Company shall
         have the power to issue Preferential Shares which are or at the option
         of the Company are to be liable to be redeemed and the resolution
         authorising such issue shall prescribe the manner, terms and conditions
         of redemption.



                                        4

         REDUCTION OF CAPITAL

8.       The Company may (subject to the provisions of Sections 78, 80, 100 to
         105 inclusive, of the Act) from time to time by Special Resolution,
         reduce its capital and any Capital Redemption Reserve Account or Share
         Premium Account in any manner for the time being authorised by law, and
         in particular, capital may be paid off on the footing that it may be
         called up again or otherwise. This Article is not to derogate from any
         power the Company would have if it were omitted.

         VARIATION OF RIGHTS

9.       If at any time the share capital is divided into different classes of
         shares, all or any of the rights and privileges attached to the shares
         of any class may subject to the provisions of Sections 106 and 107 be
         varied, commuted, affected, dealt with or abrogated with the consent in
         writing of the holders of not less than three-fourths of the issued
         shares of that class or with the sanction of a Special Resolution at a
         separate meeting of the holders of the issued shares of that class.

         ISSUE OF FURTHER PARI PASSU SHARES NOT TO AFFECT THE RIGHT OF SHARES
         ALREADY ISSUED

10.      The rights conferred upon the holders of the shares of any class issued
         with preferred or any other rights shall not, unless, otherwise
         expressly provided by the terms of issue of that class, be deemed to be
         varied by the creation or issue of further shares ranking pari passu
         therewith.

         SUB-DIVISION AND CONSOLIDATION OF SHARES

11.      Subject to the provisions of Section 94 of the Act, the Company in
         General Meeting may from time to time, sub-divide or consolidate its
         shares, or any of them, and the resolution whereby any share is
         sub-divided, may determine that, as between the holders of the shares
         resulting from such sub-division one or more of such shares shall have
         some preference or special advantage as regards dividend, capital or
         otherwise over or as compared with the other or others. Subject as
         aforesaid the Company in General Meeting may also cancel shares which
         have not been taken or agreed to be taken by any person and diminish
         the amount of its share capital by the amount of shares so cancelled.
         The cancellation of shares in pursuance of this Article shall not be
         deemed to be a reduction of the share capital.

11A.     The Directors are hereby authorized to issue Equity Shares or
         Debentures (whether or not convertible into equity shares) for offer
         and allotment to such of the officers, employees and workers of the
         Company as the Directors may select or the trustees of such trust as
         may be set up for the benefit of the officers, employees and workers in
         accordance with the terms and conditions of such scheme, plan or
         proposal as the Directors may formulate. Subject to the consent of the
         Stock Exchanges and of the Securities Exchange Board of India, the
         Directors may impose the condition that the shares in or debentures of
         the Company so allotted shall not be transferable for a specified
         period.

                             SHARES AND CERTIFICATES

         SHARES TO BE NUMBERED PROGRESSIVELY AND NO SHARES TO BE SUB-DIVIDED

12.      The shares in the capital shall be numbered progressively according to
         their several denominations and except in the manner hereinbefore
         mentioned no share shall be sub-divided. Every forfeited or surrendered
         share shall continue to bear the number by which the same was
         originally distinguished.

         SHARES AT THE DISPOSAL OF THE DIRECTORS

13.      Subject to the provisions of these Articles and the Act, the shares in
         the capital of the Company for the time being (including any shares
         forming part of any increased capital of the Company) shall be under
         the control of the Directors who may issue, allot or otherwise dispose
         of the



                                        5

         same or any one of them to such persons in such proportion and on such
         terms and conditions and either at a premium or at par or (subject to
         compliance with the provisions of the Act) at a discount and at such
         times as they may from time to time think fit and proper and with the
         sanction of the Company in General Meeting to give to any person the
         option to call for or allotted shares of any class of the Company
         either at par or at premium or subject as aforesaid at a discount
         during such time and for such consideration and such option being
         exercisable at such times as the Directors think fit; and any shares
         which may be so allotted may be issued as fully paid-up shares and if
         so issued shall be deemed to be fully paid-up shares. The Board shall
         cause to be filed the returns as to allotment provided for in Section
         75 of the Act. Provided that the option or right to call of shares not
         be given to any person except with the sanction of the company in the
         General Meeting.

         ACCEPTANCE OF SHARES

14.      Any application signed by, or on behalf of, an applicant for shares in
         the Company followed by an allotment of any shares therein, shall be an
         acceptance of shares within the meaning of these Articles; and every
         person who thus or otherwise accepts any shares and whose name is
         entered in its Register of Members shall, for the purpose of these
         Articles, be a member of the Company.

         DEPOSIT AND CALL, ETC. TO BE A DEBT PAYABLE IMMEDIATELY

15.      The money (if any) which the Directors shall, on the allotment of any
         shares being made by them, require or direct to be paid by way of
         deposits, call or otherwise, in respect of any shares allotted by them,
         shall, immediately on the inscription of the name of the allottee in
         the Register of Members as the holder of such shares, become a debt due
         to and recoverable by the Company from the allottee thereof and shall
         be paid by him accordingly.

         LIABILITY OF MEMBERS

16.      Every member, or his heirs, executors, administrators or other
         representatives, shall pay to the Company the portion of the capital
         represented by his share or shares, which may, for the time being,
         remain unpaid thereon, in such amounts, at such time or times, and in
         such manner as the Directors shall, from time to time, in accordance
         with the Company's Regulations require or fix for the payment thereof.

         SHARE CERTIFICATE

17       a)       The share certificates shall be issued in market lots and
                  where share certificates are issued in either more or less
                  than market lots, sub-division or consolidation of share
                  certificates into market lots shall be done free of charge.

         b)       Any two or more joint allottees of a share shall, for the
                  purposes of this Article, be treated as a single Member, and
                  the certificate of any share which may be the subject of joint
                  ownership, may be delivered to any one of such joint owners on
                  behalf of all of them. For any further certificate the Board
                  shall be entitled but shall not be bound, to prescribe a
                  charge not exceeding Rupee One. The Company shall comply with
                  the provisions of Section 113 of the Act.

         c)       Directors may sign a share certificate by affixing their
                  signature thereon by means of any machine, equipment or other
                  mechanical means, such as engraving in metal or lithography,
                  but not by means of a rubber stamp, provided that the Director
                  shall be responsible for the safe custody of such machine,
                  equipment or other material used for the purpose.

         RENEWAL OF SHARE CERTIFICATE

18.      a)       No fee shall be charged for issue of new share certificates in
                  replacement of those which are old, decrepit, worn-out or
                  where the cages on the reverse of the share certificates for
                  recording transfers have been fully utilised.



                                        6

         b)       When a new share certificate has been issued in pursuance of
                  Clause (a) of this Article, it shall state on the face of it
                  and against the stub or counterfoil to the effect that it is
                  "Issued in lieu of Share Certificate No.................
                  sub-divided/replaced/on consolidation of shares."

         c)       If a share certificate is lost or destroyed, a new certificate
                  in lieu thereof shall be issued only with the prior consent of
                  the Board and on payment of such fee, not exceeding Rupees two
                  as the Board may from time to time fix, and on such terms, if
                  any, as to evidence and indemnity as to payment of such
                  out-of-pocket expenses incurred by the Company in
                  investigating evidence, as the Board thinks fit.

         d)       When a new share certificate has been issued in pursuance of
                  Clause (c) of this Article, it shall state on the face of it
                  and against the stub or counterfoil to the effect that it is
                  "a duplicate issued in lieu of share certificate No.........".
                  The word "duplicate" shall be stamped or punched in bold
                  letters across the face of the share certificate.

         e)       Where a new share certificate has been issued in pursuance of
                  Clause (a) or Clause (c) of this Article, particulars of every
                  such share certificate shall be entered in a Register of
                  Renewed and Duplicate Certificates indicating against the name
                  or names of the person or persons to whom the Certificate is
                  issued the number and date of issue of the share certificate
                  in lieu of which the new certificate is issued, and the
                  necessary changes indicated in Register of Members by suitable
                  cross reference in the "Remarks" column.

         f)       All blank forms to be used for issue of share certificates
                  shall be printed and the printing shall be done only on the
                  authority or a resolution of the Board. The blank forms shall
                  be consecutively machine numbered and the forms and blocks,
                  engravings, facsimiles and hues relating to the printing of
                  such forms shall be kept in the custody of the Secretary or
                  such other person as the Board may appoint for the purposes;
                  and the Secretary or the other person aforesaid shall be
                  responsible for rendering an account of these forms to the
                  Board.

         g)       The Managing Director of the Company for the time being or, if
                  the Company has no Managing Director, every Director of the
                  Company shall be responsible for the maintenance, preservation
                  and safe custody of all books and documents relating to the
                  issue of share certificates except the blank forms of share
                  certificates referred to in sub-clause (f).

         h)       All books referred to in sub-clause (g) shall be preserved in
                  good order permanently.

         i)       The Shares in the Capital of the Company shall be numbered
                  progressively according to their several denominations,
                  provided however, that the provisions relating to progressive
                  numbering shall not apply to the shares of the Company which
                  are dematerialized or may be dematerialized in future or
                  issued in future in dematerialized form. Except in the manner
                  hereinbefore mentioned, no share shall be sub-divided. Every
                  forfeited or surrendered share held in material form shall
                  continue to bear the number by which the same was originally
                  distinguished.

                  RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON
                  JANUARY 6, 1998.

         DELIVERY OF SHARE/DEBENTURE CERTIFICATES

19.      The Company shall within three months after the allotment of any of its
         shares or debentures or debenture-stock and within one month after the
         application for the registration of the transfer of any such shares or
         debentures or debenture-stock, complete and have ready for delivery the
         certificates of all shares, debentures or debenture stock allotted or
         transferred unless the conditions of issue of shares or debentures or
         debenture-stock otherwise provided. The expression "transfer" for the
         purpose of this Article means, a transfer duly stamped and otherwise
         valid and does not include any transfer which the Company is for any
         reason entitled to refuse to register and does not register.



                                        7

         LIABILITY OF JOINT HOLDERS

20.      If any share stands out in the names of two or more persons all the
         joint holders of the share shall be severally as well as jointly liable
         for the payment of all deposits, instalments, and calls due in respect
         of such shares, and for all incidents thereof according to the
         Company's Regulations, but the person first named in the Register
         shall, as regards receipt of dividend or bonus or service of notice,
         and all or any other matters connected with the company, except voting
         at meetings and the transfer of the shares, and any other matter by the
         said Act or herein otherwise provided, be deemed the sole holder
         thereof.

         REGISTERED HOLDER ONLY THE OWNER OF THE SHARES

21.      Except as ordered by a Court of competent jurisdiction or by law
         required, the Company shall be entitled to treat the person whose name
         appears on the Register of Members as the holder of any share or whose
         name appears as the beneficial owner of shares in the records of the
         Depository, as the absolute owner thereof and accordingly shall not be
         bound to recognise any benami, trust or equity or equitable, contingent
         or other claim to or interest in such share on the part of any other
         person whether or not he shall have express or implied notice thereof.
         The Board shall be entitled at their discretion to register any shares
         in the joint names of any two or more persons, or the survivor or
         survivors of them.
         RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY
         6, 1998.

         SHARE CERTIFICATE FOR JOINT MEMBERS

22.      The Company shall not be bound to register more than three persons as
         the joint holders of any share except in the case of executors or
         trustees of a deceased member and in respect of a share held jointly by
         several persons the Company shall not be bound to issue more than one
         certificate and delivery of a certificate for a share to any one of the
         several joint holders shall be sufficient delivery to all such holders.

         FRACTIONAL CERTIFICATES

23.      The Company may issue such fractional coupons as the Board may approve
         in respect of any of the shares of the Company on such terms as the
         Board thinks fit as to the period within which the fractional coupons
         are to be converted into share certificates.

         UNDERWRITING AND BROKERAGE - COMMISSION MAY BE PAID

24.      Subject to the provisions of Section 76 of the Act, the Company may at
         any time pay a commission to any person, in consideration of his
         subscribing or agreeing to subscribe (whether absolutely or
         conditionally) for any shares or debentures of the Company, or
         procuring, or agreeing to procure subscriptions (whether absolute or
         conditional) for any shares or debentures in the Company; But so that
         the commission shall not exceed in case of shares five percent of the
         price at which the shares are issued and in case of debentures two and
         a half percent of the price at which the debentures are issued.

         BROKERAGE

25.      The Company may pay a reasonable sum for brokerage.

         INTEREST OUT OF CAPITAL - INTEREST MAY BE PAID OUT OF CAPITAL

26.      Where any shares are issued for purpose of raising money to defray the
         expenses of the construction of any works or buildings or the provision
         of any land, which cannot be made profitable for a lengthy period, the
         Company may pay interest on so much of that share capital as is for the
         time being paid up for the period, at the rate and subject to the
         conditions and restrictions provided by Section 208 of the Act and may
         charge the same to capital as part of the cost of construction of the
         works or buildings or provision of plant.



                                        8

                                      CALLS

         DIRECTORS MAY MAKE CALLS

27.      The Board may form time to time, subject to the terms on which any
         shares may have been issued and subject to the conditions of allotment,
         by a resolution passed at a meeting of the Board (and not by circular
         resolution) make such calls as it thinks fit upon the Members in
         respect of all monies unpaid on the shares held by them respectively
         and each member shall pay the amount of every call so made on him to
         the person or persons and at the time and place appointed by the Board.
         A call may be made payable by instalments.

         NOTICE OF CALLS

28.      Thirty days notice in writing of any call shall be given by the Company
         specifying the time and place of payment, and the person or persons to
         whom such calls shall be made.

         CALLS TO DATE FROM RESOLUTION

29.      A call shall be deemed to have been made at the time when the
         resolution authorising such call was passed at a meeting of the Board.

         CALL MAY BE REVOKED

30.      A call may be revoked or postponed at the discretion of the Board.

         LIABILITY OF JOINT HOLDERS

31.      A joint-holder of a share shall be jointly and severally liable to pay
         all calls in respect thereof.

         DIRECTORS MAY EXTEND TIME

32.      The Board may, from time to time at its discretion, extend the time
         fixed for payment of any call, and may extend such time as to all or
         any of the members who from residence at a distance or other cause, the
         Board may deem fairly entitled to such extension save as a matter of
         grace and favour.

         OVERDUE CALLS TO CARRY INTEREST

33.      If any member fails to pay any call due from him on the day appointed
         for payment thereof, or any such extension thereof as aforesaid, he
         shall be liable to pay interest on the same from the day appointed for
         the payment thereof to the time of actual payment at such rate as shall
         from time to time be fixed by the Board but nothing in this Article
         shall render it obligatory for the Board to demand or recover any
         interest from any such member and the Board shall be at liberty to
         waive payment of such interest either wholly or in part.

         SUMS DEEMED TO BE CALLS

34.      Any sum which by the terms of issue of a share become payable on
         allotment or at any fixed date, whether on account of the nominal value
         of the share or by way of premium shall for the purposes of these
         Articles be deemed to be a call duly made and payable on the date on
         which by the terms of issue of the same becomes payable, and in the
         case of non-payment all the relevant provisions of theses Articles as
         to payment of interest and expenses, forfeiture or otherwise shall
         apply as if such sum had become payable by virtue of a call duly made
         and notified.



                                        9

         PART PAYMENT ON ACCOUNT OF CALL ETC. NOT TO PRECLUDE FORFEITURE

35.      Neither a judgement nor a decree in favour of the company for calls or
         other moneys due in respect of any shares nor any part payment or
         satisfaction thereunder nor the receipt by the company of a portion of
         any money which shall from time to time be due from any member to the
         company in respect of his shares, either by way of principal or
         interest, nor any indulgence granted by the Company in respect of
         payment of any such money, shall preclude the company from thereafter.

         PROOF ON TRIAL OR SUIT FOR MONEY ON SHARES

36.      On the trial or hearing of any action or suit brought by the Company
         against any member or his legal representative to recover any moneys
         claimed to be due to the company for any call or other sum in respect
         of his shares, it shall be sufficient to prove -

         a)       that the name of the Member, in respect of whose shares the
                  money is ought to be recovered, appears entered in the
                  Register of Members as the holder or one of the holders, at or
                  subsequent to the date at which the money sought to be
                  recovered is alleged to have become due, on the said shares;

         b)       that the resolution making the call is duly recorded in the
                  minutes books, and

         c)       that notice of such call was duly given to the Member or his
                  legal representatives issued in pursuance of these Articles;
                  and that it shall not be necessary to prove the appointment of
                  the Directors who made such call, nor that a quorum of
                  Directors was present at the Board at which such call was
                  made, nor that the meeting at which such call was made was
                  duly convened or constituted nor any other matter whatsoever,
                  but the proof of the matters aforesaid shall be conclusive
                  evidence of the debt and the same shall be recovered by the
                  company against the Member or his representative from whom it
                  is ought to be recovered, unless it shall be proved, on behalf
                  of such Member or his representatives against the company that
                  the name of such Member was improperly inserted in the
                  Register or that the money sought to be recovered has actually
                  been paid.

         PAYMENT OF UNPAID SHARE CAPITAL IN ADVANCE

37.      a)       The Board may if it thinks fit, subject to the provisions of
                  the Act, agree to and receive from any Member willing to
                  advance the same, either in money or moneys worth the whole or
                  any part of the amount remaining unpaid on the shares held by
                  him beyond the sum actually called up and upon the moneys so
                  paid or satisfied in advance, or so much thereof, as from time
                  to time and at any time thereafter exceeds the amount of the
                  calls then made upon and due in respect of the shares on
                  account of which such advances have been made, the Board may
                  pay or allow interest at such rate as the Member paying such
                  advance and the Board agree upon; provided always that if at
                  any time after the payment of any such money the rate of
                  interest so agreed to be paid to any such Member appears to
                  the Board to be excessive, it shall be lawful for the Board
                  from time to time to repay to such Member so much of such
                  money as shall then exceed the amount of the calls made upon
                  such shares, unless there be an express agreement to the
                  contrary; and after such repayment such member shall be liable
                  to pay, and such shares shall be charged with the payment of
                  all future calls as if no such advance had been; provided also
                  that if at any time after the payment of any money so paid in
                  advance, the company shall go into liquidation, either
                  voluntary or otherwise, before the full amount of the money so
                  advanced shall have become due by the members to the Company,
                  on instalments or calls, or in any other manner, the maker of
                  such advance shall be entitled ( as between himself and the
                  other Members) to receive back from the Company the full



                                       10

                  balance of such moneys rightly due to him by the Company in
                  priority to any payment to members on account of capital.

         b)       No Member paying any such sum in advance shall be entitled to
                  any voting rights, dividend or right to participate in profits
                  in respect of money so advanced by him until the same would
                  but for such payment become presently payable.

                 FORFEITURE AND SURRENDER OF AND LIEN ON SHARES

         IF MONEY PAYABLE ON SHARE NOT PAID NOTICE TO BE GIVEN TO MEMBERS

38.      If any Member fails to pay any call or instalment of call on or before
         the day appointed for the payment of the same or any such extension
         thereof as aforesaid, the Board may, at any time thereafter, during
         such time as the call or instalment remains unpaid, give notice to him
         requiring him to pay the same together with any interest that may have
         accrued and all expenses that may have been incurred by the Company by
         reason of such non-payment.

         TERMS OF NOTICE

39.      The notice shall name a day (not being earlier than the expiry of
         fourteen days from the date of service of notice) and a place or places
         on and at which such call or instalment and such interest thereon at
         such rate as the Directors shall determine from the day on which such
         call or instalment ought to have been paid and expenses as aforesaid
         are to be paid. The notice shall also state that, in the event of the
         non-payment at or before the time and the place appointed, the share in
         respect of which the call was made or instalment is payable will be
         liable to be forfeited.

         IN DEFAULT OF PAYMENT, SHARES MAY BE FORFEITED

40.      If the requirements of any such notice as aforesaid are not complied
         with, every or any share in respect of which such notice has been
         given, may at any time thereafter, but before payment of all calls or
         instalments, interest and expenses due in respect thereof, be forfeited
         by a resolution of the Board to that effect. Such forfeiture shall
         include all dividends and bonuses declared in respect of the forfeited
         shares and not actually paid before the forfeiture.

         NOTICE OF FORFEITURE

41.      When any share shall have been so forfeited, notice of the forfeiture
         shall be given to the Member in whose name it stood immediately prior
         to the forfeiture or to any of his legal representatives, or to any of
         the persons entitled to the shares by transmission and an entry of the
         forfeiture, with the date thereof, shall forthwith be made in the
         Register of Members but no forfeiture, shall be in any manner
         invalidated by any omission or neglect to give such notice or to make
         such entry as aforesaid.

         FORFEITED SHARES TO BECOME PROPERTY OF THE COMPANY AND MAY BE SOLD,
         ETC.

42.      Any share so forfeited shall be deemed to be the property of the
         Company and may be sold, re-alloted or otherwise disposed of, either to
         the original holder thereof or to any other person, upon such terms and
         in such manner as the Board shall think fit.

         MEMBERS STILL LIABLE TO PAY MONEY DUE NOTWITHSTANDING THE FORFEITURE

43.      Any member whose shares have been forfeited shall, notwithstanding the
         forfeiture, be liable to pay, and shall forthwith pay to the Company on
         demand all calls, amounts, instalments,



                                       11

         interest and expenses owing upon or in respect of such shares at the
         time of the forfeiture, together with interest thereon from the time of
         the forfeiture until payment, at such rate as the Board may determine
         and the Board may enforce the payment thereof if it thinks fit.

         EFFECT OF FORFEITURE

44.      The forfeiture of a share shall involve extinction, at the time of the
         forfeiture, of all interest in and of all claims and demands against
         the Company, in respect of the share, and all other rights incidental
         to the share, except only such of those rights as by these Articles are
         expressly saved.

         SURRENDER OF SHARES

45.      The Directors may subject to the provisions of the Act, accept a
         surrender of any shares from or by any Member desirous of surrendering
         them on such terms as they think fit.

         EVIDENCE OF FORFEITURE

46.      A declaration in writing that the declarant is a Director or Secretary
         of the Company and that a share in the Company has been duly forfeited
         in accordance with these Articles on the date stated in the
         declaration, shall be conclusive evidence of the facts therein stated
         as against all persons claiming to be entitled to the share.

         COMPANY'S LIEN ON SHARES

47.      The Company shall have a first and paramount lien upon all the shares,
         not being fully paid-up shares, registered in the name of each Member
         (whether solely or jointly with another or others), and upon the
         proceeds of sale thereof, for all moneys (whether presently payable or
         not) called or payable at a fixed time in respect of such shares and no
         equitable interest in any share shall be created except upon the
         footing and condition that Article 21 hereof is to have full effect.
         Any such lien shall extend to all dividends from time to time declared
         in respect of such shares. Unless otherwise agreed, the registration of
         a transfer of shares shall operate as a waiver of the Company's lien if
         any on such shares. The Board of Directors may at any time declare any
         shares to be exempt, wholly or partially from the provisions of this
         Article.

         LIEN ENFORCED BY SALE

48.      For the purpose of enforcing such lien, the Directors may sell the
         shares subject thereto in such manner as they think fit and for that
         purpose may cause to be issued a duplicate certificate in respect of
         such shares and may authorise one of their member or some other person
         to execute a transfer thereof on behalf of and in the name of such
         member. No such sale shall be made until such time as the moneys in
         respect of which such lien exists or some part thereof is presently
         payable or the liability in respect of which such lien exists is liable
         to be presently fulfilled or discharged and until notice in writing of
         the intention to sell shall have been served on such Member, or his
         heirs, executors, administrators, or other representatives or upon the
         persons (if any) entitled by transmission to the shares or any one or
         more of such heirs, executors, administrators, representatives or
         persons, and default shall have been made by him or them in payment,
         fulfilment or discharge of such debts, liabilities or engagements for
         fourteen days after such notice,

         APPLICATION OF SALE PROCEEDS

49.      The net proceeds of any such sale after payment of the costs of such
         sale shall be applied in or towards the satisfaction of such debts,
         liabilities or engagements and the residue (if any)



                                       12

         paid to such Member, or any of his heirs, executors, administrators,
         representatives or assigns or any of the persons (if any) entitled by
         transmission to the shares sold.

         VALIDITY OF SALE UNDER ARTICLES

50.      Upon any sale after forfeiture, or for enforcing a lien in purported
         exercise of the powers hereinbefore given, the Board may appoint some
         person to execute an instrument of transfer of the shares sold and
         cause the purchaser's name to be entered in the Register in respect of
         the Shares sold and the purchaser shall not be bound to see to the
         regularity of the proceedings, or to the application of the purchase
         money and after his name has been entered in the Register in respect of
         such shares, the validity of the sale shall not be impeached by any
         person and the remedy of any person aggrieved by the sale shall be in
         damages only in and against the Company exclusively.

         CANCELLATION OF SHARE CERTIFICATE IN RESPECT OF FORFEITED SHARES

51.      Upon any sale, re-allotment or other disposal under the provisions of
         the preceding Articles, the certificate or certificates originally
         issued in respect of the relative shares shall (unless the same shall
         on demand by the Company have been previously surrendered to it by the
         defaulting Member) stand cancelled and become null and void and of no
         effect, and the Directors shall be entitled to issue a new certificate
         or certificates in respect of the said shares to the person or persons
         entitled thereto.

         POWER TO ANNUL FORFEITURE

52.      The Board may at any time before any share so forfeited shall have been
         sold, re-allotted or otherwise disposed of, annul the forfeiture
         thereof upon such conditions as it thinks fit.

                       TRANSFER AND TRANSMISSION OF SHARES

         REGISTER OF TRANSFERS

53.      The Company shall keep a Register of Transfers and shall have recorded
         therein fairly and distinctly particulars of every transfer or
         transmission of any share held in material form.

         RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY
         6,1998.

         FORM OF TRANSFER

54.      Shares in the Company shall be transferred by an instrument in writing
         in such form as prescribed under Section 108 of the Companies Act,
         1956, or under rules made thereunder from time to time.

         TO BE EXECUTED BY TRANSFEROR AND TRANSFEREE

55.      The instrument of transfer duly stamped and executed by the transferor
         and the transferee shall be delivered to the Company in accordance with
         the provisions of the Act. The instrument of transfer shall be
         accompanied by such evidence as the Board may require to prove the
         title of the transferor and his right to transfer the shares and every
         registered instrument of transfer shall remain in the custody of the
         Company until destroyed by an order of the Board. The transferor shall
         be deemed to be the holder of such shares until the name of the
         transferee shall have been entered in the Register of Members in
         respect thereof. Before the registration of a transfer, the certificate
         or certificates of the shares must be delivered to the Company.

55A.     In the case of transfer or transmission of shares or other marketable
         Securities where the Company has not issued any certificates and where
         such shares or securities are being held in any electronic and fungible
         form in a Depository, the provisions of the Depositories Act, 1996
         shall apply.

         RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING HELD ON JANUARY
         6,1998.



                                       13

         DIRECTORS MAY REFUSE TO REGISTER TRANSFERS

56.      Subject to the provisions of Section 111 of the Act, the Board, may at
         its own absolute and uncontrolled discretion, and without assigning any
         reason, decline to register or acknowledge any transfer of shares
         whether fully paid or not, (notwithstanding that the proposed
         transferee be already a Member), but in such cases it shall, within one
         month from the date on which the instrument of transfer was lodged with
         the Company, send to the transferee and the transferor notice of
         refusal to register such transfer. Provided that registration of a
         transfer shall not be refused on the ground that the transferor being
         either alone or jointly with any other person or persons indebted to
         the Company on any account whatsoever except on shares.

         REFUSAL TO REGISTER TRANSFER

57.      In particular and without prejudice to the generality of the above
         powers, the Board may subject to the provisions of Section 111 of the
         Companies Act, 1956 decline to register in exceptional circumstances
         when it is felt that the transferee is not a desirable person from the
         larger point of view of the interest of the Company as a whole subject
         to the provisions of the clause (c) of subsection (4) of Section 22A of
         the Securities Contract (Regulation) Act.

         SUB-DIVISION/CONSOLIDATION IN MARKETABLE LOTS ONLY

58.      Transfer of shares in whatever lot should not be refused, though there
         would be no objection to the company refusing to split a share
         certificate into several scrips of any small denominations or to
         consider a proposal for transfer of shares comprised in a share
         certificate to several parties, involving such splitting, if on the
         face of it such splitting/transfer appears to be unreasonable or
         without a genuine need. The Company should not, therefore, refuse
         transfer of shares in violation of the Stock Exchange listing
         requirements on the ground that the number of shares to be transferred
         is less than any specified number.

         DEATH OF ONE OR MORE JOINT HOLDERS OF SHARES

59.      In case of the death of any one or more of the persons named in the
         Register of Members as the joint holders of any share, the survivor or
         survivors shall be the only persons recognised by the Company as having
         any title to or interest in such share, but nothing herein contained
         shall be taken to release the estate or a deceased joint-holder for any
         liability on shares held by him jointly with any other person.

         TITLE TO SHARES OF DECEASED MEMBER

60.      The executors or administrators or holders of a Succession Certificate
         or the legal representatives of a deceased Member (not being one of two
         or more joint-holders) shall be the only person recognised by the
         Company as having any title to the shares registered in the name of
         such Member, and the Company shall not be bound to recognise such
         executors or administrators or holders of a Succession Certificate or
         the legal representatives unless such executors or administrators or
         legal representatives shall have first obtained Probate or Letter of
         Administration or Succession Certificate, as the case may be, from a
         duly constituted court in the Union of India provided that in case
         where the Board in its absolute discretion think fit, the Board may
         dispense with production of Probate or Letters of Administration or
         Succession Certificate, upon such terms as to Indemnity or otherwise as
         the Board in its absolute discretion may think necessary and under
         Article 59 register the name of any person who claims to be absolutely
         entitled to shares standing in the name of a deceased Member, as a
         Member.



                                       14

         NO TRANSFER TO INSOLVENT, ETC.

61.      No share shall in any circumstances, be transferred to any insolvent
         or person of unsound mind.

         REGISTRATION OF PERSON ENTITLED TO SHARES OTHERWISE THAN BY TRANSFER

62.      Subject to the provisions of the Act and Articles 59 end 60 any person
         becoming entitled to shares in consequences of death, lunacy,
         bankruptcy or insolvency of any Member, or by any lawful means other
         than by a transfer in accordance with these Articles, may with the
         consent of the Board (which it shall not be under any obligation to
         give) upon producing such evidence that he sustains the character in
         respect of which he proposes to act under this Article, or of his
         title, as the Board thinks sufficient, either be registered himself as
         the holder of the shares or elect to have some persons nominated by him
         and approved by the Board, registered as such holder; provided
         nevertheless, that if such person shall elect to have his nominee
         registered, he shall testify the election by executing in favour of his
         nominee an instrument of transfer in accordance with the provisions
         herein contained and until he does so he shall not be freed from any
         liability in respect of the shares.

         PERSONS ENTITLED MAY RECEIVE DIVIDENDS WITHOUT BEING REGISTERED AS
         MEMBERS

63.      A person entitled to a share by transmission shall, subject to the
         right of the Directors to retain such dividends or money as hereinafter
         provided be entitled to receive, and may give a discharge for any
         dividends or other moneys payable in respect of the shares.

         FEE ON TRANSFER OR TRANSMISSION

64.      No fee shall be charged for transfer and, transmission of Shares or for
         registration of any of power of attorney, probate, letter of
         administration or other similar documents.

         THE COMPANY NOT LIABLE FOR DISREGARD OF A NOTICE PROHIBITING
         REGISTRATION OF A TRANSFER

65.      The Company shall incur no liability or responsibility whatever in
         consequence of its registering or giving effect to any transfer of
         shares made or purporting to be made by any apparent legal owner
         thereof (as shown or appearing in the Register of Members) to the
         prejudice of a person or persons having or claiming any equitable
         right, title or interest to or in the said shares, notwithstanding that
         the Company may have any notice of such equitable right, title or
         interest or notice prohibiting registration of such transfer and may
         have entered such notice or referred thereto, in any book of the
         company, and the Company shall not be bound or required to regard or
         attend or give effect to any notice which may be given to it of any
         equitable right, title or interest, or be under any liability
         whatsoever for refusing or neglecting so to do, though it may have been
         entered or referred to in some book of the company, but the company
         shall nevertheless be at liberty to regard and attend to any such
         notice, and give effect thereto if the Board shall so think fit.

                                BORROWING POWERS

         POWER TO BORROW

66.      Subject to the provisions of Sections 58A, 292 and 293 of the Act and
         of these Articles, the Board may, from time to time at its discretion,
         by a resolution passed at a Meeting of the Board, accept deposits from
         Members, either in advance of call or otherwise, and generally raise or
         borrow or secure the payment of any sum or sums of money for the
         purposes of the company provided however, where the moneys to be
         borrowed together with the moneys already borrowed (apart from
         temporary loans obtained from the Company's bankers in the



                                       15

         ordinary course of business) exceed the aggregate of the paid up
         capital of the Company and its free reserves (that is to say, reserves
         not set apart for any specific purpose) the Board shall not borrow such
         moneys without the consent of the Company in General Meeting.

         THE PAYMENT OR REPAYMENT OF MONIES BORROWED

67.      The payment or repayment of moneys borrowed as aforesaid may be secured
         in such manner and upon such terms and conditions in all respects as
         the Board may think fit, and in particular by a resolution passed at a
         meeting of the Board (and not by Circular Resolution) by the issue of
         debentures of the Company, charged upon all or any part of the property
         of the Company (both present and future) including its uncalled capital
         for the time being, and debentures, and other securities may be made
         assignable free from any equities between the Company and the person to
         whom the same may be issued.

         TERMS OF ISSUE OF DEBENTURES

68.      Any debentures, debenture-stock or other securities may be issued at a
         discount, premium or otherwise and maybe issued on condition that they
         or any part of them shall be convertible into shares of any
         denomination, and with any privileges and conditions as to redemption,
         surrender, drawing, allotment of shares and attending (but not voting
         at) General Meetings, appointment of Directors and otherwise.
         Debentures with a right to conversion or allotment of shares shall be
         issued only with the consent of the Company in General Meeting.

         REGISTER OF MORTGAGES, ETC. TO BE KEPT

69.      The Board shall cause a proper register to be kept in accordance with
         the provisions of Section 143 of the Act of all mortgages, debentures
         and charges specifically affecting the property of the Company; and
         shall cause the requirements of Sections 118, 125, and 127 to 144 (both
         inclusive) of the Act, in that behalf to be duly complied with (within
         the time prescribed by the said sections or such extensions thereof as
         may be permitted by the Company Law Board or the Court or the Registrar
         as the case may be) so far as they fail to be complied with by the
         Board.

         REGISTER AND INDEX OF DEBENTURE HOLDERS

70.      The Company shall, if any time it issues debentures, keep a Register
         and Index of Debenture holders in accordance with Section 152 of the
         Act. the company shall have the power to keep in any State or Country
         outside India a Branch Register of Debenture-holders resident in that
         State or Country

                                  SHARE WARRANT

          POWER TO ISSUE SHARE WARRANTS

71.      The Company may issue share warrants subject to, and in accordance with
         the provisions of sections 114 and 115, and accordingly the Board may
         in its discretion, with respect to any share which is fully paid-up on
         application in writing signed by the persons registered as holder of
         the share, and authenticated, by such evidence (if any) as the Board
         may, from time to time, require as to the identity of the person
         signing the application, and on receiving the certificate (if any) of
         the share, and the amount of the stamp duty on the warrant and such fee
         as the Board may from time to time require, issue a share warrant.



                                       16

         DEPOSIT OF SHARE WARRANT

72.      1)       The bearer of a share warrant may at any time deposit the
                  warrant at the office of the Company, and so long as the
                  warrant remains so deposited, the depositor shall have the
                  same right of signing a requisition for calling a meeting of
                  the Company, and of attending, and voting and exercising the
                  other privileges of a Member at any meeting held after the
                  expiry of two clear days from the time of deposit as if his
                  name were inserted in the Register of Members as the holder of
                  the share included in the deposited warrant.

         2)       Not more then one person shall be recognised as depositor of
                  the share warrant,

         3)       The Company shall, on two days' written notice, return the
                  deposited share warrant to the depositor.

         PRIVILEGES AND DISABILITIES OF THE HOLDERS OF SHARE WARRANT

73.      1)       Subject as herein otherwise expressly provided, no person
                  shall, as bearer of a share warrant sign a requisition for
                  calling a meeting of the Company, or attend or vote or
                  exercise any other privileges of a Member at a meeting of the
                  Company, or be entitled to receive any notices from the
                  Company.

         2)       The bearer of a share warrant shall be entitled in all other
                  respects to the same privileges and advantages as if he was
                  named in the Register of Members as the holder of the share
                  included in the warrant, and shall be a Member of the Company.

         ISSUE OF NEW SHARE WARRANT OR COUPON

         74.      The Board may, from time to time, make rules as to the terms
                  on which (if it shall think fit) a new share warrant or coupon
                  may be issued by way of renewal in case of defacement, loss or
                  destruction.

                  CONVERSION OF SHARE INTO STOCK AND RECONVERSION

         SHARES MAY BE CONVERTED INTO STOCK

         75.      The Company in General Meeting may convert any paid-up shares
                  into stock; and when any shares have been converted into
                  stock, the several holders of such stock may thenceforth
                  transfer their respective interest therein, or any part of
                  such interest, in the said manner and subject to the same
                  Regulations as, and subject to which shares from which the
                  stock arose might have been transferred if no such conversion
                  had taken place, or as near thereto as circumstance will
                  admit. The Company may at any time reconvert any stock into
                  paid-up shares of any denomination.

         RIGHT OF STOCKHOLDERS

         76.      The holders of stock shall, according to the amount of stock
                  held by them, have the same right, privileges and advantages
                  as regards dividends, voting at meetings of the Company, and
                  other matters, as if they held the shares from which the stock
                  arose, but no such privilege advantage (except participation
                  in the dividends and profits of the Company and in the assets
                  on winding-up) shall be conferred by an amount of stock which
                  would not, if existing in shares, have conferred that
                  privilege or advantage.



                                       17

                               MEMBERS' MEETINGS

         ANNUAL GENERAL MEETING

77.      Annual General Meeting of the company may be convened subject to
         Section 166 and Section 210 of the Act by giving not less than 21 days
         notice in writing. Subject to the provisions of Section 171 (2) a
         meeting may be convened after giving a shorter notice.

         EXTRA ORDINARY GENERAL MEETING

78.      The Board may, whenever it thinks fit, call an Extraordinary General
         Meeting and it shall do so upon a requisition in writing by any Member
         or Members holding in the aggregate not less than one tenth of such of
         the paid-up capital; as at that date carried the right of voting in
         regard to the matter in respect of which the requisition has been made.

         REQUISITION OF MEMBERS TO STATE OBJECTS OF MEETING

79.      Any valid requisition so made by the Members must state the object or
         objects of the meeting proposed to be called, and must be signed by the
         requisitionists and be deposited at the office; provided that such
         requisition may consist of several documents in like form each signed
         by one or more requisitionists.

         ON RECEIPT OF REQUISITION, DIRECTORS TO CALL MEETING AND IN DEFAULT
         REQUISITIONISTS MAY DO SO

80.      Upon the receipt of any such requisition, the Board shall forthwith
         call an Extraordinary General Meeting; and if it does not proceed
         within twenty-one days from the date of the requisition being deposited
         at the Office to cause a meeting to be called on a day not later than
         forty-five days from the date of deposit of the requisition, the
         requisitionists, or such of their number as represent either a majority
         in value of the paid-up, share capital held by all of them or not less
         than one-tenth of such of the paid-up share capital of the Company as
         is referred to in Section 169 (4) of the Act, whichever is less, may
         themselves call the meeting, but in either case any meeting so called
         shall be held within three months from the date of deposit of the
         requisition as aforesaid.

         MEETING CALLED BY REQUISITIONISTS

81.      Any meeting called under the foregoing Articles by the requisitionists
         shall be called in the same manner, as nearly as possible, as that in
         which meetings are to be called by the Board.

         QUORUM AT GENERAL MEETING

82.      Five members present in person shall be a quorum for a General Meeting.

         BODY CORPORATE PERSONALLY PRESENT

83.      A body corporate being a member shall be deemed to be personally
         present if it is represented in accordance with Section 187 of the Act.

         IF QUORUM NOT PRESENT MEETING TO BE DISSOLVED OR ADJOURNED

84.      If, at the expiration of half an hour from the time appointed for
         holding a meeting of the Company, a quorum shall not be present, the
         meeting it convened by or upon the requisition of Members, shall stand
         dissolved, but in any other case the meeting shall stand adjourned to



                                       18

         the same day in the next week or if that day is a public holiday until
         the next succeeding day which is not a public holiday at the same time
         and place or to such other day at such other time and place within the
         city or town in which the Office of the Company is situate as the Board
         may determine, and if at such adjourned meeting a quorum is not present
         at the expiration of half an hour from the time appointed for holding
         the meeting, the Members present shall be a quorum, and may transact,
         the business for which the meeting was called.

85.      The Chairman (if any) of the Directors shall be entitled to take the
         chair at every General Meeting, whether Annual or Extraordinary. If
         there be no such Chairman of the Directors, or if at any meeting he
         shall not be present within fifteen minutes of the time appointed for
         holding such meeting then the members presents shall elect another
         Director as Chairman and if no Director be present or if all Directors
         present decline to take the Chair, then the members present shall elect
         one of their members to be the Chairman.

         BUSINESS CONFINED TO ELECTION OF CHAIRMAN WHILST CHAIR VACANT

86.      No business shall be discussed at any General Meeting except the
         election of a Chairman, whilst the chair is vacant.

         CHAIRMAN WITH CONSENT MAY ADJOURN MEETING

87.      The Chairman with the consent of the meeting may adjourn any meeting
         from time to time and from place to place within the city or town in
         which the office of the Company is situated for the time being but no
         business shall be transacted at any adjourned meeting other than the
         business left unfinished at the meeting from which the adjournment took
         place.

         QUESTION AT GENERAL MEETING HOW DECIDED

88.      At any General Meeting a resolution put to the vote of the meeting
         shall be decided on a show of hands unless a poll is (before or on the
         declaration of the result of the show of hands) demanded by a member
         or members present in person or by proxy and holding shares in the
         Company which confer a power to vote on the resolution not being less
         than 1/10th of the total voting power in respect of the Resolution or
         on which an aggregate sum of not less than Rs. 50,000/- has been paid
         up. The demand for a poll may be withdrawn at any time by the person or
         persons who made the demand.

         CHAIRMAN'S CASTING VOTE

89.      In the case of any equality of votes, the Chairman shall both on a show
         of hands and at a poll (if any) have a casting vote in addition to the
         votes to which he may be entitled as a Member.

         DEMAND FOR POLL NOT TO PREVENT TRANSACTION OF OTHER BUSINESS

90.      The demand for a poll except on the question of the election of the
         Chairman and of an adjournment shall not prevent the continuance of a
         meeting for the transaction of any business other than the question on
         which the poll has been demanded.

         MEMBER IN ARREARS NOT TO VOTE

91.      No member shall be entitled to vote either personally or by proxy at
         any General Meeting or meeting of a class of shareholders either upon a
         show of hands or upon a poll in respect of any shares registered in his
         name on which any calls or other sums presently payable by him have not
         been paid or in regard to which the Company has, and has exercised, any
         right of lien.



                                       19

         NUMBER OF VOTES TO WHICH MEMBER ENTITLED

92.      Subject to the provisions of these Articles and without prejudice to
         any special privileges or restrictions as to voting for the time being
         attached to any class of shares for the time being forming part of the
         capital of the Company, every member, not disqualified by the last
         preceding Article shall be entitled to be present and to speak and vote
         at such meeting, and on a show of hands every member present in person
         shall have one vote and upon a poll the voting rights of every member
         whether present in person or by proxy, shall be in proportion to his
         share of the paid-up equity capital of the Company.

         CASTING OF VOTES BY A MEMBER ENTITLED TO MORE THAN ONE VOTE

93.      On as poll taken at a meeting of the Company, a member entitled to more
         than one vote, or his proxy, or other person entitled to vote for him
         as the case may be, need not, if he votes, use all his votes or cast
         in the same way all the votes he uses.

         VOTES OF MEMBERS OF UNSOUND MIND AND MINORS

94.      A member of unsound mind or in respect of whom an order has been made
         by any court having jurisdiction in lunacy, may vote, whether on a show
         of hand or on a poll, by his committee or other legal guardian, and any
         such committee or guardian may, on a poll vote by proxy. If any member
         be a minor, the votes in respect of his share or shares shall be by his
         guardian or any of his guardians, if more than one, to be elected in
         case of dispute by the Chairman of the meeting.

         VOTES OF JOINT MEMBERS

95.      If there be joint registered holders of any shares, any one of such
         persons may vote at any meeting or may appoint another person (whether
         a Member or not) as his proxy in respect of such shares as if he were
         solely entitled therein but the proxy so appointed shall not have any
         right to speak at the meeting and, if more than one of such
         joint-holders be present at any meeting, that one of the said person so
         present whose name stands higher on the Register shall alone be
         entitled to speak and to vote in respect of such shares, but the other
         or others of the joint-holders shall be entitled to be present at the
         meeting. Several executors or administrators of a deceased member in
         whose names share stand shall for the purpose of these Articles be
         deemed joint holders thereof.

         VOTING IN PERSON OR BY PROXY

96.      Subject to the provisions of these Articles votes may be given either
         personally or by proxy. A body corporate being a member may vote either
         by a proxy or by a representative duly authorised in accordance with
         Section 187 of the Act and such representative shall be entitled to
         exercise the same rights and powers (including the right to vote by
         proxy) on behalf of the body corporate which he represents as the body
         could exercise if it ware an individual member.

         VOTES IN RESPECT OF SHARES OF DECEASED OR INSOLVENT MEMBERS

97.      Any person entitled under Article 62 to transfer any shares may vote at
         any General Meeting in respect thereof in the same manner as if he were
         the registered holder of such shares, provided that 48 hours, at least,
         before the time of holding the meeting or adjourned meeting as the case
         may be at which he proposed to vote he shall satisfy the Directors of
         his right to transfer such shares and give such indemnity (if any) as
         the Directors may require or the Directors shall have previously
         admitted his right to vote at such meeting in respect thereof.


                                       20

         APPOINTMENT OF PROXY

98.      Every proxy (whether a member or not) shall be appointed in writing
         under the hand of the appointer or his attorney, or if such appointer
         is a corporation under the common seal of such corporation, or be
         signed by an officer or an Attorney duly authorised by it and any
         committee or guardian may appoint such proxy. The proxy so appointed
         shall not have any right to speak at the meeting.

         PROXY EITHER FOR A SPECIFIED MEETING OR FOR SPECIFIED PERIOD

99.      An instrument of proxy may appoint a proxy either for purpose of a
         particular meeting specified in the instrument and any adjournment
         thereof or it may appoint for the purposes of every meeting of the
         Company, or of every meeting to be held before the data specified in
         the instrument and any adjournment of any such meeting.

         NO PROXY EXCEPT FOR A BODY CORPORATE TO VOTE ON A SHOW OF HANDS

100.     A member present by proxy shall be entitled to vote only on a poll but
         not on a show of hands, unless such member is a body corporate present
         by a representative in which case such proxy shall have a vote on the
         show of hand as if he were a member.

         DEPOSIT OF INSTRUMENT OF PROXY

101.     The instrument appointing a proxy and the Power of Attorney or other
         authority (if any) under which it is signed or a notarially certified
         copy of that power or authority shall be deposited at the office not
         later than forty eight hours before the time for holding the meeting at
         which the person named in the instrument proposes to vote, and in
         default the instrument of proxy shall not be treated as valid. No
         instrument appointing a proxy shall be valid after the expiration of
         twelve months from the date of its execution.

         FORM OF PROXY

102.     Every instrument of proxy whether for a specified meeting otherwise
         shall, as nearly as circumstances will admit, be in any of the forms
         set out in Schedule 1X of the Act.

         VALIDITY OF VOTES GIVEN BY PROXY NOTWITHSTANDING DEATH OF MEMBER

103.     A vote given in accordance within the norms of an instrument of proxy
         shall be valid notwithstanding the previous death or insanity of the
         Principal, or revocation of the proxy or of any power of attorney under
         which such proxy was signed, or the transfer of the share in respect of
         which the vote is given, provided that no intimation in writing of the
         death or insanity, revocation or transfer shall have been received at
         the office before the meeting.

         TIME FOR OBJECTION TO VOTE

104.     No objection shall be made to the validity of any vote; except at any
         meeting or poll at which such vote shall be tendered and every vote,
         whether given personally or by proxy, not disallowed at such meeting or
         poll shall be deemed valid for all purposes of such meeting or poll
         whatsoever.


Article 107 deleted WE7 June 14 2003.
[STAMP: IFOSYS TECHNOLOGIES LIMITED * BANGALORE]

                                       21

CHAIRMAN OF ANY MEETING TO BE THE JUDGE OF VALIDITY OF VOTE

105.     The Chairman of any meeting shall be the sole judge of the validity of
         every vote tendered at such meeting. The Chairman present at the taking
         of a poll shall be the sole judge of the validity of every vote
         tendered at such poll.

                                   DIRECTORS

         NUMBER OF DIRECTORS

108.     Until otherwise determined by the company in a General Meeting and
         subject to the provisions of Section 252 of the Act, the number of
         directors (excluding Debenture Directors and Directors appointed under
         Article 111 hereof and Alternate Directors) shall not be less than
         three nor more than eighteen.

         RESOLUTION PASSED AT THE ANNUAL GENERAL MEETING HELD ON MAY 27, 2000.

         NON-RETIRING DIRECTORS

107.     If and so long as Mr. N.R. Narayana Murthy and/or his relatives shall
         hold not less than 5% of the issued equity share capital of the
         Company, Mr. N.R. Narayana Murthy shall be the Managing Director of the
         Company and shall not be liable to retire by rotation.

108.     The Board may appoint, from time to time, one or more of their members
         to be the Managing Director or Joint Managing Director or Wholetime
         Director or Deputy Managing Director or Manager of the Company on such
         terms and on such remuneration (whether by way of salary or commission,
         or partly in one and partly in another) as they may think fit and the
         directors so appointed shall not while holding that office, be subject
         to retirement by rotation or taken into account in determining the
         rotation of retirement of directors, but their appointment shall be
         subject to determination ipso facto if they cease from any cause to be
         a director or if the company in General Meeting resolve that their
         tenure of the office Managing Director or Joint Managing Director or
         Wholetime Director or Deputy Managing Director or Manager be
         determined.

109.     Subject to the provisions of the Act, the Directors, may from time to
         time entrust and confer upon e Managing Director for the time being
         such of the power exercisable upon such terms and conditions and with
         such restrictions they may think fit either collaterally with or to the
         exclusion of and in substitution for all or any of their own powers and
         from time to time revoke, withdraw, alter or vary all or any of such
         powers.

         APPOINTMENT OF SPECIAL DIRECTORS

110.     On behalf of the Company, whenever Directors enter into a contract with
         any Government, Central, State or Local, any Bank or Financial
         institution or any person or persons (hereinafter referred to as "the
         appointer") for borrowing any money or for providing any guarantee or
         security or for technical collaboration or assistance or for
         underwriting or entering into any other arrangement whatsoever the
         Directors shall have, subject to the provisions of Section 255 of the
         Act, the power to agree that such appointer shall have right to appoint
         or nominate by notice in writing addressed to the Company one or more
         Directors on the Board for such period and upon such conditions as may
         be mentioned in the agreement and that such Director or Directors may
         not be liable to retire by rotation nor be required to hold any
         qualification shares. The Directors may also agree that any such
         Director of Directors may be removed from time to time by the appointer
         entitled to appoint or nominate them and the appointer may appoint
         another or others in his or their place and also fill in any vacancy
         which may occur as a result of any such Director or Directors ceasing
         to hold that office for any reason whatsoever. The Directors appointed
         or nominated under this Article shall be entitled to exercise and enjoy
         all or any of the rights and privileges exercised and enjoyed by the

                                       21



                                       22

         Directors of the Company including payment of remuneration and
         travelling expenses to such Director of Directors as may be agreed by
         the Company with the appointer.

         DEBENTURE DIRECTORS

111.     If it is provided by any Trust Deed, security or otherwise, in
         connection with any issue of debentures of the Company that any person
         or persons shall have power to nominate a Director or Directors of the
         Company, then in the case of any and every such issue of debentures,
         the person or persons having such power may exercise such power from
         time to time and appoint a Director or Directors accordingly. Any
         Director so appointed is herein referred to as "Debenture Director". A
         Debenture Director may be removed from office at any time by the person
         or persons in whom for the time being is vested the power under which
         he was appointed and another director may be appointed in his place. A
         debenture director shall not be bound to hold any qualification shares.
         A debenture director shall not if so agreed by the company be liable to
         retire by rotation; but shall automatically cease to hold office as a
         director if and when the debentures are fully discharged.

         NOMINEE DIRECTORS

112.     Nominee Directors: So long as any moneys remain owing by the Company to
         The Industrial Development Bank of India, Industrial Finance
         Corporation of India, The Industrial Credit and Investment Corporation
         of India Limited. The Industrial Reconstruction Corporation of India
         Limited, Life Insurance Corporation of India, General Insurance
         Corporation of India, National Insurance Company Limited, The Oriental
         Fire & General Insurance Company Limited, The New India Assurance
         Company Limited, United India Insurance Company Ltd., Karnataka State
         Industrial Investment and Development Corporation Ltd., or any State
         Financial Corporation or any Financial Institution owned or controlled
         by the Central Government or any State Government or the Reserve Bank
         of India or by two or more of them by Central Government themselves
         (each of the above and Unit Trust of India are hereinafter referred to
         as the Corporation) out of any loans/debentures, assistance granted by
         them to the Company or so long as the Corporation holds or continues to
         hold Debentures/Shares in the Company as a result of any guarantee
         furnished by the Corporation on behalf of the Company and remaining
         outstanding the Corporation shall have a right to appoint from time to
         time, any person as Director, Wholetime or non-Wholetime (which
         Director or Directors, is/are hereinafter referred to as `Nominee
         Director/s') on the Board of the Company and to remove from such office
         any person or persons so appointed and to appoint any person in his or
         their places. The Board shall have no power to remove from the office
         of the Nominee Directors. At the option of the Corporation such Nominee
         Director/s shall not be liable to retirement by rotation. Subject as
         aforesaid, Nominee Director/s shall be entitled to the same rights and
         privileges and be subject to the same obligations as any other
         Directors of the Company.

         PERIOD OF HOLDING OF OFFICE BY NOMINEE DIRECTORS

113.     The Nominee Director/s so appointed shall hold the said office only so
         long as any moneys remain owing by the Company to the Corporation or so
         long as the Corporation holds or continues to hold Debentures/shares in
         the Company as a result of underwriting or by direct subscription or
         private placement or the liability of the Company arising out of the
         guarantee is outstanding and the Nominee Director/s so appointed in
         exercise of the said powers shall ipso facto vacate such office
         immediately the moneys owing by the Company to the Corporation are paid
         off or on the Corporation ceasing to hold Debentures/shares in the
         Company or on the satisfaction of liability of the Company arising out
         of any guarantee furnished by the Corporation.



                                       23

         CO-OPTION OF DIRECTORS

114.     Directors shall have power at any time and from time to time to co-opt,
         any other person as a director either to fill a casual vacancy or as an
         additional director, so that the total number of directors shall not at
         any time exceed the maximum fixed. Any director appointed to fill a
         casual vacancy shall hold office only up to the date up to which the
         director in whose place he has been place would have held the office if
         it had not been vacated. Any additional director shall hold office only
         up to the date of next Annual General Meeting of the Company but shall
         be eligible for re-election at such meeting.

         ALTERNATE DIRECTORS

115.     The Board may appoint an alternate director to act for a director
         (hereinafter called "original director" during his absence for a period
         of not less than three months from the State in which meetings of the
         Board are ordinarily held. An alternate director appointed under this
         Article shall not hold office as such for a period longer than that
         permissible to the original director and shall vacate office if and
         when the original director returns to the State aforesaid. If the term
         of office of original director is determined before he so returns to
         the State aforesaid any provision for automatic re-appointment of
         retiring directors in default of another appointment shall apply to the
         original and not to the alternate director.

         QUALIFICATION SHARES OF DIRECTORS

116.     A Director shall not be required to hold any qualification shares.

         REMUNERATION OF DIRECTORS

117.     The remuneration of Directors and Executives of the Company, including
         the fees payable to the Directors of the Company in attending the
         Meeting of the Board or the Committees of the Board, shall be
         determined by the Board of Directors from time to time, provided that
         the sitting fees payable to the Directors as aforesaid shall be within
         the maximum limits of such fees that may be prescribed under the
         proviso to Section 310 of the Companies Act, 1956.

         DIRECTORS' TRAVELLING EXPENSES

118.     In addition to the remuneration payable to them, the Directors shall be
         entitled to be paid all travelling, hotel and other incidental expenses
         properly incurred by them in attending and returning from meetings of
         the Board of Directors or any Committee thereof or General Meetings or
         in connection with the business of the Company. The rules in this
         regard may be framed by the board of Directors from time to time.

         SPECIAL REMUNERATION FOR PERFORMING EXTRA SERVICES

119.     If any Director be called upon to perform extra services or special
         exertions or efforts (which expression shall include work done by a
         Director as a Member of any committee formed by the Director(s) the
         Board may arrange with such Directors for such special remuneration for
         such extra services or special exertions or efforts either by a fixed
         sum or otherwise as may be determined by the Board and such
         remuneration may be either in addition to or in substitution for his
         remuneration, subject to provisions of the Act and confirmation by the
         Company in General Meeting.

         DIRECTORS MAY ACT NOTWITHSTANDING ANY VACANCY

120.     The continuing Directors may act notwithstanding any vacancy in their
         body, but if and so long as their number is reduced below the quorum
         fixed by the Act for a meeting of the Board



                                       24

         of Directors, the continuing Director or Directors may act for the
         purpose of increasing the number of Directors to that fixed for a
         quorum or for summoning a General Meeting but for no other purpose.

         TERMS OF OFFICE OF DIRECTORS

121.     Not less than two-thirds of the total number of Directors shall be
         persons whose period of office is liable to determination by retirement
         of Directors by rotation.

         RETIREMENT OF DIRECTORS BY ROTATION

122.     At every annual general meeting of the Company one-third of such of the
         Directors for the time being as are liable to retire by rotation, or if
         their number is not three or a multiple of three, then the number
         nearest to one third, shall retire from office.

         ASCERTAINMENT OF DIRECTORS TO RETIRE

123.     The Directors to retire by rotation under the foregoing article shall
         be those who have been longest in office since their last appointment,
         but as between persons who become Directors on the same day, those who
         are to retire shall, in default of and subject to any agreement among
         themselves, be determined by lot. A retiring Director shall be eligible
         for re-election.

         COMPANY TO APPOINT SUCCESSORS

124.     The Company, at the annual general meeting at which a Director retires
         in manner aforesaid, may, fill up the vacated office by electing the
         retiring Director or some other person thereto.

         PROVISIONS IN DEFAULT OF APPOINTMENT

125.     a)       If the place of the retiring Director is not so filled up and
                  the meeting has not expressly resolved not to fill the
                  vacancy, the meeting shall stand adjourned till the same day
                  in the next week at the same time and place, or if that day is
                  a public holiday, till the next succeeding day which is not a
                  public holiday at the same time and place.

         b)       If at the adjourned meeting also, the place of the retiring
                  Director is not filled up and that meeting also has not
                  expressly resolved not to fill the vacancy, the retiring
                  Director shall be deemed to have been re-appointed at the
                  adjourned meeting, unless:-

                  i)       at the meeting or at the previous meeting a
                           resolution for the re-appointment of such Director
                           has been put to the meeting and lost;

                  ii)      the retiring Direction has, by his notice in writing
                           addressed to the Company or its Board of Directors
                           expressed his unwillingness to be so re-appointed;

                  iii)     he is not qualified or is disqualified for
                           appointment;

                  iv)      a resolution, whether special or ordinary is required
                           for the appointment or re-appointment by virtue of
                           any provisions of the Act: or

                  v)       the provision to sub-section (2) of Section 263 is
                           applicable to the case.



                                       25

         COMPANY MAY INCREASE OR REDUCE NUMBER OF DIRECTORS

126.     Subject to Sections 252, 256 and 259 of the Act, the Company in general
         meeting may from time to time, increase or reduce the number of
         Directors, within the limits fixed in that behalf by these Articles.

         REMOVAL DIRECTORS

127.     The Company may (subject to the provisions of Section 284 of the Act)
         remove any Director before the expiration of his period of office and
         appoint another person in his stead.

                      PROCEEDINGS OF THE BOARD OF DIRECTORS

         MEETING OF DIRECTORS

128.     The Directors may meet together as a Board for the dispatch of business
         from time to time and shall so meet at least once in every
         three calendar months and at least four such meetings shall be held in
         every year. The Directors may adjourn and otherwise regulate their
         meetings as they may think fit.

         NOTICE OF THE BOARD MEETINGS

129.     Notice of every meeting of the Board shall be given in writing to every
         Director for the time being in India and at his address in India to
         every other Director.

         QUORUM

130.     Subject to Section 287 of the Act, the quorum for a meeting of the
         Board shall be one-third of its total strength (excluding Directors, if
         any, whose places may be vacant at the time, and any fraction contained
         in that one-third being rounded off as one), or two Directors whichever
         is higher. Provided that where at any time the number of interested
         Directors exceeds or is equal to two-thirds of the total strength, the
         number of the remaining Directors, that is to say, the number of the
         Directors who are not interested present at the meeting being not less
         than two, shall be the quorum during such meeting.

         ADJOURNMENT OF MEETINGS FOR WANT TO QUORUM

131.     If a meeting of the Board could not be held for want of quorum, then
         the meeting shall automatically stand adjourned to such other time as
         may be fixed by the Chairman.

         SECRETARY TO CALL BOARD MEETING

132.      The Secretary shall, and when directed by any Director to do so,
         convene a meeting of the Board by giving a notice in writing to every
         other Director.

         CHAIRMAN OF DIRECTORS

133.     The Directors shall choose one of their number to be the Chairman of
         the Directors who shall hold such office until the Directors otherwise
         determine. If at any meeting the Chairman of the Directors shall not be
         present at the time appointed for holding the same, the Directors
         present shall choose some one of their member to be the Chairman of
         such meeting.



                                       26
         QUESTIONS HOW DECIDED

134.     Question arising at any meeting of the Board shall be decided by a
         majority of votes and in the case of an equality of votes the Chairman
         shall have second or a casting vote.

         POWER OF BOARD MEETING

135.     A meeting of the Board for the time being at which a quorum is present,
         shall be competent to exercise all or any of the authorities, power and
         discretions which by or under the Act or the Articles of the Company
         are for the being vested in or exercisable by the Board generally.

         APPOINTMENT OF SUB-COMMITTEE

136.     The Board may appoint from time to time a sub-committee consisting of
         one or more Director(s) and or one or more senior executive(s) of the
         Company to deal with matters relating to transfer / transmission of
         shares / debentures and such other matters incidental thereto with such
         powers and duties, as the Board deems fit.

         DIRECTORS MAY APPOINT COMMITTEES

137.     Subject to the restrictions contained in Section 292 of the Act, the
         Board may delegate any of its powers to committees of the Board
         consisting of such members of its body as it thinks fit, and it may
         from time to time revoke and discharge any such committee of the Board
         either wholly or in part, and either as to persons or purposes but
         every committee of the Board so formed shall in the exercise of the
         powers so delegated, confirm to any Regulations that may from time to
         time be imposed on it by the Board. All acts done by any such committee
         of the Board in conformity with such Regulations and in fulfillment of
         the purpose of their appointment but not otherwise shall have the like
         force and effect as if done by the Board.

         MEETING OF COMMITTEE HOW TO BE GOVERNED

138.     The meeting and proceedings of any such committee of the Board
         consisting of two or more members shall be governed by the provisions
         herein contained for regulating the meetings and proceedings of the
         Directors so far as the same are applicable thereto and are not
         superseded by any Regulations made by the Directors under the last
         preceding Article. The provisions of Article 134 shall mutatis mutandis
         apply to the meeting of such committee.

         CIRCULAR RESOLUTION

139.     No resolution shall be deemed to have been duly passed by the Board or
         by a Committee thereof by circulation, unless the resolution has been
         circulated in draft, together with the necessary papers, if any, to all
         the Directors or to all the members of the committee then in India (not
         being less in number than the quorum fixed for a meeting of the Board
         or Committee, as the case may be), and to all other Directors or
         members of the Committee, at their usual address in India and has been
         approved by such of the Directors of members of the Committee as are
         then in India, or by a majority of such of them as are entitled to vote
         on the resolution.

         VALIDITY OF DIRECTORS ACTS

140.     All acts done by any meeting of the Board or by a Committee or by a
         sub- committee of the Board, or by any person acting as a Director
         shall notwithstanding that it shall afterwards be discovered that there
         was some defect in the appointment of such Directors, or persons acting
         as aforesaid, or that they or any of them were disqualified or had
         vacated office or that



                                       27

         the appointment of any of them were disqualified or had vacated office
         or that the appointment of any of them had been terminated by virtue of
         any provisions contained in the Act or in these Articles, be as valid
         as if every such persons had been duly appointed and was qualified to
         be a Director and had not vacated his office or his appointment had not
         been terminated. Provided that nothing in this Article shall be deemed
         to give validity to acts done by a Director after his appointment has
         been shown to the Company to be invalid or to have terminated.

         POWERS OF DIRECTORS

141.     The business of the Company shall be managed by the Board of Directors,
         who may exercise all such powers of the Company and do all such acts
         and things as are not, by the Act, or any other Act or by the
         Memorandum or by the Articles of the Company required to be exercised
         by the Company in General Meeting subject nevertheless to the
         Regulations of these Articles to the provisions of the Act, or any
         other Act and to such Regulations being not inconsistent with the
         aforesaid Regulations or provisions as may be prescribed by the Company
         in General Meeting but no Regulation made by the Company in General
         Meeting shall invalidate any prior act of the Board which would have
         been valid if that Regulation had not been made. Provided that the
         Board of Directors shall not except with the consent of the Company in
         General Meeting.

         a.       sell, lease or otherwise dispose of the whole or substantially
                  the whole of the undertaking of the Company, or where the
                  company owns more than one undertaking, of the whole, or
                  substantially the whole, of any such undertaking;

         b.       remit or give time for the repayment of, any debt by a
                  Director;

         c.       invest, otherwise than in trust securities, the amount of
                  compensation received by the company in respect of the
                  compulsory acquisition of any such undertaking as is referred
                  to in Clause (a) or of any premises or properties used for any
                  such undertaking and without which it cannot be carried on or
                  can be carried on only with difficulty or only after a
                  considerable time;

         d.       borrows moneys, where the moneys to be borrowed together with
                  the moneys already borrowed by the company (apart from
                  temporary loans obtained from the company's Bankers in the
                  ordinary course of business) will exceed the aggregate of the
                  paid-up capital of the company and its free reserves, that is
                  to say, reserves not set apart for any specific purposes.
                  Provided further that the powers specified in Section 292 of
                  the Act shall be exercised only at meetings of the Board
                  unless the same be delegated to the extent therein stated; or

         e.       contribute to Charitable and other funds not directly relating
                  to the business of the Company or the welfare of its employees
                  any amounts, the aggregate of which will in any financial year
                  exceed Rupees Fifty Thousand only or five percent of its
                  average net profit as determined in accordance with the
                  provisions of Sections 349 and 350 of the Act during the three
                  financial years immediately preceding, whichever is greater.

         CERTAIN POWERS TO BE EXERCISED BY THE BOARD ONLY AT MEETINGS

142.     The Board of Directors of the Company shall exercise the following
         powers on behalf of the Company and it shall do so only by means of
         resolutions passed at meetings of the Board:-

         a.       The power to make calls on share holders in respect of money
                  unpaid on their shares;

         b.       The power to issue debentures;



                                       28

         c.       The power to borrow money otherwise than on debentures

         d.       The power to invest the funds of the Company;

         e.       The power to make loans;

         Provided that the Board may, by a resolution passed at a meeting,
         delegate to any committee of Directors, the Manager or any other
         principal officer of the company or in the case of a branch office of
         the company, a principal officer of the branch office, the powers
         specified in clauses (c), (d) and (e) of this Article to the extent
         specified in sub-sections (2), (3) and (4) respectively of Section 292
         of the Act, on such condition as the Board may prescribe in respect of
         dealings between the company and its bankers, the exercise by the
         company of the powers specified in Clause (c) shall mean the
         arrangement made by the company with its bankers for the borrowing of
         money by way of overdraft or cash credit or otherwise and not the
         actual day to day operation on overdraft, cash credit or other accounts
         by means of which the arrangement so made is actually availed of.

         CERTAIN POWERS OF THE BOARD

143.     Without prejudice to the general powers conferred by the last preceding
         Article and so as not in any way to limit or restrict these powers, and
         without prejudice to the other powers conferred by these Articles, but
         subject to the restrictions contained in the last preceding Article, it
         is hereby declared that the Directors shall have the following powers,
         that is to say power:

         1)       To pay the costs, charges and expenses preliminary and
                  incidental to the promotion, formation, establishment and
                  registration of the company.

         PAYMENT OUT OF CAPITAL

         2)       To pay and charge to the capital account of the company any
                  commission or interest lawfully payable thereout under the
                  provisions of Sections 76 and 208 of the Act.

         TO ACQUIRE PROPERTY

         3)       Subject to Sections 292 and 297 of the Act to purchase or
                  otherwise acquire for the Company any property, rights,
                  privileges which the Company is authorised to acquire, at or
                  for such price or consideration and generally on such terms
                  and conditions as they think fit, and in any such purchase or
                  other acquisition to accept such title as the Directors may
                  believe or may be advised to be reasonably satisfactory.

         TO PAY FOR PROPERTY, ETC.

         4)       At their discretion and subject to the provision of the Act,
                  to pay for any property, rights, or privileges acquired or
                  services rendered in the Company either wholly or partially,
                  in cash or in shares, bonds, debentures, mortgages, or other
                  securities of the such amount credited as paid up thereon as
                  may be agreed upon and any such bonds; debentures, mortgages
                  or other securities may be either, specifically charged upon
                  all or any part of the property to the Company and its
                  uncalled capital or not so charged.

         TO SECURE CONTRACTS

         5)       To secure the fulfilment of any contracts or engagements
                  entered into by the Company by mortgage or charge of all or
                  any of the property of the Company and its uncalled capital
                  for the time being or in such manner as they may think fit.



                                       29

TO ACCEPT SURRENDER OF SHARES

6)       To accept from any member, as far as may be permissible by law, a
         surrender of his shares or any part thereof, on such terms and
         conditions as shall be agreed.

TO APPOINT TRUSTEES

7)       To appoint any person to accept and to hold in trust for the Company
         any property belonging to the Company, or in which it is interested, or
         for any other purposes; and to execute and do all such deeds and things
         as may be required in relation to any such trust, and to provide for
         the remuneration of such trustee or trustees.

TO BRING AND DEFEND ACTIONS

8)       To institute, conduct, defend, compound, or abandon any legal
         proceedings by or against the Company or its officers or otherwise
         payment or satisfaction of any debts due, and of any claims or demands
         by or against the Company, and to refer any differences to arbitration,
         and observe and perform any awards made thereon.

TO ACT IN INSOLVENCY MATTERS

9)       To act on behalf of the Company in all matters relating to bankrupts
         and insolvents.

TO GIVE RECEIPTS

10)      To make and give receipts, releases and other discharges for moneys
         payable to the Company, and for the claims and demands of the Company.

TO INVEST MONEYS

11)      Subject to the provisions of Sections 292, 293 (1)(c), 295, 370 and 372
         of the Act, to invest, deposit and deal with any moneys of the Company
         not immediately required for the purpose thereof, upon such security
         (not being shares of this Company), or without security and in such
         manner as they may think fit, and from time to time to vary or realise
         such investments. Save as provided in Section 49 of the Act, all
         investments shall be made and held in the Company's own name.

TO PROVIDE FOR PERSONAL LIABILITIES

12)      To execute in the name and on behalf of the Company in favour of any
         Director or other person who may incur or be about to incur any
         personal liability whether as principal or surety; for the benefit of
         the Company such mortgages of the Company's property (present and
         future) as they think fit; and any such mortgage may contain a power of
         sale, and such other powers, provisions, covenants and agreements as
         shall be agreed upon.

TO AUTHORISE ACCEPTANCES

13)      To determine from time to time who shall be entitled to sign, on the
         Company's behalf, bills, notes, receipts, acceptances, endorsements,
         cheques, dividend warrants, releases, contracts and documents and to
         give necessary authority for such purpose.

TO DISTRIBUTE BONUS

14)      To distribute by way of bonus amongst the staff of the Company a share
         in the profits of the Company, and to give to any officer or other
         person employed by the Company



                                       30

         a commission on the profits of any particular business or transaction
         and to charge such bonus or commission as part of the working expenses
         of the Company.

TO PROVIDE FOR WELFARE OF EMPLOYEES

15)      To provide for the welfare of Directors or Ex-Directors or employees or
         ex-employees of the Company and their wives, widows and families or the
         dependants or connections of such persons by building or contributing
         to the building of houses, dwellings or chawls or by grants of moneys,
         pensions, gratuities, allowances, bonus or other payments; or by
         creating and from time to time subscribing or contributing to provident
         and other associations, institutions or funds or trusts and by
         providing or subscribing or contributing towards places of instruction
         and recreation, hospitals and dispensaries, medical and other
         attendance and other assistance as the Board shall think fit, and
         subject to the provisions of Section 293 (1)(e) of the Act. To
         subscribe or contribute or otherwise to assist or to guarantee money to
         any charitable, benevolent, religious, scientific, national or other
         institutions or objects which shall have any moral or other claim to
         support or aid by the Company either by reason of locality of
         operation, or of public and general utility or otherwise.

TO CREATE RESERVE FUND

16)      Before recommending any dividend to set aside, out of the profits of
         the Company such sums as they may think proper for depreciation or to a
         Depreciation Fund or to an Insurance Fund or as a Reserve Fund or
         Sinking Fund or any special fund to meet contingencies or to repay
         debentures or debenture-stock, or for special dividends or for
         equalising dividends or for repairing, improving, extending and
         maintaining any of the property of the Company and for such other
         purposes (including the purposes referred to in the preceding clause),
         as the Board may in their absolute discretion think conducive to the
         interest of the Company, and subject to Section 292 of the Act, to
         invest the several sums so set aside or so much thereof as required to
         be invested, upon such investments (other than shares of the Company)
         as they think fit, and from time to time to deal with and vary such
         investments and dispose of and apply and expend all or any part thereof
         for the benefit of the Company, in such manner and for such purposes as
         the Board in their absolute discretion, think, conducive to the
         interest of the company notwithstanding that the matters to which the
         Board apply or upon which they expend the same, or any part thereof,
         may be matters to or upon which the capital moneys of the company might
         rightly be applied or expended, and to divide the reserve fund into
         such special funds as the Board may think fit with full power to
         transfer the whole or any portion of the Reserve Fund into such special
         funds as the Board may think fit, with full power to transfer the whole
         or any portion of a Reserve Fund or division of a Reserve Fund and with
         full power to employ the assets constituting all or any of the above
         funds, including the Depreciation Fund, in the business of the company
         or in the purchase or repayment of debentures or debenture-stock, and
         without being bound to keep the same separate from the other assets and
         without being bound to pay interest on the same with power however to
         the Board at their discretion to pay or allow to the credit of such
         funds interest at such rate as the Board may think proper.

TO APPOINT MANAGERS ETC.

17)      To appoint, and at their discretion remove or suspend such general
         managers, secretaries, assistants, supervisors, clerks, agents and
         servants for permanent, temporary or special services as they may from
         time to time think fit, and to determine their powers and duties and
         fix their salaries, or emoluments or remuneration, and to require
         security in such instances and to such amount as they may think fit.
         And also from time to time to provide for the management and
         transaction of the affairs of the company in any specified locality in
         India or elsewhere in such manner as they think fit.



                                       31

TO COMPLY WITH LOCAL LAWS

18)      To comply with requirements of any local law which in their opinion it
         shall in the interest of the Company be necessary or expedient to
         comply with.

TO APPOINT LOCAL BOARD

19)      From time to time and at any time to establish any Local Board for
         managing any of the affairs of the Company in any specified locality in
         India or elsewhere and to appoint any persons to be Members of such
         Local Boards, and to fix their remuneration.

TO DELEGATE POWERS

20)      Subject to Section 292 of the Act, from time to time and at any time to
         delegate to any persons so appointed any of the powers; authorities and
         discretions for the time being vested in the Board, other than their
         power to make call or to make loans or borrow moneys and to authorise
         the members for the time being of any such Local Board, or any of them,
         to fill up any vacancies therein and to act notwithstanding vacancies,
         and any such appointment or delegation may be made on such terms, and
         subject to such conditions as the Board may think fit, and the Board
         may at any time remove any persons so appointed and may annul any such
         delegation.

TO AUTHORISE BY POWER OF ATTORNEY

21)      At any time and from time to time by Power of Attorney under the Seal
         of the Company, to appoint any person or persons to be the Attorney or
         Attorneys of the Company, for such purposes and with such powers,
         authorities, and discretions (not exceeding those vested in or
         exercisable by the Board under these presents and excluding the power
         to make calls and excluding also except in the limits authorised by the
         Board, the power to make loans and borrow moneys) and for such period
         and subject to such conditions as the Board may from time to time think
         fit, and any such appointment may (if the Board thinks fit) be made in
         favour of the members of any local board, established as aforesaid or
         in favour of any company or the shareholders, directors, nominees or
         managers of any company or firm or otherwise in favour of any
         fluctuating body of persons whether nominated directly, or indirectly
         by the Board and any such Power of Attorney may contain such powers for
         the protection or convenience of persons dealing with such Attorneys as
         the Board may think fit, and may contain Powers enabling any such
         delegates or Attorneys as aforesaid to sub-delegate all or any of the
         Powers, authorities and discretions for the time-being vested in them.

TO NEGOTIATE

22)      Subject to Section 294 and 297 of the Act for or in relation to any of
         the matters aforesaid or otherwise for the purposes of the Company to
         enter into all such negotiations and contracts and rescind and vary all
         such contracts, and execute and do all such acts, deeds and things in
         the name and on behalf of the Company as they may consider expedient.

TO MAKE AND VARY REGULATIONS

23)      From time to time make, vary or repeal bye-laws for the regulation of
         the business of the Company, its officers and servants.



                                       32

         AMENDMENTS TO ACCOUNTS

         24)      The director shall, if they consider it to be necessary and in
                  the interest of the company, be entitled to amend the Audited
                  Accounts of the company of any financial year which have been
                  laid before the Company in General Meeting. The amendments to
                  the Accounts effected by the directors in pursuance of this
                  Article shall be placed before the members in General Meeting
                  for their consideration and approval.

         TO FORMULATE SCHEMES, ETC.

         25)      The directors may formulate, create, institute or setup such
                  schemes, trusts, plans or proposals as they may deem fit for
                  the purpose of providing incentive to the officers, employees
                  and workers of the company, including without limiting the
                  generality of the foregoing, formulation of schemes for the
                  subscription by the officers, employees and workers to shares
                  in, or debentures of, the company.

         SIGNING OF CHEQUES

144.     All cheques, promissory notes, drafts, bills of exchange, and other
         negotiable instruments, and all receipts for moneys paid by the
         company, shall be signed, drawn, accepted or otherwise executed as the
         case may be, in such manner as the directors shall from time to time by
         resolution determine.

         FOREIGN REGISTER

145.     The company may exercise the powers conferred upon the company by
         Sections 157 and 158 of the Act with regard to the keeping of branch
         registers of members or debenture holders residing in any State or
         Country outside India, and the directors may (subject to the provisions
         of those Sections) make and vary such Regulations as they may think fit
         respecting the keeping of any such register.

         DECLARATION OF SECRECY

146.     Every director including Managing, Wholetime, Debenture or Special
         Director, Manager, Secretary, Treasurer, Trustees for the time being of
         the company, member or Debenture holder, member of a committee,
         officer, servant, agent, accountant or any other person employed in or
         about the company business shall if so required by the Board of
         Directors before entering upon his duties, sign a declaration pledging
         himself to observe strict secrecy respecting all transactions of the
         company with its customers and the state of accounts with individuals
         and all manufacturing, technical and business information of the
         company, except when required so to do by the Board or by any meeting
         or by a Court of law and except so far as may be necessary in order to
         comply with any of the provisions in these Articles contained.

         SECRECY OF WORKS AND INFORMATION

147.     No member or other person (not being a director) shall be entitled to
         visit or inspect any works of the company without the permission of the
         directors or to require discovery of any information concerning the
         business trading or customers of the Company, or any matter which is or
         may be in the nature of a trade secret, mystery of trade, secret
         process, or any other matter which may relate to the conduct of the
         business of the Company and which in the opinion of the Directors, it
         would be inexpedient in the interest of the Company to disclose.



                                       33

         PROHIBITION OF SIMULTANEOUS APPOINTMENT OF MANAGING DIRECTOR AND
         MANAGER

148.     The Company shall not appoint or employ at the same time more than one
         of the following categories of management personnel namely:

         a.       Managing Director and

         b.       Manager

         SECRETARY

149.     The Directors shall from time to time appoint a Secretary and at their
         discretion remove any such Secretary to perform any functions, which by
         the Act are to be performed by the Secretary and to execute any other
         ministerial or administrative duties, which may from time to time be
         assigned to the Secretary by the Directors. The Director may also at
         any time appoint any person or persons (who need not be the Secretary)
         to keep the registers required to be kept by the Company.

         THE SEAL, ITS CUSTODY AND USE

150.     a.       The Board shall provide a Common Seal for the purposes of the
                  Company and shall have power from time to time to destroy the
                  same and substitute a new seal in lieu thereof and the Board
                  shall provide for the safe custody of the Seal for the time
                  being and the Seal shall never be used except by the authority
                  of the Board or a Committee of the Board previously given.

         b.       The Company shall also be at liberty to have an official Seal
                  in accordance with Section 50 of the Act, for use in any
                  territory, district or place outside India.

         DEED HOW EXECUTED

151.     Every Deed Or Other instrument, to which the Seal of the Company is
         required to be affixed, shall unless the same is executed by a duly
         constituted attorney be signed by one Director or some other person
         appointed by the Board for the purpose provided that in respect of the
         Share Certificate the Seal shall be affixed in accordance with Rule 6
         of the Companies (Issue of Share Certificates) Rules, 1960.

         DIVISION OF PROFITS

152.     The profits of the Company, subject to any special rights relating
         thereto created or authorised to be created by these Articles, shall be
         divisible among the Members in proportion to the amount of capital
         paid-up or credited as paid-up and to the period during the year for
         which the capital is paid-up on the shares held by them respectively.

         THE COMPANY IN GENERAL MEETING MAY DECLARE DIVIDENDS

153.     Subject to the provisions of Section 205 of the Companies Act, 1956 the
         Company in General Meeting may declare dividends, to be paid to its
         Members according to their respective rights but no dividends shall
         exceed the amount recommended by the Board, but the Company in General
         Meeting may declare a smaller dividend.

         INTERIM DIVIDEND

154.     The Board may, from time to time, pay to the members such interim
         dividend as in their judgement the position of the Company justifies.



                                       34

         CAPITAL PAID-UP IN ADVANCE CARRYING INTEREST NOT TO EARN DIVIDEND

155.     Where capital is paid in advance of calls, such capital may carry
         interest but shall not be in respect thereof confer a right to dividend
         or participate in profits.

         DIVIDEND TO BE PAID PRO-RATA

156.     a.       Subject to the rights of persons, if any, entitled to shares
                  with special rights as to dividends, all dividends shall be
                  declared and paid according to the amounts paid or credited as
                  paid on the shares in respect whereof dividend is paid but if
                  and so long as nothing is paid upon any shares in the Company,
                  dividends may be declared and paid according to the amounts of
                  the shares.

         b.       No amount paid or credited as paid on shares in advance of
                  calls shall be treated for the purpose of this regulation as
                  paid on shares.

         c.       All dividends shall be apportioned and paid proportionately to
                  the amounts paid or credited as paid on the shares during any
                  portion or portions of the period in respect of which the
                  dividend is paid, but if any shares is issued on terms
                  providing that it shall rank for dividend as from a particular
                  date such shares shall rank for dividend accordingly.

         RETENTION OF DIVIDENDS UNTIL COMPLETION OF TRANSFER UNDER ARTICLE 62

157.     The Board may retain the dividends payable upon shares in respect of
         which any person is, under Article 62 entitled to become a Member,
         which any person under that Article is entitled to transfer, until such
         person shall become a member in respect of such shares or shall duly
         transfer the same.

         DIVIDEND, ETC. TO JOINT-HOLDERS

158.     Any one of the several persons who are registered as the joint-holders
         of any share may give effectual receipts for all dividends or bonus and
         payment on account of dividends or bonus or other moneys payable in
         respect of such shares.

         NO MEMBER TO RECEIVE DIVIDEND WHILST INDEBTED TO THE COMPANY AND
         COMPANY'S RIGHT TO REIMBURSEMENT THEREOF

159.     No member shall be entitled to receive payment of any interest or
         dividend in respect of his share or shares, whilst any money may be due
         or owing from him to the Company in respect of such share or shares or
         otherwise howsoever either alone or jointly with any other person or
         persons; and the Board may deduct from the interest or dividend payable
         to any member all sums of money so due from him to the Company.

         TRANSFER OF SHARES TO BE REGISTERED

160.     A transfer of shares shall not pass the right to any dividend declared
         thereon before the registration of the transfer.

         MANNER OF PAYMENT OF DIVIDEND

161.     Unless otherwise directed, any dividend may be paid by cheque or
         warrant or by a pay slip or receipt having the force of a cheque or
         warrant sent through the post to the registered address of member or
         person entitled or in case of joint holder to that one of them first
         named in the Register in respect of joint holder. Every such cheque or
         warrant shall be made



                                       35

         payable to the order of the person to whom it is sent. The company
         shall not be responsible for any cheque or warrant or pay slip or
         receipt lost in transmission or for any dividend lost to the member or
         person entitled thereto by the forged signature of any pay slip or
         receipt or the fraudulent recovery of the dividend by any other means.

         INTEREST ON DIVIDENDS

162.     No unpaid dividend shall bear interest as against the Company. No
         unclaimed dividend shall be forfeited by the Board unless the claim
         thereto becomes barred by law and the Company shall comply with all the
         provisions of Section 205A of the Act in respect of unpaid or unclaimed
         dividend.

         DIVIDEND AND CALL TOGETHER

163.     Any General Meeting declaring a dividend may on the recommendation of
         the Directors make a call on the Members of such amount as the meeting
         fixes, but so that the call on each member shall not exceed the
         dividend payable to him and so that the call may be made payable at the
         same time as the dividend and the dividend may, if so arranged between
         the Company and the Members, be set off against the call.

         CAPITALISATION OF PROFITS

164.     1)       The Company in General Meeting may, upon the recommendation of
                  the Board, resolve;-

                  a)       that it is desirable to capitalise any part of the
                           amount for the time being standing to the credit of
                           any of the company's reserve accounts or to the
                           credit of the profit and loss account, or otherwise
                           available for distribution; and

                  b)       that such sum be accordingly set free for
                           distribution in the manner specified in clause (2)
                           amongst the members who would have been entitled
                           thereto, if distributed by way of dividend and in the
                           same proportions.

         2)       The sum aforesaid shall not be paid in cash but shall be
                  applied, subject to the provisions contained in clause (3),
                  either in or towards:-

                  i)       paying up any amounts for the time being unpaid on
                           any shares held by such member respectively;

                  ii)      paying up in full, unissued shares of the company to
                           be allotted and distributed, credited as fully paid
                           up to and amongst such members in the proportions
                           aforesaid; or

                  iii)     partly in the way specified in sub-clause (i) and
                           partly in that specified in sub-clause(ii).

         3)       A share premium account and a capital redemption reserve
                  account may, for the purpose of this Regulation, only be
                  applied in the paying up of unissued shares to be issued to
                  members of the company as fully paid bonus shares.

         4)       The Board shall give effect to the resolution passed by the
                  Company in pursuance of this Regulation.

165.     1)       Whenever such a resolution as aforesaid shall have been
                  passed, the Board shall:-



                                       36

                  a)       make all appropriation and application of the
                           undivided profits resolved to be capitalised thereby,
                           and all allotments and issues of fully paid shares,
                           if any; and

                  b)       generally do all acts and things required to give
                           effect thereto.

         2)       The Board shall have full power:-

                  a)       to make such provision, by the issue of fractional
                           certificates or by payment in cash or otherwise, as
                           it thinks fit, for the case of shares or debentures
                           becoming distributable in fraction; and also

                  b)       to authorise any person to enter, on behalf of all
                           the members entitled thereto, into an agreement with
                           the Company providing for the allotment to them
                           respectively, credited as fully paid up, of any
                           further shares to which they may be entitled upon
                           such capitalisation or (as the case may require) for
                           the payment of by the company on their behalf by the
                           application thereto of their respective proportion of
                           the profits resolved to be capitalised, of the
                           amounts or any part of the amounts remaining unpaid
                           on their existing shares.

         3)       Any agreement made under such authority shall be effective and
                  binding on all such members.

         BOARD REPORT

166.     There shall be attached to every such balance sheet a report of the
         Board as to the state of the Company's affairs and as to the amounts,
         if any, which it proposes to carry to any reserves in such balance
         sheet and the amount, if any, which it recommends should be paid by way
         of dividend, and material changes and commitments, if any, affecting
         the financial position of the Company which have occurred between the
         end of the financial year of the company to which the balance sheet
         relates and the date of the report. The Board's report shall so far as
         is material for the appreciation of the state of the Company's affairs
         by its members and will not in the Board's opinion be harmful to the
         business of the company or any of its subsidiaries, deal with any
         changes which have occurred during the financial year in the nature of
         the Company's business, in the Company's subsidiaries or in the nature
         of the business carried on by them and generally in the classes of
         business in which the company has an interest and any other information
         as may be required by Section 217 of the Act. The Board shall also give
         the fullest information and explanations in its report aforesaid or in
         an addendum to that report, on every reservation, qualification or
         adverse remark contained in the auditor's report. The Board's report
         and any addendum thereto shall be signed by its Chairman if he is
         authorised in that behalf by the Board; and when he is not so
         authorised, shall be signed by not less than two Directors.

         SIGNING OF BALANCE SHEET

167.     The profit and loss account and balance sheet shall be signed by the
         Secretary if any, and by not less than two Directors, one of whom shall
         be a Managing Director if there is one provided that if there is only
         one Director present in India at the time, the profit and loss account
         and balance sheet shall be signed by such Director but in such a case
         there shall be attached to the profit and loss account and balance
         sheet a statement signed by such Director explaining the reason for
         non-compliance with the aforesaid provision requiring the signature of
         Directors. The profit and loss account shall be annexed to the balance
         sheet and the auditor's report (including the auditor's separate,
         special or supplementary report, if any), shall be attached thereto,
         and such report shall be read before the Company in general meeting and
         shall be open to inspection by any member.



                                       37

         RIGHTS OF MEMBERS TO COPIES OF BALANCE SHEETS AND AUDITOR'S REPORT

168.     The Company shall comply with the requirement of Section 219 of the
         Act.

                             DOCUMENTS AND NOTICES

         SERVICE OF DOCUMENTS OR NOTICES ON MEMBERS BY THE COMPANY

169.     A document or notice may be served or given by the Company on any
         member either personally or by sending it by post to him to his
         registered address, or (if he has no registered address in India) to
         the address supplied by him to the Company for serving documents or
         notices on him.

         MANNER OF SERVICE OF DOCUMENTS OR NOTICES

170.     Where a document or notice is sent by the post, service of the document
         or notice shall be deemed to be effected by properly addressing,
         prepaying and posting a letter containing the documents or notice,
         provided that where a member has intimated to the Company in advance
         that documents or notices should be sent to him under a certificate of
         posting or by registered post with or without acknowledgement due and
         has deposited with the Company a sum sufficient to defray the expenses
         of doing so, service of the document or notice shall not be deemed to
         be effected unless it is sent in the manner intimated by the Member and
         such service shall be deemed to have been effected in the case of
         notice of a Meeting at the expiration of forty-eight hours after the
         letter containing the document or notice is posted and in any other
         case at the time of which the letter would be delivered in the ordinary
         course of post.

         BY ADVERTISEMENT

171.     A document or notice advertised in a newspaper circulating in the city
         in which the office of the Company is situated shall be deemed to be
         duly served or sent on the day on which the Advertisement appears on or
         to every Members who has no registered address in India and has not
         supplied to the Company an address within India for the serving of
         documents on or the sending of notice to him.

         ON PERSONAL REPRESENTATIVES, ETC.

172.     A document or notice may be served or given by the Company on or to
         persons entitled to a share in consequence of the death or insolvency
         of a member by sending it through the post in a prepaid letter
         addressed to them by name or by the title of representative of the
         deceased, or assignee of the insolvent or by any like description, at
         the address (if any) in India supplied for the purpose by the persons
         claiming to be so entitled or (until such an address) has been so
         supplied by serving the documents or notice in any manner in which the
         same might have been given if the death or insolvency had not occurred.

         ON JOINT-HOLDERS

173.     A document or notice may be served or given by the Company to the joint
         holders of share by serving or giving the document or notice on or to
         the joint holder named first in the register of members in respect of
         the share.



                                       38

         TO WHOM DOCUMENT OR NOTICES MUST BE SERVED OR GIVEN

174.     Documents or notices of every General Meeting shall be served or given
         in some manner hereinbefore authorised on or to (a) every Member, (b)
         every person entitled to a share in consequence of the death or
         insolvency of a member and (c) the Auditor/s for the time being of the
         Company.

         MEMBERS BOUND BY DOCUMENTS OR NOTICES SERVED ON OR GIVEN TO PREVIOUS
         HOLDERS

175.     Every person, who, by operation of law, transfer or other means
         whatsoever, shall become entitled to any share shall be bound by every
         document or notice in respect of such share, which prior to his name
         and address being entered on the Register of Members, shall have been
         duly served on or given to the person from whom he derives his title to
         such share.

         DOCUMENTS OR NOTICES BY COMPANY AND SIGNATURE THEREOF

176.     Any document or notice to be served or given by the Company may be
         signed by a Director or some person duly authorised by the Board of
         Directors for such purposes and the signature thereto may be written,
         printed or lithographed.

         SERVICE OF DOCUMENTS OR NOTICE BY MEMBER

177.     All documents or notices to be served or given by Members on or to the
         Company or any officer at the office by post under a Certificate of
         Posting or by Registered Post, or by leaving it at the office.

                                   WINDING UP

         DISTRIBUTION OF ASSETS

178.     The Liquidator on any winding up (whether voluntary and supervision or
         compulsory) may with the sanction of a Special Resolution, but subject
         to the rights attached to any preference share capital, divide among
         the contributories in specie any part of the assets of the Company and
         may, with the like sanction, vest any part of the assets of the Company
         in trustees upon such trusts for the benefit of the contributors, as
         the liquidator, with the like sanction shall think fit.

                          INDEMNITY AND RESPONSIBILITY

         OFFICER'S AND OTHERS RIGHT TO INDEMNITY

179.     Every officer or agent for the time being of the Company shall be
         indemnified out of the assets of the Company against all liability
         incurred by him in relation to the business of the company in defending
         any proceedings whether civil or criminal in which judgement is given
         in his favour or in which he is acquitted or in connection with any
         application under Section 633 of the Act in which relief is granted to
         him by the Court.

         DIRECTORS, MANAGERS ETC. NOT LIABLE FOR ACTS OF OTHERS

180.     Subject to provisions of Section 201 of the Act no Director, Manager or
         other Officer of the Company shall be liable for the act, receipts,
         neglects of any other director or officer or for joining in any
         receipts or other act for conformity or for any loss or expenses
         happening to the company through the insufficiency or deficiency of
         title to any property acquired by order of the directors, for and on
         behalf of the company or for the insufficiency or deficiency of any



                                       39

         security in or upon which any of the moneys of the company shall be
         invested or for any loss or damage arising from bankruptcy, insolvency
         or tortious act of any person with whom any moneys, securities, or
         effects shall be deposited or for any loss occasioned by an error of
         judgement or oversight on his part, or for any other loss, damages or
         misfortunes whatever which shall happen in the execution of the duties
         of this officer or in relation thereto unless the same happens through
         his own dishonesty.

         We the several persons whose names and address are subscribed below are
desirous of being formed into a Company in pursuance of this Articles of
Association and we respectively agree to take the number of shares in the
Capital of the Company set opposite to our respective names.



- ----------------------------------------------------------------------------------
   Signature, Name, Address,        Number of Equity     Signature, Name, Address,
 description and occupation of    Shares taken by each  description and occupation
        Subscribers                    Subscriber               of Witness
- ----------------------------------------------------------------------------------
                                                  
Nagavara Ramarao Narayana Murthy          1
(Son of Nagavara Ramarao)            (One equity)
Flat 6, Padmanabhan Apartment,
1126/2, Shivajinagar,
Pune - 411 016.

Consultant

Nadathur Srinivasa Raghavan              1
(Son of N. Sarangapani)              (One equity)
5, 'Ravikripa', Station Road,
Matunga (C. R.),
Bombay - 400 019.

Consultant

Senapathy Gopalakrishnan                  1             VIPUL DEVENDRA
(Son of P. G. Senapathy)             (One equity)       KINKHABWALA
Krishna Vihar, Kalapalayam Lane,                        (S/o Devendra Vithaldas
Pathenchanthai,                                         Kinkhabwala)
Trivandrum - 695 001.                                   14, Thakurdwar Road,
                                                        Zaveri Building, Bombay -
                                                        400 - 002
                                                        Service
Consultant

Nandan Mohan Nilekani                     1
(Son of M. R. Nilekani)              (One equity)
37, Saraswatput,
Dharwar - 580 002.
KARNATAKA

Consultant

                                  --------------------
                                          4
                                    (Four equity)
- --------------------------------------------------------------------------------


Dated this 15th day of June 1981.