UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

(Mark One)

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

Chennai, Tamil Nadu, India
(Jurisdiction of incorporation or organization)

Tidel Park, 2nd Floor
No. 4, Rajiv Gandhi Salai
Taramani, Chennai 600 113 India
(91) 44-2254-0770, Fax (91) 44 -2254 0771
(Address of principal executive offices)

M.P.Vijay Kumar, Chief Financial Officer,+ 91- 44 -2254 -0770; vijaykumar.mp@sifycorp.com
Tidel Park, 2nd Floor, No. 4, Rajiv Gandhi Salai, Taramani, Chennai 600113 India
(Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)

Not Applicable
(Title of class)

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

     42,820,082 Equity Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o No þ

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No þ

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).:

Yes o No þ

 

Unless the context otherwise requires, references in this annual report to “we,” “us,” the “company,” “Sify” or “Satyam Infoway” are to Sify Technologies Limited, a limited liability company organized under the laws of the Republic of India. References to “U.S.” or the “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. In January 2003, we changed the name of our company from Satyam Infoway Limited to Sify Limited. In October 2007, we gain changed our name from Sify Limited to Sify Technologies Limited. “Sify”, “SifyMax.in,”, “Sify e-ports” and “Sify online” are trademarks used by us for which we have already obtained registration certificates in India. All other trademarks or trade names used in this Annual Report on Form 20F are the property of their respective owners. In this Annual Report on Form 20F, references to “$,” “Dollars” or “U.S. dollars” are to the legal currency of the United States, and references to “Rs.,” “rupees” or “Indian rupees” are to the legal currency of India . References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

     For your convenience, this Annual Report on Form 20-F contains translations of some Indian rupee amounts into U.S. dollars which should not be construed as a representation that those Indian rupee or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Indian rupees, as the case may be, at any particular rate, the rate stated below, or at all. Except as otherwise stated in this Annual report on Form 20F, all translations from Indian rupees to U.S. dollars contained in this Annual Report have been based on the reference rate in the City of Mumbai on March 31,2009 for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI) which was Rs.50.95 per $1.00.

     Our financial statements are presented in Indian rupees and prepared in accordance with International Financial Reporting Standards as issued by the International Accounts Standards Board, or IFRS. In this Annual Report, any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

     Information contained in our websites, including our corporate website, www.sifycorp.com, is not part of this Annual Report on Form 20-F.

This Annual Report on Form 20-F contains ‘forward-looking statements’, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our current expectations, assumptions, estimates and projections about our Company, our industry, economic conditions in the markets in which we operate, and certain other matters. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘seek’, ‘should’ and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results or outcomes to differ materially from those implied by the forward-looking statements. Important factors that may cause actual results or outcomes to differ from those implied by the forward-looking statements include, but are not limited to, those discussed in the “Risk Factors” section in this Annual Report on Form 20-F. In light of these and other uncertainties, you should not conclude that the results or outcomes referred to in any of the forward-looking statements will be achieved. All forward-looking statements included in this Annual Report on Form 20-F are based on information available to us on the date hereof, and we do not undertake to update these forward-looking statements to reflect future events or circumstances.

Item 1. Identity of Directors, Senior Management and Advisers.

     Not applicable.

Item 2. Offer Statistics and Expected Timetable

     Not applicable.

Item 3. Key Information

Selected Financial Data

Summary of Consolidated Financial Data

     You should read the summary consolidated financial data below in conjunction with the Company’s consolidated financial statements and the related notes, as well as the section entitled “Operating and Financial Review and Prospects,” all of which are included elsewhere in this Annual Report on Form 20-F. The summary consolidated statements of income data for the three years ended March 31, 2009, 2008 and 2007 and the summary consolidated balance sheet data as of March 31, 2009 and 2008, have been prepared and presented in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB) have been derived from our audited consolidated financial statements and related notes to the consolidated financial statements.

          Exchange Rates

     Our functional currency is the Indian rupee. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may fluctuate substantially in the future. Our exchange rate risk primarily arises from our foreign currency revenues, receivables and payables

The following table sets forth the high and low exchange rates for the previous six months and is based on the reference rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI).

The following table sets forth, for the fiscal years indicated, information concerning the number of Indian rupees for which one U.S. dollar could be exchanged based on the reference rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI). The column titled ‘Average’ in the table below is the average of the last business day of each month during the year.

On March 31, 2009, the reference rate in the City of Mumbai for cable transfers in Indian rupees as published by RBI was Rs. 50.95.

Capitalization and indebtedness

     Not applicable.

Reasons for the offer and use of proceeds

     Not applicable.

Risk Factors

     This Annual Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the following risk factors and elsewhere in this Annual Report on Form 20F.

Risks Related to our Company and Industry

We may incur losses in the future and we may not achieve or maintain profitability.

          We have incurred net loss of Rs.851.63 million ($ 16.71 million) for the year ended March 31, 2009 with an accumulated deficit of Rs.13,104.39 million ($ 257.20million) as at March 31, 2009. We may in the future incur additional net losses and suffer negative operating cash flows. We expect to increase our expenditures as we continue to expand our services, promote our brand, and invest in the expansion of our infrastructure. We have incurred and in the future may incur expenses in connection with investments in data centers and infrastructure. Accordingly, we will need to generate significant additional revenues in order to become profitable. We may not be able to do so. Our business model is not yet proven in consumer space, and we cannot assure you that we will improve our profitability or that we will not incur operating losses in the future. If we are unable to improve profitability, we will be unable to build a sustainable business. In this event, the price of our ADSs and the value of your investment would likely decline.

We may lose the incentive for exports availed under Serve from India Scheme on account of changes in Government policy.

               The Government of India has introduced “the Served from India Scheme” (the “Scheme”) in order “to accelerate growth in export of services so as to create a powerful and unique Served from India brand, instantly recognized and respected world over.”

               Under the Scheme, all service providers (the exporter of various services) are entitled to a customs duty credit called ‘Duty credit scrip’ at 10% of the foreign exchange earned during the financial year. A service provider will be eligible for such duty credit scrip only on satisfaction of two conditions: (a) the service provider should export services; and (b) the service provider should earn foreign exchange. This duty credit may be used for settling the customs duty payable to the Government of India on the import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

               The new Foreign Trade (2009-2014) policy announced by The Commerce Ministry on August 27, 2009 has explicitly excluded Telecom Sector from the purview of Served From India Scheme (SFIS). As a result of new policy document, we will not be eligible for 10% as export incentive on Foreign Exchange earnings from all existing business streams other than E-learning and Infrastructure management services prospectively.

               The loss of credits from the above scheme may impact the financial condition and operating results of the Company in the future.

The economic environment, pricing pressure and decreased utilization rates could negatively impact our revenues and operating results.

               Spending on technology products and services in most parts of the world has been rising for the past few years. However, there was a decline in the growth rate of global IT purchases in the latter half of 2008 due to the global economic slowdown. This downward trend is expected to continue into 2009 with global IT purchases expected to decline due to the challenging global economic environment

With regard to the domestic Indian economy, a slow down affects enterprise customers leading to lower investments in IT infrastructure with a resultant slow down in the adoption of IT services such as ours. Lead times for orders or contracts also becomes much longer, as do credit periods. On the consumer side, sale of home PCs has dropped significantly in the last quarter of the fiscal 2009 and is likely to be depressed in 2009-10. This will have a bearing on the growth in demand for broadband services. Online advertising on our portal has also seen a decline with the slow down.

Overseas economic performance also has a bearing on our Infrastructure and e-Learning businesses. The NLD/ILD business and eLearning may likely be affected in terms of prices and growth. Currency fluctuations will also lead to variations in revenue.

Reductions in IT spending and extended credit terms arising from or related to the economic slowdown, and any resulting pricing pressures, reduction in billing rates, increased credit risk may adversely impact our revenues, gross profits, operating margins and results of operations.

Currency fluctuations may affect the results or our operations or the value of our ADSs

               The exchange rate between the rupee and the U.S. dollar has changed significantly in recent years and may fluctuate substantially in the future.

We use derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and payable and forecast cash flows denominated in US dollar. As of March 31, 2009, we had outstanding option contracts of $ 4.75 million. We may not purchase derivative instruments adequate to insulate ourselves from foreign currency exchange risks, and over the past year, we have incurred significant losses as a result of exchange rate fluctuations that have not been offset in full by our hedging strategy.

For the year ended March 31, 2009, we recognized a gain of Rs.2.99 million ( $ 0.05 million) on our forward and option contracts and Rs.25.96 million ($.0.51 million) on foreign exchange translations. If foreign exchange currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely affect our results of operations in future periods. Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively and make them expensive

Further, the policies of the Reserve Bank of India may change from time to time which may limit our ability to hedge our foreign currency exposures adequately. In addition, a high-level committee appointed by the Reserve Bank of India had recommended that India move to increased capital account convertibility over the next few years, and proposed a framework for such increased convertibility. Full or increased capital account convertibility, if introduced, could result in increased volatility in the fluctuations of exchange rates between the rupee and US dollar. Our US customers may leave us exposed to fluctuation in revenues based on currency fluctuations.

We may encounter legal confrontations as the Information Technology Act 2000 lacks specificity as to issues on online processes and/or Internet

The Information Technology Act of 2000, an Indian regulation, still does not cover all areas of online processes or the Internet comprehensively leaving many grey areas that could expose to legal complications. The regulations regarding the operation of cyber cafes are not well defined, and vary from state to state, often dependent upon the discretion of local law enforcement authorities who may not have adequate knowledge on the service. Despite our constant efforts in educating the franchisees not to have unlicensed software, some franchisees may use unlicensed software . Such events may affect the company’s reputation negatively.

Intense competition in our businesses could prevent us from improving our profitability and we may be required to further modify the rates we charge for our services in response to new pricing models introduced by new and existing competition which would significantly affect our revenues

Our corporate network/data services compete with well-established companies, including Bharti Airtel, Tata Communications Limited or TCL, Reliance Infocomm, HCL Infinet, Tata Teleservices, Tulip Telecom Limited and the government-owned telecom companies, Bharat Sanchar Nigam Limited or BSNL, Mahanagar Telephone Nigam Limited or MTNL.

A significant number of competitors have entered India’s Internet service provider industry. The large players, especially the state run telecommunication companies, may enjoy significant competitive advantages over our company, including greater financial resources, which could allow them to charge prices that are lower than ours in order to attract subscribers. These factors have resulted in periods of significant reduction in actual average selling prices for consumer Internet Service Provider, or ISP, services. We expect the market for Internet access and other connectivity services to remain extremely price competitive. Increased competition may result in operating losses, loss of market share and diminished value in our services, as well as different pricing, service or marketing decisions. Additionally, we believe that our ability to compete also depends in part on factors outside our control, such as the availability of skilled employees in India, the price at which our competitors offer comparable services, and the

extent of our competitors’ responsiveness to their clients’ needs. We cannot assure you that we will be able to successfully compete against current and future competitors.

Margin squeeze may affect the results or our operations

Our margins have been shrinking in the recent past due to competition. Competition will continue to increase with the entry of new competitors into the Enterprise service category such as British Telecom (BT) and AT&T. However, these competitors generally will prefer to operate with a few global customers wishing to do business in India. They may attract customers for managed hosting services with their capability of superior network and competitive pricing. We expect the market for such services to remain extremely price competitive. Increased competition may result in the reduction of profit margin which would impact our results of operations

Procuring power at lower costs for data centers by the competitors may put us at a disadvantage in terms of pricing for our data center operations

The single largest operating cost in data centers is electrical power, and if a competitor were to have a source of power at a significantly lower cost, it could be a disadvantage to us. This raises the question of data centre location. While all data centres are now located in proximity to, or at the edge of major urban centers such as Mumbai, inexpensive land and labor allow companies to locate new data centres in remote locations. We may neither be in a position to develop high cost data centers at remote locations where power is cheap nor procure power at cheaper rates for our data centres. If the competitors procure power at lower cost, they can have an advantage over pricing. Our inability to offer competitive pricing may result in loss of customers and will impact our result of operations.

We have added a number of new lines of business in the past years, including the operation and licensing of public Internet cafés, as well as the provision of broadband services, security services, e-learning software development services, managed network services and infrastructure management services. It is therefore difficult to evaluate our company based on our historical results of operations

          The industry we operate in is still evolving and therefore comparable benchmarks are not readily available. In India, the total number of broadband subscribers was 6.22 million as at March 31, 2009 as compared to 3.90 million as at March 31,2008 registering a growth of 59.48%.The total number of internet wireline subscribers as at December 31, 2008, was 12.85 million as compared to 11.09 million as at March 31,2008 registering a growth of 15.87 %.The base of wireless internet subscriber base was 101.10 million as at December 31, 2008 as compared to 65.50 million as at March 31,2008 registering a growth of 54.35% according to figures compiled from Telecom Regulatory Authority of India’s, or TRAI’s, Report on the Indian Telecom Services Performance Indicators October — December 2008. The risks we face in developing Internet service market include our inability to:

          We cannot assure you that we will successfully address the risks or difficulties described above. Failure to do so could lead to an inability to attract and retain corporate customers for our network/data services and subscribers for our Internet access services as well as the loss of advertising revenues.

Despite the company’s best efforts to optimize costs, our future operating results could fluctuate in part because our expenses are relatively fixed in the short term while future revenues are uncertain, and any adverse fluctuations could negatively impact the price of our ADSs

          Our revenues, expenses and operating results have varied in the past and may fluctuate significantly in the future due to a number of factors, many of which are outside our control. A significant portion of our investment and cost base is relatively fixed in the short term. Our revenues for the foreseeable future will depend on many factors, including the following:

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

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

We lack full redundancy for our computer systems and a system failure could prevent us from operating our business for a significant time, which could have an adverse effect on our business and results of operations

          We rely on the Internet and accordingly, depend upon the continuous, reliable and secure operation of Internet servers, related hardware and software and network infrastructure such as lines leased from telecom operators. We have a back-up data facility, but we do not have full redundancy for all of our computer and telecommunications facilities. As a result, failure of key primary or back-up systems to operate properly could lead to a loss of customers, damage to our reputation and violations of our Internet service provider license and contracts with corporate customers. A loss of customers or damage to our reputation would result in a decrease in the number of our subscribers, which would cause a material decrease in revenues. A violation of our Internet service provider license could result in the suspension or termination of that license, which would prevent us from carrying on a significant portion of our operations and materially adversely affect our operating results. Violations of our contracts with corporate customers could result in the termination of these contracts, which would cause a decrease in the revenues generated by our corporate data/network services division. Any of these failures could also lead to a decrease in value of our ADSs, significant negative publicity and litigation.

          We have at times suffered service outages. We guarantee to a number of our corporate customers that our network will meet or exceed contractual reliability standards, and our Internet service provider license requires that we provide an acceptable level of service quality and that we remedy customer complaints within a specified time period. Our computer and communications hardware are protected through physical and software safeguards. However, they are still vulnerable to fire, storm, flood, power loss, telecommunications failures, physical or software break-ins and similar events. We do not carry business interruption insurance to protect us in the event of a catastrophe even though such an event could lead to a significant negative impact on our business.

Security breaches could damage our reputation or result in liability to us

          Our facilities and infrastructure must remain secure, and be perceived by our corporate and consumer customers to be secure, because we retain confidential customer information in our database. Despite the implementation of security measures, our infrastructure may be vulnerable to physical break-ins, computer hacking, computer viruses, programming errors or similar disruptive problems beyond our control. If a person circumvents our security measures, he or she could jeopardize the security of confidential information stored on our systems, misappropriate proprietary information or cause interruptions to our operations. We may be required to make significant additional investments and efforts to protect against or remedy security breaches. A material security breach could damage our reputation or result in liability to us, and we do carry insurance that protects us from this kind of loss.

          The security services that we offer in connection with our business customers’ networks cannot assure complete protection from computer viruses, break-ins and other disruptive problems. Although we attempt to contractually limit our liability in such instances, the occurrence of these problems could result in claims against us or liability on our part. These claims, regardless of their ultimate outcome, could result in costly litigation and could damage our reputation and hinder our ability to attract and retain customers for our service offerings.

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

          Our success depends upon the continued service of our key personnel including our senior management team. Each of our employees may voluntarily terminate his or her employment with us. We do not carry key person life insurance on any of our personnel. Our success also depends on our ability to attract and retain additional highly qualified technical, marketing and sales personnel. The labor market for skilled employees in India is extremely competitive, and the process of hiring employees with the necessary skills is time consuming and requires the diversion of significant resources. We may not be able to continue to retain or integrate existing personnel or identify and hire additional personnel in the future. The loss of the services of key personnel or the inability to attract additional qualified personnel, could disrupt the implementation of our business strategy, upon which the success of our business depends.

The failure to keep our technical knowledge confidential could erode our competitive advantage

          Our technical know-how is not protected by intellectual property rights such as patents, and is principally protected by maintaining its confidentiality. As a result, we cannot be certain that our know-how will remain confidential in the long run. Employment contracts with certain of our employees who have special technical knowledge about our products or our business contain a general obligation to keep all such knowledge confidential and such obligation extends for a period of two years after the termination of employment. In addition to the confidentiality provisions, these employment agreements typically contain non-competition clauses. If either the confidentiality provisions or the non-competition clauses are unenforceable, we may not be able to maintain the confidentiality of our know-how. In the event that confidential technical information or know-how about our products or business becomes available to third parties or to the public, our competitive advantage over other companies in the wireless based IP/VPN industry could be harmed which could have a material adverse effect on our current business, future prospects, financial condition and results of operations.

Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance

          Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and Nasdaq Global Select Market rules are creating uncertainty for companies like ours. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.

          In particular, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting requires the commitment of significant financial and managerial resources and external auditor’s independent assessment of the internal control over financial reporting.

          It is also possible that laws in India may be made more stringent with respect to standards of accounting, auditing, public disclosure and corporate governance. We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

          In addition, it may become more expensive and/or more difficult for us to obtain director and officer liability insurance. Further, our board members, Chief Executive Officer, and Chief Financial Officer could face an increased risk of personal liability in connection with their performance of duties and our SEC reporting obligations. As a result, we may face difficulties attracting and retaining qualified board members and executive officers, which could harm our business. If we fail to comply with new or changed laws or regulations, our business and reputation may be harmed

We may inadvertently fail to comply with local laws of other countries in connection with the negotiation and execution of operational agreements

          As part of our international business, we may negotiate with and enter into contracts with strategic partners, clients, suppliers, employees and other third parties in various countries. We may inadvertently fail to comply with their laws may result in lawsuits or penalties, which could adversely affect our business or results of operations.

If there is an adverse outcome resulting in cash payout in excess of the insurance coverage in the class action litigation that has been filed against us, it will impact our financial condition

          A class action suit was filed in the United States District Court for the Southern District of New York by a purported class of purchasers of Sify’s ADS against the Company, certain of its officers and directors and several of the underwriters involved in the Company’s initial public offering of American Depository Receipts. The complaint alleges that the underwriters in the Company’s IPO solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased Sify’s ADSs in the IPO and the aftermarket. The complaint also alleges that Sify violated the United States Federal Securities laws by failing to disclose in the IPO prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. This case is defended by SIFY and more than 300 issuers who went public between 1998 and 2000. The plaintiffs announced a proposed settlement between all parties, including the Group and its former officers and directors. Any direct financial impact of the proposed settlement is expected to be borne by the Company’s insurers. On June 12, 2009, the Federal District Court granted preliminary approval of the proposed settlement. On September 10, 2009, the Federal District Court held the fairness hearing for final approval of the settlement. At the hearing it was noted that out of the seven million people who were sent notices of the settlement, only 140 people objected. The objectors had five main arguments: (1) the class definition is overbroad and does not exclude individuals who participated in the scheme; (2) the requested attorney’s fees are excessive; (3) the awards requested by the lead plaintiffs are excessive; (4) the settlement amount is insufficient and thus the recovery to class members is too small; and (5) the notice is insufficient, in part because it does not disclose the amounts requested by individual lead plaintiffs. The Court did not rule on the motion for final approval at the hearing and did not indicate when it planned to do so. The preliminarily approved settlement is subject to final approval by the Federal District Court overseeing the IPO Litigation and, if final approval is granted, it may potentially be subject to appellate review by United States Court of Appeals for the Second Circuit. Any direct financial impact of the preliminary approved settlement is expected to be borne by the Company’s insurers. We believe that we have sufficient insurance coverage to cover the maximum amount that we may be responsible for under the preliminary approved settlement and believe that our maximum exposure under this settlement is approximately U.S.$ 338,983, an amount which we believe is fully recoverable from the Group’s insurer. If the settlement in an outcome necessitating a larger award and our insurance does not cover such payment, it may affect our results of operations.

          Please see the section entitled “Legal Proceedings” in this annual report for more information on the litigation.

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

          We have a significant, non-controlling minority interest in MF Global Sify Securities India Private Limited (formerly known as Man Financial Sify Securities India Private Limited) that is accounted for under IFRS using the equity method of accounting.

Under this method, we generally are obligated to report as “share of profit of equity accounted investee” a pro rata portion of the net income after tax of any such company in our statement of operations even though we do not control the other company, subject to limitations in the case of losses that exceed our cost of investment. Thus, our reported results of operations can be significantly increased or decreased depending on the results of MF Global Sify Securities India Private Limited or other companies in which we may make similar investments even though we may have only a limited ability to influence these activities.

Our inter-city network is leased from other service providers and is dependent on their quality and availability

          We have provided inter-city connectivity for our wireless-based IP/VPN business through lease arrangements rather than through capital investment in assets for connectivity business. Our ability to offer high quality telecommunications services depends, to a large extent, on the quality of the networks maintained by other operators, and their continued availability, neither of which is under our control. However, the abundance of supply of inter-city connectivity provides us with the ability of switching to companies offering better services. Although we always use more than one service provider where required, there can be no assurance that this dependence on external parties would not affect our network availability.

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

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

          Our efforts to protect our intellectual property may not be adequate. We hold no patents, and our competitors may independently develop similar technology or duplicate our services. Unauthorized parties may infringe upon or misappropriate our services or proprietary information. In addition, the laws of India do not protect proprietary rights to the same extent as laws in the United States, and the global nature of the Internet makes it difficult to control the ultimate destination of our services. For example, the legal processes to protect service marks in India are not as effective as those in place in the United States. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly.

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

Our current infrastructure and its scalability may not accommodate increased use while maintaining acceptable overall performance.

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

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

          We have not paid cash dividends to date because of the accumulated losses in the previous years. We may not pay a cash dividend in the near future in anticipation of meeting the fund requirements for facilitating future expansion plans of the company. Investors seeking cash dividend should not purchase our ADS.

Risks Related to the ADSs and Our Trading Market

The interests of our significant shareholder, Infinity Capital Ventures, L.P.,USA (Infinity Capital) may differ from your interests

          We believe that Infinity Capital owns approximately 26.06 % of our outstanding equity capital (post merger of Sify Communications Limited with Sify Technologies Limited). Mr. Raju Vegesna controls Infinity Capital and serves as our Chairman of the Board of Directors. Mr. P.S. Raju serves on our Board of Directors as a nominee of Infinity Capital. As a result, Infinity Capital will be able to exercise significant influence over many matters requiring approval by our Board of Directors and/or our shareholders, including the election of directors and approval of significant corporate transactions, such as a sale of our Company. Under Indian law, a simple majority is sufficient to control all shareholder action except for those items, which require approval by a special resolution. If a special resolution is required, the number of votes cast in favor of the resolution must not be less than three times the number of votes cast against it. Examples of actions that require a special resolution include:

          Circumstances may arise in which the interests of Infinity Capital, or a subsequent purchaser of the shares owned by Infinity Capital, could conflict with the interests of our other shareholders or holders of our ADSs. Infinity Capital could delay or prevent a change of control of our company even if a transaction of that sort would be beneficial to our other shareholders, including the holders of our ADSs.

An investor in our ADSs may not be able to exercise preemptive rights for additional shares and may thereby suffer dilution of such investor’s equity interest in us

          Under the Companies Act, 1956, or the Indian Companies Act , a company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless such preemptive rights have been waived by three-fourths of the shares voting on the resolution to waive such rights.

          Holders of ADSs may be unable to exercise preemptive rights for equity shares underlying ADSs unless a registration statement under the Securities Act of 1933, as amended, or the Securities Act, is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. To the extent that holders of ADSs are unable to exercise preemptive rights granted in respect of the equity shares represented by their ADSs, their proportional interests in us would be reduced.

ADS holders may be restricted in their ability to exercise voting rights.

          At our request, the Depository will mail to holders of our ADSs any notice of shareholders’ meeting received from us together with information explaining how to instruct the Depository to exercise the voting rights of the securities represented by ADSs. If the Depository receives voting instructions from a holder of our ADSs in time , relating to matters that have been forwarded to such holder, it will endeavor to vote the securities represented by such holder’s ADSs in accordance with such voting instructions. However, the ability of the Depository to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure that the holders of our ADSs will receive voting materials in time to enable such holders to return voting instructions to the Depository . Securities for which no voting instructions have been received will not be eligible to vote.

          Under Indian law, subject to the presence in person at a shareholder meeting of persons holding equity shares representing a quorum, all resolutions proposed to be approved at that meeting are voted on by a show of hands unless a shareholder present in person and holding at least 10% of the total voting power or on which an aggregate sum of not less than Rs.50,000 has been paid-up, at the meeting demands that a poll be taken. Equity shares not represented in person at the meeting, including equity shares underlying ADSs for which a holder has provided voting instructions to the Depository , are not counted in a vote by show of hands. As a result, only in the event that a shareholder present at the meeting demands that a poll be taken will the votes of ADS

holders be counted. Securities for which no voting instructions have been received will not be voted on a poll. Accordingly, you may not be able to participate in all offerings, transactions or votes that are made available to holders of our equity shares.

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

The market price of our ADSs has been and may continue to be highly volatile.

          The market price of our ADSs has fluctuated widely and may continue to do so. Many factors could cause the market price of our ADSs to rise and fall. Some of these factors include:

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

We may not be able to maintain our Nasdaq Global Select Market listing.

               Our shares traded on the Nasdaq Global Select Market below $1.00 share for 40 trading days out of which 34 days consecutively during the period from January 28, 2009 to March 31, 2009. As of September 21, 2009, our shares were trading at $ 2.24 and had traded in excess of $1.00 for 120 days since April 1, 2009.

Failure to comply with the Nasdaq minimum bid price requirement, or any other listing standard applicable to issuers listed on the Nasdaq Global Select Market, subject to any exemptions or waivers granted by Nasdaq, would result in our common stock being ineligible for quotation on the Nasdaq Global Select Market. Nasdaq implemented a suspension of the minimum bid price rule until July 31, 2009. Our shares have traded over $1.00 since April 1, 2009; however, we cannot assure you that our trading price will exceed the minimum bid price requirements.

An active or liquid market for the ADSs is not assured

               We cannot predict that an active, liquid public trading market for our ADSs will continue to exist. Although ADS holders are entitled to withdraw the equity shares underlying the ADSs from the Depository at any time, there is no public market for our equity shares in India or the United States. The loss of liquidity could increase the price volatility of our ADSs.

The future sales of securities by our company or existing shareholders may reduce the price of our ADSs

          Any significant sales of our equity shares or ADSs or a perception that such sales may occur might reduce the price of our ADSs and make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We may issue additional equity shares to raise capital and to fund acquisitions and investments, and the parties to any such future transactions could also decide to sell them.

The current capital and credit market conditions may adversely affect our access to capital, the cost of capital, and ability to execute our business plan

               Access to capital markets is critical to our ability to operate. Declines and uncertainties in the global capital markets over the past year have severely restricted raising new capital and have affected companies’ ability to continue to expand or fund new projects. If these economic conditions continue or become worse, our future cost of equity or debt capital and access to the capital markets could be adversely affected. In addition, an inability to access the capital markets on favorable terms due to our low stock price, or upon our delisting from the Nasdaq Global Select Market if we fail to satisfy a listing requirement, could affect our ability to execute our business plan as scheduled.

Risks Related to Investments in Indian Companies

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

Changes in the policies of the Government of India 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 Central and State governments in the Indian economy as producers, consumers and regulators has remained significant. The new government of India, formed in May 2009, has to spell out their policies with regard to continuation of economic liberalization pursued by previous governments and/or further economic reforms. The rate of economic liberalization could change, and specific laws and policies affecting technology and Telecom Companies, foreign investment, exchange rate regime 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.

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 months, Pakistan has been experiencing significant instability and this has heightened the risks of conflict in South Asia. 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 the market for our services.

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

          Terrorist attacks, such as the attacks of July 25, 2008 in Bangalore, the attacks of November 26 to 29, 2008 in Mumbai and other acts of violence have the potential to affect us or our clients. In addition, such attacks may destabilize the economic and political situation in India. Furthermore, such attacks could cause a disruption in the delivery of our services to our clients, and could have a negative impact on our business, personnel, assets and results of operations, and could cause our clients or potential clients to choose other vendors for the services we provide. Terrorist threats, attacks or war could make travel more difficult, may disrupt our ability to provide services to our clients and could delay, postpone or cancel our clients’ decisions to use our services.

The markets in which we operate are subject to the risk of earthquakes, floods and other natural disasters

          Some of the regions that we operate in are prone to earthquakes, flooding and other natural disasters. In the event that any of our business centers are affected by any such disasters, we may sustain damage to our operations and properties, suffer significant financial losses and be unable to complete our client engagements in a timely manner, if at all. Further, in the event of a natural disaster, we may also incur costs in redeploying personnel and property. In addition, if there is a major earthquake, flood or other natural disaster in any of the locations in which our significant customers are located, we face the risk that our customers may incur losses, or sustained business interruption and/or loss which may materially impair their ability to continue their purchase of products or services from us. A major earthquake, flood or other natural disaster in the markets in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows. However, we have reasonable insurance coverage for the loss or damage of the properties and business interruption.

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

          Currently, there is no public trading market for our equity shares in India or elsewhere nor can we assure you that we will take steps to develop one. Our equity securities are only traded on Nasdaq through the ADSs as described in this report. Under prior Indian laws and regulations, our Depository could not accept deposits of outstanding equity shares and issue ADRs evidencing ADSs representing such equity shares without prior approval of the Government of India. The Reserve Bank of India has announced fungibility regulations permitting, under limited circumstances, the conversion of ADSs to equity shares and the reconversion of equity shares to ADSs provided that the actual number of ADSs outstanding after such reconversion is not greater than the original number of ADSs outstanding. If you elect to surrender your ADSs and receive equity shares, you will not be able to trade those equity shares on any securities market and, under present law, likely will not be permitted to reconvert those equity shares to ADSs.

          If in the future a market for our equity shares is established in India or another market outside of the United States, those shares may trade at a discount or premium to the ADSs. Under current Indian regulations and practice, the approval of the Reserve Bank of India is not required for the sale of equity shares underlying ADSs by a non-resident India to a resident India as well as for renunciation of rights to a resident of India, unless the sale of equity shares underlying the ADSs is through a recognized stock exchange or in connection with the offer made under the regulations regarding takeovers. Since exchange controls still exist in India, the Reserve Bank of India will approve the price at which the equity shares are transferred based on a specified formula, and a higher price per share may not be permitted. Holders who seek to convert the rupee proceeds from a sale of equity shares in India into foreign currency and repatriate that foreign currency from India will have to obtain Reserve Bank of India approval for each transaction. We cannot assure you that any required approval from the Reserve Bank of India or any other government agency can be obtained.

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

          Our business is highly regulated as per extant telecom policy of the Government of India. Our ISP license issued in the year 1998 runs for a term of 15 years. If we are unable to renew the ISP license for any reason, we will not be able to carry on the said business beyond license term, which may adversely affect our business or results of operations.

          The GOI has right to revoke, terminate or suspend or take over entire operations for reasons such as national security or similar reasons without compensation to us. In view of increasing cyber threats and attacks, the GOI may require telecom licensees (including ISPs) at their costs to provide monitoring facility across its network, and facilities for capture and retention of data in terms of traffic flow, usage details, etc. This would result in significant increase in costs and possible lesser usage due to perceived invasion of privacy by customers.

          Certain government departments have been making queries whether use of Session Initiation Protocol, or SIP, terminal to make calls to phones abroad is permissible within ISP license. We believe that such overseas phone calls are permitted, since, SIP terminal is a “computer” as defined in Information Technology Act, 2000. We may have to make a significant investment as capital outlay in SIP terminals to make it a PC-equivalent, if the government authorities issue regulations governing SIP usage contrary to our beliefs, which would have a material effect on our results of operations.

In the event that the Government of India or the government of another country changes its tax policies in a manner that is adverse to us, our tax expense may materially increase, reducing our profitability.

          The statutory corporate income tax rate in India was 30% during fiscal 2009 and was subject to a 10% surcharge ,2% education cess and 1% secondary and higher education cess, resulting in an effective tax rate of 33.99%. For fiscal year 2010, the statutory corporate income tax rate is still 30% and subject to a 10% surcharge and 2% education cess and 1% secondary and higher education cess resulting in an effective tax rate of 33.99%. We cannot assure you that the surcharge will be in effect for a limited period of time or that additional surcharges will not be implemented by the Government of India. Although currently there are no material pending or threatened claims against us for taxes, such claims may be asserted against us in the future. Defending these claims would be expensive, time consuming and may divert our management’s attention and resources from operating our company

Risks Related to the Internet Market in India

          Our success will depend in large part on the increased use of the Internet by consumers and businesses in India. However, our ability to exploit the Internet service provider and other data service markets in India is inhibited by a number of factors. If India’s limited Internet usage does not grow substantially, our business may not succeed.

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

          Bandwidth, the measurement of the volume of data capable of being transported in a communications system in a given amount of time, remains very expensive in India, especially when compared to many countries where bandwidth penetration is quite high. Although prices for international and domestic leased lines were substantially reduced recently, they are still high due to, among other things, capacity constraints and lack of competition. If the cost of bandwidth is not further reduced, or increases significantly, our business and results of operations will be adversely affected.

We may fail to exploit the market for WiMax services because of lack of access to spectrum

          The ability to provide fast and easy connectivity across cities will be a competitive advantage in future as more companies look to provide connectivity to their offices. Wimax, or wireless digital communications, therefore gains significance for ubiquitous connectivity in cities, which will enable fast and easy connectivity in the last mile to the service provider’s network. However, we are currently not able to participate in the spectrum auction for Wimax given the high prices.

The Department of Telecommunications or DoT, has issued guidelines for auction and allocation of spectrum for BWA(Broadband Wireless Access) services. The stated Guidelines seek to license only four operators for BWA services per circle, creating monoliths that will dominate the entire BWA market and will limit the competition and competitive advantage for the consumer. We will not be in a position to bid or participate in the auction by paying the expectedly huge spectrum cost. (as per 25% of the base price of 3G).This could put us at a disadvantage in future compared to other service providers from the telecom sector who are able to obtain spectrum for Broadband Wireless Access (BWA) services

We may be compelled to surrender the Spectrum that we now utilise for our operations

          The Government of India has asked the Company to surrender 2.3GHz range of spectrum licensed to us. The other range of spectrum 5.7 GHz is also close to capacity utilization and will need to be augmented in future. Enterprise connectivity will need

licensed bands of spectrum for assured quality and security, so the non-availability of spectrum is a risk going forwards. In the event of the surrender of the spectrum 2.3 GHz, we may lose some of our Enterprise clients.

Our connectivity business may stagnate with a declining contribution

          In the connectivity business, as the volume scales, the unit price is continually reduced. Every year when annual contracts come up for review, customers contract more bandwidth or more links at a lower overall unit price. This is offset somewhat by lower bandwidth costs which we negotiate with our service providers. This impacts us in two ways: one, despite an increase in volumes, we do not see a commensurate rise in revenues; and two, margins in this business are continually shrinking. Therefore, our revenue from connectivity business may stagnate with declining contribution.

We may not be able to retain and acquire customers for our data centers

          In the field of Internet data center services, competition from data center operators may attract customers away from us or make it more difficult for us to attract new customers. Other companies in the data center business such as Reliance ,IBM and AT&T may become strong competitors of ours, and if they are successful in the market, it could be difficult for us to retain and/or bring in customers. Furthermore, once they leave us and choose another service provider, it may be difficult for us to reacquire them in future

          In order to improve our competitiveness, we are developing data centers at NOIDA- Delhi. If we are unable to attract adequate customers to these centers, we will not be able to achieve the revenues initially anticipated, which could have an adverse effect on our future results of operations and financial condition.

We may lose relevance and revenues if we do not position our business models in line with current and future technology trends

          Technology trends allow new business models that could replace current lines of business unless we are aware of them and positioning ourselves to take advantage of the transition. Two examples are Software as a Service and Cloud Computing. The former enables smaller companies to use software from a service provider on a subscription basis rather than having to buy it for themselves effectively moving this from a capital expenditure item to become an operating expenditure. The second enables hosting on a widely distributed and shared model, which will exclude the need for companies to contract data centre services. Unless we are able to adopt and deploy these advances in technology and infrastructure, we may lose our competitive position in the marketplace, which would adversely affect our revenues and may lead to increased customer attrition, as our customers switch to providers that utilize such information technology infrastructure.

We may fail to augment our skills and capability to best manage our services over Internet Protocol and data networks

          We have been able to build a reputation and maintain our lead because of our expertise and capability with the delivery and management of services over Internet Protocol and data networks. As the competition builds up their capability and experience, if we do not augment our skills and capabilities to keep our qualitative lead over them, we are at the risk of losing market share. Especially as infrastructure such as networks are a commodity today, and the only differential that we offer is our ability to manage and monitor services over them in a superior manner.

It may not be possible for us to retain our brand equity if we do not resort to huge investments for brand development

          Our competitors offering similar services are all large telecom companies who make substantial investments in building their brand image across their services. Sify, on the other hand, is a company focused on IT infrastructure services over data telecom networks and as such enjoys the reputation of a specialist in these services. However, if we do not build up awareness as well as our brand and reputation over time, the sheer weight of investments in brand development by the Telcos will dilute our brand equity.

We may not meet the selection criteria set for high value contracts by the Governments

          As we participate in bidding for large Government of India contracts, as well as business from large corporations, we increasingly come under scrutiny for the net assets value of our balance sheet as well as lack of profitability. Unless we increase capacity quickly and become profitable, we could be excluded from major government projects as not meeting their selection criteria.

The success of our business depends on the development of our capability

          As we offer our enterprise application services to an increasing base of large corporations, we run the risk of not being able to meet their needs for scaling and sophistication in future if we do not build the capacity to develop applications software to meet with future needs. We may not have adequate resources to develop our capability as a result of emerging sophistication required for such services.

We may fail to offer end-to-end managed services to sustain our position

          We believe that we are very well positioned in terms of the range of services we offer versus our competition across connectivity, hosting, security, applications, voice services and infrastructure management. Most of the telcos offer primarily connectivity and hosting currently. However, the market is evolving towards service providers who offer end-to-end managed services that include managing everything down to desktops. If we are to continue to lead the market, we need to extend our library of services to ensure that our portfolio of services helps graduate the market to managed services where we can maintain leadership. It may be difficult for us to offer end-to-end managed services to sustain our leadership in managed services without significant expenditures which would adversely affect our results of operations.

We may not get repeat corporate orders to optimize the capacity utilisation

          As we expand the network to small cities and towns, there is an operational cost involved in both the establishment and operation of these nodes. While the expansion is facilitated by a corporate order, we have to subsequently get additional business for capacity utilization in these nodes to make them profitable. If we are not able to do this rapidly by scaling up the business through these towns, we run the risk of overcapacity on the network in new areas, which results in a higher cost structure and margins.

Absence of policy support will hamper Internet and Data Services

          We have, and continue to be, subject to Indian regulations regarding the VPN license requirements, including the percentage of foreign holdings to offer VPN services as well the need for NLD/ILD licenses to offer VPN services and carrier voice services. The growth and development data and internet sector is dependent on a policy support of Department of Telecommunications Regulatory changes, as well the as continuing lack of policy initiatives to vitalize the data and Internet sector continue to be a risk in future.

We can not influence enabling policies that facilitate the growth and development of data and Internet connectivity in India . The absence of policy support for internet and data services may hamper the growth of such services in future.

Constant improvement of technology standards/ skills and evolving tools & applications are essential to sustain our position in Remote management of IT infrastructure

          We are relatively unknown outside India, and in comparison to other established IT players which have a large base of customers. If we are not able to constantly upgrade our technology standards and skills, and if we are unable to scale for critical mass in the near term, we would still be at the risk of being at a disadvantage.

          Management of IT infrastructure is dependent on sophisticated tools and applications to remotely monitor the IT infrastructure and assets of customers. If we are unable to retain our competitive advantages in terms of the evolving tools & applications, or the maturity of our processes, we will be at the risk of performing at a lower level to the competition.

The continued recession in the United States affects sales of our eLearning services

          The continued economic recession and uncertainty in the United States may cause reduced demand for our eLearning products, as our customers may reduce their training budgets and programming. Additionally, we may not be able to acquire new customers due to the poor economy. A prolonged period of reduced customer demand for our eLearning services may adversely affect our business and results of operations.

Emergence of Enterprise Software Suites may hamper our growth in eLearning stream

          The emergence of competitors such as Oracle, IBM, SAP, SumTotal and SABA offering enterprise software suites for eLearning for large organizations to develop their own learning programs could be a threat to our business in future. We may lose our business to our competitors, and if we are unable to acquire new customers or retain our existing customers, our revenues and results of operations may suffer.

The success of our strategy depends on our ability to keep pace with technological changes

          Our future success depends, in part, upon our ability to use leading technologies effectively, to continue to develop our technical expertise, to enhance our existing services and to develop or otherwise acquire new services that meet changing customer requirements. The markets for our service are characterized by rapidly changing technology, evolving industry standards, emerging competition and frequent introduction of new services. We may not successfully identify new opportunities, develop and bring new services to market in a timely manner.

We may not be able to grow our business if online advertising in our markets does not expand

          Our business strategy depends on the anticipated growth of online advertising in our markets and the growth of our revenues depends on increased revenues generated by online advertising. Online advertising is an evolving business and our ability to generate advertising revenues will (among others) depend on:

          Different pricing models are used to sell online advertising, and it is difficult to predict which, if any, of the models will emerge as the industry standard. This makes it difficult to project our future advertising rates and revenues. A reduction in traffic on our website may cause new advertisers not to enter into contracts with us and could cause existing advertisers not to renew their contractual arrangements with us, each of which, in turn, would reduce our potential advertising revenues. Additionally, any development of Internet software that blocks advertisements before they appear on a user’s screen may hinder the growth of online advertising and could materially and adversely affect our ability to grow our online advertising revenues and our business. Also, a slowdown in economic growth, and in particular a slowdown in the growth of companies that advertise on the Internet, may result in a reduction in our advertising revenues.

               Our contracts with advertising customers do not commit them to continue to provide us with a specific volume of business and can typically be terminated by them with or without cause, with little or no advance notice and without penalty. Additionally, our contracts with advertising customers are usually limited to a specific project and/or for a specific time period and not any future work. There are also a number of factors, other than our performance, which are not within our control, that could cause the loss of advertising customers. Early termination of material contracts or non-renewal of an expired material contract could have a material adverse effect on our business and our future financial performance

Adequate user database is necessary to make our advertising business profitable

               In order to increase advertising revenues, we need to continue to increase the number of users of our sports, recipes and entertainment video contents through our websites. If we are not able to attract and keep new users in a constantly evolving user base, we are likely to lose page views, and advertisers may reduce or cease publishing advertisements in our websites. It is important for us to provide necessary contents through our websites to attract more users. As a result of increased competition, it will be difficult for us to attract new users if we do not provide dynamic content to attract website visitors and attract new advertisers. If we are unable to increase our website views and advertising revenues, our results of operations will be affected.

The viability of Cyber café services depends on the success of the franchisees to generate or sustain adequate profitability

          The cyber café chain is a franchised model whose success depends on the success of the franchisees. In the last two years, operating costs have increased steeply, particularly rent for retail premises, eroding the margins of franchisees and making the business unattractive. We may be unable to modify or develop a business model that will provide additional revenues from these cafés to ensure continued profitability of the cyber cafes.

Our cybercafés may not fetch premium prices due to competition from unorganized sector

          Users view cyber cafés for Internet access as an utility, and are unwilling to pay for a premium service. Most of the competition is from the unorganized sector with low rates that have become the industry norm. Our premium pricing of products/services offered through cybercafés is viewed as being more expensive while some users acknowledge our superior services .Users therefore come to our cafes for unique products/services and routinely use other cafes for ordinary products/services. In view of the penetration pricing prevailing in the market, we may lose revenue from cybercafés and our profitability will be impacted.

Heightened security concerns for cybercafés issued by the governments will discourage franchisees to operate such cybercafés

          The government’s rules & regulations for operating cyber cafes have become more and more stringent in the face of rising terrorism and the use of emails to threaten key government officials and others. In addition, state level regulations differ in levels of compliance required of both the café operator and users. This is discouraging franchisees from entering the business and users for the risk of being harassed for using such facilities. This may lead to a decrease of cybercafés and may impact our revenues and result of operations

The expected growth for broadband services to retail segment may come down

          As the economy slows down and the consumer confidence erodes, the sale of PCs has dropped significantly during the period under review. We believe that a reduction in consumer confidence and the sale of consumer goods is likely to result in a drop in demand for broadband services until the cycle is reversed, as consumers delay or reduce their discretionary spending and personal computer usage. If this trend continues, reduced broadband usage may impact our revenue and result of operations.

Our pricing for broadband services to retail segment may not be competitive

          Service providers such as BSNL are frequently reducing rates so the Average Revenue Per User (ARPU) is constantly coming down .We have to continually respond with promotions and value added services to compete with such service providers. If we are unable to compete on pricing terms with our competitors, we may lose customers and fail to attract new customers, which may adversely impact our revenue and results of operations.

We may lose our broadband services to retail segment to competitors

          Our broadband business depends upon Cable Television Operators (CTOs) for delivery of services. This has proved difficult, leaving large areas uncovered and open to the competition representing a significant opportunity loss. In future, as competitors roll out Wimax services, they will have ubiquitous connectivity and will be able to offer broadband services everywhere without constraints. This will severely curb our ability to compete.

          The future of broadband services to home may revolve around Wimax wireless capability. Since Wimax capability is to be brought under 3G spectrum in the near future, we may not be able to afford the same unlike other big players in the Industry . Hence, we are likely to be at a disadvantage. This may result in loss of business to competitors.

We do not have any control over service delivery of Broadband Services to Home

          Our service delivery is dependent on the Cable Television Operator( CTO) for the last mile over which we do not have direct control, so a customer’s direct service experience is only as good as the quality of the CTO’s last mile connectivity, and the level of interest it takes in servicing customers. Our brand’s perception therefore, is directly impacted by an external party over whom we have little or no control in the matter of service delivery, and our customers may attribute usage problems to us rather than their CTOs.

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

          The market penetration rates of personal computers and online access in India are far lower than such rates in the United States. Alternate methods of obtaining access to the Internet, such as satellite internet and wireless internet are steadily becoming popular in metro centers and slowly replacing the wireline internet. There can be no assurance that the number or penetration rate of personal computers in India will increase rapidly. This may impact our ability to increase our revenue and may affect our results of operations.

The high cost of accessing the Internet in India limits our pool of potential customers and restricts the amount of revenues that our Internet access services division might generate

          The growth of our consumer services is limited by the cost to Indian consumers of obtaining the hardware, software and communications links necessary to connect to the Internet in India. If the costs required to access the Internet do not significantly decrease, most of India’s population will not be able to afford to use our services. Any long term absence of affordability to access internet at reasonable cost may adversely affect our business and results of operations.

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

          Many of our existing and proposed services are designed to facilitate electronic commerce in India. The e-commerce in India is at a very early stage as compared to western world. The market potential for e-commerce is yet to be exploited. Demand and market acceptance for these services by businesses and consumers, therefore, are still remain uncertain. Many Indian businesses have deferred purchasing Internet access and deploying electronic commerce initiatives for the following reasons:

If usage of the Internet in India does not increase substantially and the legal infrastructure and network infrastructure in India are not developed further, we may not realize any benefits from our investment in the development of electronic commerce services.

Risks Related to the Internet

We are now subject to quality of service (QOS) guidelines issued by TRAI. Failure to comply with one or more guidelines may expose us into fines/penalties

          TRAI has issued the following guidelines to the ISPs for improving the quality of service:

          Fixing up a contention ratio, may put standalone ISPs, like ours, at a serious disadvantage as cost of delivery of Internet bandwidth may increase. Telecom companies offering similar internet services are tempted to offer significantly lower prices and incentives as they own the last mile and at the same time by bundling telephony along with Internet enhance their otherwise idle last mile. Under such circumstances, it will be very difficult for ISPs to compete with big telcos which can offer broadband services by cross subsidising with voice/other services.

          In the event of our failure to comply with one or more of the above guidelines, we may expose ourselves to fines/penalties

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

          We could become liable if confidential information is disclosed inappropriately on or through our websites. Others could also sue us for the content and services that are accessible from our websites through links to other websites or through content and materials that may be posted by our users in chat rooms or bulletin boards. The laws in India relating to the liability of companies which provide Internet services, like ours, for activities of their users, are still relatively unclear. Investigating and defending these claims is expensive, even if they do not result in liability However, we have an insurance cover to protect us against some of these claims as per our Professional Indemnity Policy. Further, our business is based on establishing our network as a trustworthy and dependable provider of information and services and allegations of impropriety, even if unfounded, could damage our reputation, disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.

Our business may not be compatible with delivery methods of Internet access services developed in the future

          We face the risk that fundamental changes may occur in the delivery of Internet access services. Currently, Internet services are accessed primarily by computers and are delivered by modems using telephone lines. As the Internet is becoming accessible by cellular telephones, personal data assistants, television set-top boxes and other consumer electronic devices, and becomes deliverable through other means involving digital subscriber lines, coaxial cable or wireless transmission mediums, we will have to develop new technology or modify our existing technology to accommodate these developments. Our pursuit of these technological advances, whether directly through internal development or by third-party license, may require substantial time and expense. We may be unable to adapt our Internet service business to alternate delivery means and new technologies may not be available to us at all. We provide wireless connectivity on the 5.7 GHz spectrum allotted to us by the Wireless Planning Commission. The spectrum allocation may be inconsistent with industry standards. The current capacity may be insufficient to offer a breadth of services. The Government may issue instructions to release the spectrum that we hold. High cost of spectrum acquisition may be inconsistent with our revenue and cost models. We may not keep up with the pace of change that takes place in wireless technologies. The launch of DTH (Direct to Home) relay by service providers such as Tata Teleservices, Reliance, Dishnet and Sun TV may weaken the presence of Cable TV Operators (CTOs) in providing connectivity to homes through cables. Due to such competition, we may lose business from the CTOs for providing internet services through cables.

Our service offerings may not be compatible with industry standards developed in the future

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

Item 4. Information on the Company

History and Development

               We were incorporated on December 12, 1995 in Tamil Nadu, India as Satyam Infoway Limited ,a private limited company under the Indian Companies Act,1956 to develop and offer connectivity-based corporate services in India . Until December 2002, we were a majority-owned subsidiary of Satyam Computer Services, an Indian information technology services company traded on the New York Stock Exchange and the principal Indian stock exchanges. We changed our name from Satyam Infoway Limited to Sify Limited in January 2003 and from Sify Limited to Sify Technology Limited in October 2007. We completed our initial public offering of ADSs in the United States in October 1999. We listed our ADS in Nasdaq market on October 19,1999. In February 2000, we completed our secondary offerings of ADS in the United States.

               Sify International Inc. and Sify Networks Private Limited are our wholly owned and controlled subsidiaries.

               The address of our principal executive office is Tidel Park, 2nd Floor, No. 4, Rajiv Gandhi Salai, Taramani, Chennai 600113 India, and our telephone number is 91-44-2254-0770. Our Agent for Investors Relations in the United States is Graling Global ,phone +1-646-284-9400 .Our website address is sifycorp.com and the information contained in our website does not constitute a part of this Annual Report.

               From December 1995 through 1997, we focused on the development and testing of our private data network. In 1997, we began forming strategic partnerships with a number of leading technology and electronic commerce companies, including UUNet Technologies, in order to broaden our service offerings to our corporate customers. In March 1998, we obtained network certification for conformity with Indian and international network operating standards from the Technical Evaluation Committee of India. In April 1998, we began offering private network services to businesses in India. Our initial services included electronic data interchange, e-mail and other messaging services, virtual private networks and related customer support.

               We started development of www.sify.com, our online portal, and other related content sites for news, travel, finance , health and shopping with the goal of offering a comprehensive suite of websites offering content specifically tailored to Indian interests worldwide.

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

               In March 2000, we launched our network of public Internet cafés called iways to cater to the needs of Indians who do not have access to the Internet. In September 2000, we commenced our hosting services from our Tier-I data center at Vashi, Mumbai to provide co-location and managed services to our clients. In June 2001, we obtained permission to provide wireless connectivity on the 5.7 GHz spectrum from the Wireless Planning Commission. This enabled us to convert all our iways from Integrated Services Digital Network, or ISDN, connectivity on the last mile to wireless connectivity. This technology also enabled us to commence our high-speed/broadband access to homes, which began in March 2003. To enable quicker access to homes, we developed a model of partnering with Cable Television Operators, or CTOs, who already interface with households for providing cable television facilities to millions of households in India.

               In April 2002, ISP’s were permitted to provide restricted VoIP limited to outbound calls to International destinations and personal computer to personal computer calls in India. We started providing this service through our network of cybercafés, and later on through VoIP booths located in large commercial areas and corporate office complexes across major cities in India.

               From the time we launched our corporate services in 1997, we have continually upgraded our technology to provide data services to corporate clients. We were the first Internet service provider in India to make our entire network IP-based and subsequently Multi Protocol Label Switching (MPLS)-enabled, which permitted us to continue to grow our corporate customer base. As of March 31, 2009, we provide data connectivity services to more than 2,380 corporate clients in industries ranging from information technology, manufacturing, banking and financial services industry, pharmaceuticals, retail distribution and the government.

               Initial Public Offering and Subsequent Financing Transactions

               In October 1999, we completed our initial public offering on the Nasdaq National Market and issued 4,801,250 ADSs at a price of $18.00 per ADS. We received proceeds of approximately $79.2 million, net of underwriting discounts, commissions and other offering costs. In connection with our initial public offering, we received the benefit of exemptions from the Nasdaq corporate governance rules relating to shareholder meeting quorum, solicitation of proxies and shareholder approval for issue of shares other than in a public offering under Nasdaq Rules 4350(f), 4350(g) and 4350(i)(1)(D), respectively. We will continue to avail of the exemptions from the Nasdaq corporate governance rules.

               In February 2000, we completed a secondary offering and issued 467,175 ADSs at a price of $320.00 per ADS. We received proceeds of approximately $141.2 million, net of underwriting discounts, commissions and other costs.

               In October 2002, we agreed to sell an aggregate of 7,558,140 ADSs to SAIF for consideration of $13.0 million and to sell an aggregate of 2,034,883 equity shares to VentureTech for consideration of $3.5 million. This transaction was approved by our shareholders at our Extraordinary General Meeting held on December 9, 2002. In December 2002, we completed the sale of the ADSs to SAIF and the sale of 2,034,883 equity shares to VentureTech. In April 2003, we sold an additional 1,017,442 equity shares to VentureTech. In July 2003, we sold an additional 1,017,441 ADSs to an affiliate of Venture Tech.

               On November 10, 2005, Infinity Capital Ventures, LP (“Infinity Capital”) acquired 11,182,600 ADS of our Company from Satyam Computer Services Limited (“Satyam”) for US $5.60 per share in cash through a Sponsored ADR Programme arranged by the Company. The total purchase price for the Satyam shares was approximately US $62.6 million.

               In a separate transaction, also on November 10, 2005, Infinity Capital entered into a Subscription Agreement with us pursuant to which, upon the terms and subject to the conditions set forth therein, Infinity Capital agreed to purchase from us approximately 6.7 million newly-issued equity shares or ADSs at a purchase price of US $5.60 per share in cash. The total purchase price for the newly issued shares was approximately US $ 37.5 million. This transaction was approved by our shareholders at our Extraordinary General Meeting held on December 23, 2005. In January 2006, we completed the transaction. Also on November 10, 2005, Sify, Infinity Capital and Mr. Raju Vegesna entered into a Standstill Agreement pursuant to which, upon the terms and subject to the conditions set forth therein, Infinity Capital agreed not to purchase more than 45% of our fully diluted equity. The Board of Directors waived the above clause in the standstill agreement passed through a Board resolution dated January 22, 2008.

               In connection with the transactions, Mr. Raju Vegesna of Infinity Capital was appointed as the Chairman of our Board of Directors. We also appointed Mr. P. S. Raju as the second nominee of Infinity Capital to our Board of Directors.

               On March 24, 2008, the Company entered into a Subscription Agreement with Infinity Satcom Universal Private Limited (Infinity Satcom Universal), a private limited company in India which is controlled by Ananda Raju Vegesna and brother of Raju Vegesna,Chairman and Managing Director, for issuance of 12,817,000 Equity Shares of the Company with face value of Rs.10/- per share at a premium of Rs.165/-. It was approved by the Company’s shareholders at the Extra ordinary General Meeting held on March 17, 2008.

               On March 24, 2008, the Company received a sum of Rs 112.14 million (comprising of Rs 12.81 towards face value and Rs 99.33 million towards securities premium / share premium) .Subsequently, Infinity Satcom Universal communicated to the Company that they would focus their attention on the business of Sify Communication Limited (erstwhile subsidiary) and hence shall not contribute the balance money towards the subscription of 12,817,000 Equity Shares on call. On August 29, 2008, the Board of Directors, forfeited the shares allotted and the application monies collected (Rs. 112.14 million including sums towards capital and premium).

               Acquisition of Minority Interest in Subsidiary

               In January 2008, the Board of Directors of Sify approved the merger of its subsidiary, Sify Communications Limited with the Company. The Boards of each of Sify and Sify Comm determined that a merger would produce cost savings efficiencies and, as a combined entity, benefit all shareholders. The Board then submitted the proposed merger to the shareholders and to the High Court of Madras for approval. In August 2008, while approval for the merger was pending, the Indian government proposed new regulations regarding the delivery of internet services and was expected to announce changes to the policy governing the spectrum for the delivery of wireless data. The Board reviewed these regulatory changes and determined that it would be in the best interest

of each company to remain as separate entities, as opposed to combining the entities as contemplated by the proposed merger. The Company submitted a petition to the High Court of Madras to withdraw the merger, and such petition was approved.

               In October 2008, the Company again evaluated the feasibility of a merger between Sify and Sify Comm and the Board of Directors of the Company at their meeting held on November 24, 2008 approved the merger of Sify Comm with retrospective effect from April 1, 2008, subject to approval by the Shareholders, the Honourable High Court and other statutory authorities. The Board considered the deterioration of the Indian and global economy, and its effect on the Company’s performance during the first half of fiscal 2009 as well as the impact of a prolonged economic downturn on the Company during the third and fourth 2009 fiscal quarters. The Board evaluated these issues and determined that a combined entity would provide cost savings and increased cash flow, and strengthen the Company’s ability to borrow additional funds, if necessary. Accordingly, the Board of Sify determined that the merger should again proceed and sought shareholder approval, and submitted the merger to the High Court of Madras for approval. The Honourable High Court approved the merger on 26th June, 2009. In connection with such merger the Company has issued 10.53 million equity shares to Infinity Satcom Universal Private Limited, a 26 % stake holder in the erstwhile Sify Communications Limited prior to merger.

               On July 15,2009, Infinity Satcom Universal Private Limited has acquired 4,000,000 shares of the Company from Infinity Capital LP, USA in a private transaction. Post merger, Infinity Capital now owns approximately 26.06% and Infinity Satcom Universal Private Limited owns 27.24% of outstanding shares.

               Principal Capital Expenditures

               In fiscal 2009, 2008 and 2007, we spent Rs.1,153.91 million, Rs.849.09 million and Rs.686.32 million respectively, on capital expenditures. As of March 31, 2009, we had contractual commitments of approximately Rs.322.61 million for capital expenditure towards the acquisition of property, plant and equipment. These commitments included approximately Rs.273.92 million in domestic purchases and Rs.48.69 million in imports and overseas commitments for products and spares. All our capital expenditures were financed out of cash generated from operations and the funds raised from banks. During the year, the Company has entered into a contract with Emirates Integrated Telecom in relation to construction and maintenance of Europe India Gateway which is towards carriage of communication traffic in the future.

               Investment Strategy

               In evaluating investment opportunities, we consider important factors, such as strategic fit, competitive advantage and financial benefit, through a formal net present value evaluation.

               Sify Networks Private Limited (formerly E Alcatraz Consulting Private Limited)

               In March 2004, we acquired E Alcatraz Consulting Private Limited, a company engaged in the business of providing security services to corporate customers, for a consideration of Rs.32.7 million.

               Globe Travels, USA.

               In April 2006, we acquired Globe Travels, USA engaged in the business of selling online airline tickets in the U.S. with a special focus on the U.S.-India sector along with its Indian outfit for a consideration of USD $2.50 million, apart from 125,000 stock options and some conditional earn out payments. We believe this acquisition marks Sify’s entry into the online travel business, particularly e-ticketing. We also believe that the addition of a travel portal is in line with the Company’s strategy of providing end-to-end services to Sify users. Consequent to impairment testing for goodwill, the Company has recorded Rs. 15,200 impairment charge towards goodwill. This is primarily on account of the decline in business travels due to the global economic environment.

               India World Communication Limited

               India World Communications Limited filed an application with the Registrar of Companies, Tamil Nadu in 2008 for the winding up of its business under section 560 of the Indian Companies Act,1956. The Registrar had struck off its name from the register. Hence, the Company ceased to exist from the date of order of the ROC.

               Sify International Inc

               Sify International Inc incorporated in the United States of America (US) is a wholly owned subsidiary of Sify. The Company does not have any operations during the last three years.

Business Overview

               We are one of the largest integrated Internet, network and electronic commerce services companies in India, offering end-to-end solutions with a comprehensive range of services delivered over a common Internet backbone infrastructure. Our services enable our business and consumer customers to communicate, transmit and share information, access online content and conduct business remotely using our private data network or the Internet. Our Internet and network services include the following:

               We began providing corporate network/data services to businesses in April 1998, and as of March 31, 2009 we had more than 2,380 corporate customers located principally in India. We launched our Internet service provider business in November 1998, becoming the first private Internet service provider to begin service after the Indian government opened the market to private competition. We also operate online portals, www.sify.com, www.sifymax.in, www.samachar.com, and related content sites specifically tailored for Indian interests worldwide. Sify.com is one of India’s leading portals with services in areas such as news, travel, finance, health and shopping in addition to e-mail, chat and search. SifyMax.in is a broadband portal offering live streaming and on demand video and audio content, news clips, TV reality shows and highlights of cricket matches.

               We are providing NLD (National Long Distance) and ILD (International Long Distance) services through our network from August 2008. We have made tie-ups with a few international and domestic carriers to carry their traffic into India. We carry voice traffic, both national and international, using the IP back-bone and deliver voice traffic to direct inter-connect operators.

               Consequent to the merger of Sify Communications Limited with the Company, the Company has made the application to the Department of Telecommunications for the transfer of NLD / ILD licences to the Company and the approval of the Government is awaited.

               We currently operate a large national private data network in India. Our network utilizes Internet protocol, which is an Internet industry standard for tracking Internet addresses, routing outgoing messages and recognizing incoming messages. In February 2002, we became the first Indian company to be certified ISO 9001:2000 for network services, data center operations and customer relationship management. The ISO 9001:2000 certification from Det Norske Veritas (DNV), Netherlands under the RvA accreditation scheme provides recognition for self-defined benchmarks against international companies with respect to facilities, metrices, processes and practices. In fiscal year 2003, our Enterprise Solutions division was also certified ISO 9001:2000 for provisioning of corporate VPN’s, Internet bandwidth, VoIP, and integrated security solutions including pre-sales, sales, order processing and project management.

               As of March 31, 2009, we operated 547 points of presence serving more than 500 towns and cities across India. Points of presence are telecommunications facilities located in a particular market which allow our customers to connect to the Internet through a local telephone call. Although our Internet service provider license permits us to establish and maintain our own direct connection to the international Internet, we no longer maintain satellite gateways. We provide international bandwidth by leasing capacity of multiple oceanic systems.

               We continue to seek to be the premier integrated Internet, network and electronic commerce solutions provider to businesses and consumers in India. We believe that demand for our services is significant in India and growing rapidly as businesses and consumers seek alternatives to the communications services offered by telecom providers that were formerly controlled by the Government of India. We intend to continue to focus on providing superior network performance and high levels of customer service and technical support to increase our customer base and maximize customer satisfaction.

Industry Overview

               Development of the Internet. We believe that the large and increasing number of home and office computers linked to the Internet, advances in network design, increased availability of Internet-based software and applications, the emergence of useful content and electronic commerce technologies, and convenient, fast and inexpensive Internet access will continue to drive Internet growth and usage in the near future.

               Special Communications Needs of Businesses. As the Internet is now easily available and more reliable, businesses are increasingly utilizing the Internet for functions critical to their core business strategies, such as sales and marketing, customer service and project coordination. The Internet presents a compelling profit opportunity for businesses by enabling them to reduce operating costs, access valuable information and reach new markets. To maintain a significant presence on the Internet, businesses typically purchase Internet access services and establish a website. Internet access provides a company with its basic gateway to the Internet, allowing it to transfer e-mail, access information and connect with employees, customers and suppliers. A website provides a company with a tangible identity and an interactive presence on the Internet. Many corporations are also converting their legacy information systems and databases to web-enabled systems.

               The Opportunity in India. The resulting service remains inferior to service in developed countries. At the same time, however, the Indian economy continues to modernize and expand, particularly in sectors such as software development that are dependent on a reliable communications network. The growth of these industries is leading to an increasing base of personal computers and wired and wireless homes and businesses in India with a resulting increased demand for Internet services. We believe these trends, which mirror those in more mature economies, will continue to develop in India.

               The ability to exploit the Internet service provider and other data service markets in India is currently inhibited by the government systematically extended controls on the provision of Internet based services. Generally, bandwidth remains very expensive in India, despite falling prices for International and Domestic leased lines and the emergence of private players in the last couple of years and liberalization measures have brought an increase in supply and a consequent downtrend in prices respectively. Ceilings for bandwidth prices are set by the DoT and the TRAI plays the advisory role to the DoT.

               Absence of policy support for Internet is hurting India’s strategic objectives. Most government targets for Internet and broadband access remain unmet.ISPs face more restrictions than they faced at inception. ISPs face considerably tougher licensing terms. The visionary decision to make all ISP licenses free has now been changed to include hefty fees for virtual private networks (VPN) and Internet telephony. IPTV services are being closed to ISPs.Spectrum charges and procedures are more unfavourable now than before.

               It is easier for foreign companies to provide Internet telephony than Indian ISPs who wish to offer the service. Indian ISPs have to pay 10.3% Service Tax, and 6% of Annual Gross Revenues (AGR) as licence fees to provide Internet Telephony. They must meet regulatory and security obligations. Standalone ISPs are disallowed from offering un-restricted Internet Telephony and from terminating calls on the Indian Public Switched Telephone Network (PSTN). Interconnection between ISP & ISP Offering Internet Telephony is not allowed. On the other hand foreign ISPs such as Skype, Yahoo, and MSN offer services without any fees, obligations or security clearances.

               We expect the growth in personal computers and Internet users to increase the demand for Internet content directed towards domestic Indian consumers as well as the amount of electronic commerce in India.

               Private market participants historically have not been able to exploit the market opportunities in India because the regulatory environment in India largely prevented any competition with the national government-controlled telecom providers. Until November 1998, the only Internet service provider permitted in India was Tata Teleservices, which began providing Internet

access on August 15, 1995. On November 6, 1998, the government opened the Indian Internet service provider market to private competition and granted Internet service provider licenses. The licensees include cable television operators and joint ventures between local companies and large international telecom providers. Internet service provider licenses are granted for 15 years, with only nominal license fees. Currently, pricing of Internet service is not regulated by the Government of India, although it has the power to do so through policy directives. However, the interconnection charges between service providers are regulated by the TRAI.

Sify Business Model

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

               Key advantages of the Sify business model include:

Strategy

               Our goal is to become the premier integrated Internet, network and electronic commerce solutions provider to businesses and consumers in India. Our principal business strategies to accomplish this objective are discussed below:

Service Offerings

               Corporate network/data services. Our corporate network/data services division addresses the network, security and application services needs of Indian enterprises by leveraging our national Tier 1 IP network infrastructure. The services include a comprehensive range of Internet protocol based Virtual Private Network, or IPVPN, offerings, including intranets, extranets and remote access applications to both small and large corporate customers. There is a strong focus on industry verticals such as IT/ITES (IT enabled services), banking and financial services industry (BFSI), government, manufacturing, pharmaceutical and FMCG. We were the first service provider in India to provide MPLS-enabled IPVPN’s on its entire network. We have entered into a strategic partnership with the Power Grid Corporation of India (PGCIL) to provide enterprise network services to end customers across the country. Our entire network is MPLS enabled with built in redundancy with world class design and service standards.

               SecureConnect (TM) is our comprehensive offering of secure, reliable and scalable IPVPN solutions that meet both mission- critical data networking and converged voice, video and data connectivity needs. It offers a variety of intranet and extranet configurations for connecting offices, remote sites, traveling employees and business partners, whether in India or abroad. Our platform of services includes:

               In February 2002, we became the first Indian company to be certified ISO 9001:2000 for network services, data center operations and customer relationship management. The ISO 9001:2000 certification from Det Norske Veritas (DNV), Netherlands under the RvA accreditation scheme provides recognition for self-defined benchmarks against international companies with respect to facilities, metrices, processes and practices. Our corporate network/data services were also certified 9000:2001 compliant for pre-sales, sales, project management and backend operations in September 2003.

               We also offer a suite of security solutions, including security design, audit, procurement and integration. Our enterprise solutions portfolio includes a range of application services, such as enterprise class e-mail platforms, audio and video conferencing solutions and business web services. Contracts for these services are negotiated on an individual basis to provide specifically tailored network/data services to each customer.

               Application Services. We offer value-added services to organisations such as website design, development, content management, search engine optimisation, hosting and management services, including domain name management, secure socket layer (SSL) certificate for websites, and server space in required operating system and database. We provide state of the art messaging and collaboration services and solutions such as e-mail servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and services to enable data & access security over the Internet. We also offer web-applications such as online merchandising with on-line payment gateways, sales force automation, supply chain management, intranet and extranets, workflow engine and knowledge management systems. We also provide infrastructure-based services on demand, including on-line testing engine and network management. On-line testing services include test management software, required servers and proctored examination facilities at Sify’s e-port cybercafés. On-line exam engine offered allows a secure and flexible way of conducting examinations involving a wide range of question patterns.

               Security and Assurance Services. We offer a comprehensive suite of security solutions including security design, procurement and integration services for infrastructure security, vulnerability assessment and penetration testing. Implementation services include implementation of security products, such as firewalls, intrusion detection systems, content security, authentication tools and VPN services. We also provide assurance services covering Information systems(IS) Audit, Risk Assessment, and Business Continuity/Disaster Recovery Planning.

               Data Centers. We operate India’s first level 4 Internet Data Centers (IDC) two in Mumbai (Bombay), one each at Chennai (Madras) and Bangalore, which are designed to act as reliable, secure and scalable facilities to host mission-critical applications. We offer co-location services which allow customers to bring in their own rack-mountable servers and house them in shared racks, or they could hire complete racks, and even rent ‘secure cages’ at the hosting facility as per their application requirements. We also offer a wide variety of managed hosting services, such as storage, back-up and restoration, performance monitoring and reporting hardware and software procurement and configuration, network configuration as well as spares and replacement. Our Fort Knox platform for security management of hosted servers offers Service Level Agreement (SLA)-based security services to protect servers. Our Infrastructure Data Management Services (IDMS) service provides specific services related to building data centers, leveraging on our proven expertise to build world-class infrastructure.

               Digital Certification. In technical collaboration with Verisign, a leading provider of Internet trust services, we formed a subsidiary, Sify Communications Limited, to provide managed digital certificate-based authentication services in India. Sify Communications Limited was the principal affiliate of Verisign in India and was a member of Verisign’s Global Affiliate Network. Sify Communications Limited was accredited as the first Certifying Authority for issuance of Certificate for Digital Signature by the Ministry of Information Technology, Government of India. Sify Communications Limited has merged with Sify Technologies Limited during the period under review. Consequent upon the merger,Sify Technologies Limited now provides digital certificate- based authentication services which were provided by its erstwhile subsidiary,Sify Communications Limited.

               Remote Management Services. This service provides continuous proactive management and support of customer operating systems, applications and database layers through deploying specialized monitoring tools and infrastructure experts to ensure that our customers’ infrastructure is performing optimally.

               Our corporate network/data services division accounted for approximately 58.09%, 66.48% and 69.86% of our revenues in fiscal years 2007, 2008 and 2009 respectively. We believe that corporate services will continue to be the largest part of our business for the immediate future.

               VOIP Services. We offer a comprehensive VoIP services covering Managed Voice for Enterprises particularly in IT/ITES segment to meet their international business communications. As part of the service, our Hosted dialer platform is also provided to enable BPOs to use this infrastructure as a service.

               Internet access services.

               Our Internet access services for retail consumers include high-speed/broadband access to homes over cable, public Internet access from our network of e-ports(formerly iway cybercafés), VoIP and dial-up access to homes.

               Public Internet Access. We provide public Internet access to the large segment of the Indian population that does not own a personal computer through our network of iway cybercafés. Sify operates these iway cybercafés on a franchisee model. As of March 31, 2009, we had 1,651 operational e-ports(formerly iways) in 253 towns and cities.

               In connection with our franchised e-ports(formerly iways), we grant each franchisee a non-exclusive license to operate the cybercafé using our logo, brand and trade names. We enter into an agreement with the franchisee establishing the rights and obligations of each party. In connection with the establishment of a franchised e-port (formerly iway), we receive an initial franchise fee that covers the following upfront services rendered by our company:

               The cybercafés are owned and operated by the franchisees. The franchisee procures the retail space, invests in furniture, interior decor, personal computers, point of sale signage and employs/trains the staff. The franchisee is responsible for the maintenance of the premises and interface with customers. We provide the complete back-end support, including bandwidth, the authentication/usage engine and the billing/collection system. The prices to be charged to the customers and the services that can be rendered are controlled by Sify. On average, these e-ports (formerly iways) have about seven personal computers and operate in an area of about 250 square feet. All e-ports operate on a prepaid subscription model, and the end customer has the ability to browse from any of the e-ports using the roaming facility that Sify provides. The billing system allows us the option of charging different prices based on the services used, time of usage and the place of use. More than 99% of these cafés are connected through the wireless mode, on the 5.7 GHz or the 2.4 GHz spectrum, with a subscriber unit placed on the top of the building and connected to an access point in a tower that is within a 5 kilometre radius from this location. We believe the e-ports offer a superior browsing experience compared to other internet cafés that operate on either a leased line or an ISDN facility. Today, e-ports are being used for a multitude of services including VoIP, video conferencing, online examination centres, online games , e-distribution points and value added services such as IRCTC ( an online passenger reservation site) and utility payments.

               Sify e-port. The iways cyber café chain is re-branded as “sify e-port”.Sify e-port is today the largest chain of branded retail outlets in the country, empowering every user to reap the benefit of internet and its applications . As of March 31,2009, we had approximately 1,651 operational e-ports. We have launched a model of e-port Xpress with a single PC with value added services as a kiosk chain offering services like travel ticket booking, bill payment, mobile recharge and e-commerce transactions in addition to internet browsing, chat, email and gaming.

               Voice Over Internet Protocol. VoIP can be used in India for making International calls. We have leveraged on our extensive network of e-ports to offer VoIP. As of March 31, 2009, more than 1,651 of the e-ports had the capability to provide VoIP. We provide these services through standalone VoIP booths at various strategic locations in major cities. We use MPLS enabled technology that ensures voice clarity.

               VoIP for home: In addition to offering VoIP services through e-ports and VoIP booths, we provide VoIP services for all home users. This product is called Sifytalk and is a PC 2 Phone prepaid product. By using the prepaid pack, the user will be able to make international calls from his PC to any international destinations. The user can use sifytalk by connecting to any broadband connection.

               Broadband/High Speed Internet to Home: We believe that the Sify Broadband Business Model, over the past few years, has emerged as the most unique and cost-efficient model for scaling up broadband across the country. It leverages the brand, marketing and technical abilities of Sify as an ISP and the strengths of cable operators in having right of way and the network required to connect customers at a marginal cost. We have also launched an internet pack called “Nights unlimited” for internet access, which provides unlimited download during the night time, i.e, from 10.00 P.M to 08.00 A.M to the user.

               We believe that the combination of wireless to cable operator and cable to home services will enable us to successful operate as a broadband operator. We believe that our current biggest strength as a broadband operator lies in our marketing. We have built our reputation through our focused and targeted investment and business development strategy. Due to our relations with cable operators, we can utilize our substantial network available to provide our service on cable networks.

               Innovation at Sify is a continuous process and coupled with customer focus, we have dedicated the entire power and control to our valued subscribers by introducing “Direct Renewal Facility”, which allows a Sify broadband subscriber to renew his connection at anytime of the day or night from the comfort of his home. Users whose validity has expired or pack amount is not available can login and re-charge their account. The subscriber gets full freedom to recharge according to the needs, convenience and at any time of the day-the recharge amount can be paid conveniently within three days from the time of recharge.. Based on Voice over Internet Protocol, this facility will be available to Sify Broadband subscribers as a Closed User Group service.

               Our Internet access services division accounted for approximately 33.89 %, 25.72 % and 18.30 % of our revenues in fiscal years 2007, 2008 and 2009 respectively.

               Online Portal Services

               We operate online portals, including India’s first broadband content portal, www.sifymax.in, and a group of websites under www.sify.com and an NRI portal, www.samachar.com, that function as principal entry points and gateways for accessing the Internet by providing useful web-related services and links. We also offer related content sites specifically tailored to Indian interests worldwide in five local Indian languages. Our portal sites, www.sifmax.in and sify.com, are designed to be the initial launch screen for all of our SifyOnline customers and e-port users.

               Sify.com provides a gateway to the Internet by offering communication and search tools such as email in 11 languages, messaging, chat, blogs, e-greetings and search engine to classifieds, jobs, travel, online portfolio management and channels for personal finance, astrology, lifestyle, shopping, movies, sports and news. It has been designed to address a wide audience, incorporating world class design and usability. The finance portal www.walletwatch.com covers the entire spectrum of equity markets, business news, insurance, mutual funds, loans and a host of paid and free financial services. The sports channel www.khel.com covers the entire gamut of Indian and international sports with special focus on cricket. The food channel www.bawarchi.com focuses on Indian recipes and cooking and is especially popular among Non-resident Indians (NRIs) audiences with over 90% of its content being user generated. The community tools in Sify.com include discussion boards, blogs and groups.

               SifyMax.in provides live streaming and on demand video and audio content in 12 categories, including films and music, general entertainment, lifestyle, TV reality shows, podcasts, video blogs, business, sports and national news. Sify Max streams video content live (24 X 7) from TV channels like CNN-IBN & CNBC and hosts 3 radio stations offering Bollywood hits, latest chart-busters, Indipop and international in multiple languages. Sify Max has also been the official Internet partner of India’s most popular reality shows. Sify Max is a pioneer in live video streaming, having webcast the Indian budget 2007, Mumbai Marathon, Lakme Fashion Week, the India Today Conclave and cricket matches. We now also have city specific entertainment focused websites www.mumbailive.in, www.bangalorelive.in, www.hyderabadlive.in, www.delhilive.in and www.chennailive.in that focus on rich video content of interest to the residents of that particular city including shopping, best buys, cinema and entertainment, and popular restaurants in the city.

               We believe that NRIs, or non-resident Indians, have greater ease of access to the internet than Indians residing domestically. Our NRI news portal, www.samachar.com, focuses on Indian news and allows NRIs to stay connected to India by aggregating news from across all popular newspapers and other news portals. This portal provides a range of news in English and five Indian languages, entertainment and services, including money transfer and gifting, that help millions of NRIs. We also launched our NRI Finance site to cater to increasing financial needs of the NRI community.

               Sifymall.in, the online shopping mall, stocks products from India’s leading brands and products. We believe that it offers competitive prices and a secure and convenient method of payment. Users can buy using their credit or debit card, pay cash on delivery or send a check.

               Sify Mobile was launched during the year 2004 with 54545 as its short code. Its focus has been on providing relevant regional content to cater to the burgeoning number of mobile users in India. The range of services includes downloadable ring tones, wallpapers, news, cricket scores and a variety of other interactive services. Sify mobile has also tied up with mobile operators to tailor specific applications and content of interest to mobile consumers.

               Our online portal services division accounted for approximately 4.82%, 3.51%, and 2.86 % respectively, of our revenues in fiscal years 2007,2008 and 2009 respectively. The decrease in revenue from portal services is on account of drop in corporate orders and mobile business operations due to lower margin as well as high operational costs.

Corporate Customers

               We have established a diversified base of corporate customers in a variety of data intensive industries, including information technology enabled services (ITES), banking financial services and Insurance (BFSI), publishing, retail, pharmaceuticals and manufacturing. Our corporate customer base has grown to over 2,380 customers. The increased scope of the services we offer, particularly the provision of broadband services to our existing customers and International IPVPN services along with the increased reach of our network, has increased our market base.

Customer Service and Technical Support

               We believe that excellent customer support is critical to our success in attracting and retaining subscribers. We currently provide customer service and technical support via a local telephone call in most of the cities in which we have a point of presence. Our web-based help desk and MIS system provide online information to our clients. Subscribers can also e-mail their questions directly to a customer service and technical support address at our company. Our customer service and technical support staff handles all questions regarding a subscriber’s account and the provision of our services and is available 24-hours-a-day, seven-days-a-week.

Sales and Marketing

               Corporate Offerings. The principal focus of our sales and marketing staff is to acquire new customers and maintain cordial relationship with the existing corporate customers. We seek to penetrate this market through trade publication ads, industry trade shows and seminars for the benefit of industry associations and potential customers. As of March 31, 2009, we had 505 employees dedicated to sales and marketing exclusively for our corporate offerings.

               Consumer Offerings. A key element of our business strategy is to increase our brand awareness and market penetration among consumers through a number of means including an expanded advertising campaign focused primarily on print advertising, direct mail and free software to consumers who become subscribers.

               To increase Internet access and use of our websites by personal computer buyers, we have entered into arrangements with leading personal computer manufacturers to have our Internet access software bundled with their computers sold in India.

Technology and Network Infrastructure

               We operate a national internet protocol private data network with 547 points of presence serving more than 500 cities and towns across India. We operate our network facilities and customer service operations, which gives us greater control over the utilization and quality of our network. We have designed and built our network using advanced technologies and equipment which will enable us to continue to expand the geographic range of our network, integrate improved data processing technologies and enhance speed and capacity with little or no disruption to our customers.

               Geographic Coverage. Through our national network of points of presence, our business and consumer Internet access customers are able to access the Internet markets in India via local leased lines or a local phone call on dial-up or through our cybercafé chain or wireless. We have 547 points of presence, or POPs. These points of presence, or primary nodes, reside at the core of a larger Internet protocol network with a partially meshed topology architecture. We have additional points of presence, or secondary nodes/base stations, in other towns and cities. Each point of presence contains data communications equipment housed in a secure facility owned, leased or operated on an infrastructure co-location basis by our company located near a Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) or private basic service operator (BSO) telephone switching station. Most points of presence contain a modem bank which receives and aggregates incoming calls from customers who access our system by modem connection through a local call on the public telephone system, and then switches and routers aggregating broadband subscribers on wireless and fiber. The last mile of the Internet could be a leased line, ISDN or point-to-multipoint radio link in the 5.7, 2.5 or 3.3 gigahertz range which we have licensed from the Wireless Planning Commission. We also use 2.4 ghz radios, which do not require an operating license, in some locations. Our larger corporate customers access the point of presence directly through leased lines or wireless links.

               Network Architecture. We ensure network reliability through several methods and have invested in proven technologies. We use Cisco routers to route traffic between nodes interconnected using a high speed interface. Most of our applications and network verification servers are manufactured by IBM, Sun and Hewlett-Packard.

               The primary nodes on the backbone network are connected by multiple high-speed fiber optic lines that we lease from long distance operators. The secondary nodes are connected by lower speed leased lines. A number of nodes are accessible from at least two other nodes, if not, by two long distance operators, allowing us to reroute traffic in the event of failure on one route. We reduce our exposure to failures on the local loop by usually locating our points of presence within range of service providers switching equipment and purchasing connectivity from multiple providers. To further maximize our network uptime, we are almost completely connected on fiber optic cables to the switching points of our service providers from our POPs.

               In addition to a fundamental emphasis on reliability and security, our network design philosophy has focused on compatibility, interoperability, scalability and quality of service. We use Internet protocol with Multi Protocol Label Switching, or MPLS, to transmit data, thus ensuring that our network is completely interoperable with other networks and systems and that we may port any application onto our network. The modular design of our network is fully scalable, allowing us to expand without changing the network design or architecture, thus ensuring little or no service disruption.

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

               Data Centre Infrastructure. We operate three level 4 Internet Data Centres, two in Mumbai, one each at Chennai and Bangalore. Sify offers managed hosting, security and infrastructure management services from these facilities.

Competition

               General. We face competition in each of our markets and expect that this competition will intensify as the markets in India for corporate network/data services, Internet access services and online content develop and expand. We compete primarily on the basis of service, reliability and customer support. Price and ease of use are also competitive factors.

               Corporate Network/Data Services. Our competitors for many private network services include government services companies that have built and operate their own private data networks. For Internet access, our main competitors are Bharti Televentures, Reliance Infocomm and Tata Teleservices, and our main competitors for domestic VPN includes terrestrial network providers, such as Bharti, Reliance and Tata Indicom, and satellite communications agencies, such as Bharti BT (which recently bought Comsat Max) and HCL Comnet. For international MPLS VPN, our main competition is from MCI, AT&T and Bharti BT.

               Internet Access Services. During the last few years, BSNL and MTNL, the leading government owned telecom providers, have grown their dial-up businesses significantly by bundling their Internet services with basic telephony services. While the dial-up segment will grow, we expect the market for broadband Internet services to grow more rapidly in the future due to additional

telecom providers emerging as competitors. We expect the market for consumer Internet access to remain extremely price competitive as late market entrants attempt to acquire customers.

               There is no single significant competitor in the cybercafé space. Reliance Infocomm, a member of the Reliance group, has more than 225 “webworlds”, Currently, the market is highly fragmented and dominated by individual entrepreneurs who own Internet cafés, with a few personal computers connected to the Internet through a leased line or ISDN line. With considerably lower overheads, these individuals are able to offer Internet access at lower rates. We compete by offering faster browsing speeds, improved overall ambience at our e-ports, convenient billing systems and roaming facilities.

               Online Portal Services. There are several other companies in India that have developed websites, including rediff.com which completed its initial public offering in the United States in June 2000. The market is dominated by Sify.com, Rediff.com, Indiatimes.com, Yahoo.co.in, MSN.co.in and Google.com. Most of the services offered on these portals are similar with very little differentiation. Google established an office in India and began operations in 2005.

               All the above mentioned portals are competing for a share of the online services market in India, which is dominated by online advertising, mobile telephone short code revenues and e-commerce. In terms of the share of the online advertising market, we are one of the leading companies. However, we lag behind our competitors in mobile telephony short code and e-commerce services.

               Most of our online portal competitors enjoy the following advantages compared to our company:

               To be competitive, we must constantly innovate and introduce new services to the market quickly. We also need to keep pace with rapidly changing technology in this area. Increased competition could result in loss of market share, reduced prices or reduced margins, any of which could adversely affect our business.

Intellectual Property

               Our intellectual property rights are important to our business. We rely on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property. We have filed a number of trademark and service mark applications in India for registering our product and service offerings.

               Our efforts to protect our intellectual property may not be adequate. We hold no patents, and our competitors may independently develop similar technology or duplicate our services. Unauthorized parties may infringe upon or misappropriate our services or proprietary information. In addition, the laws of India do not protect proprietary rights to the same extent as laws in the United States, and the global nature of the Internet makes it difficult to control the ultimate destination of our services. For example, the legal processes to protect service marks in India are not as effective as those in place in the United States. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly.

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

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

Government Regulation

               Our business is subject to comprehensive regulation by the Ministry of Communications through the Telecom Commission and the DoT, pursuant to the provisions of the Indian Telegraph Act of 1885, or Telegraph Act, the India Wireless Telegraphy Act, 1933, or Wireless Act, the Information Technology Act, 2000 or IT Act and the terms of our Internet service provider license issued by the DoT under which we operate. Pursuant to the Telegraph Act, the provision of any telecommunications services in India requires a license from the Government of India, obtained through the DoT. While the Telegraph Act sets the legal framework for regulation of the telecommunications sector and the Wireless Act regulates the possession of wireless telegraphy equipment, much of the supervision and regulation of our company is implemented more informally through the general administrative powers of the DoT, including those reserved to the DoT and other governmental agencies under our license.

               In March 1997, the Government of India established the TRAI, an independent regulatory authority, under the provisions of the Telecom Regulatory Authority of India Act. The TRAI is an autonomous body consisting of a chairperson and at least two and not more than four members.

               Under the Telecom Regulatory Authority of India Act, the functions of the TRAI are to:

               The TRAI also has the authority to, from time to time, set the rates at which domestic and international telecommunications services are provided in India. The TRAI does not have authority to grant licenses to service providers or renew licenses, functions that remain with the DOT. The TRAI, however, has the following powers:

Failure to follow TRAI directives may lead to the imposition of fines. Decisions of the TRAI may be appealed to the Telecom Disputes Settlement and Appellate Tribunal.

     In December 2004, the Government of India through DOT imposed new requirements on Internet Service Providers wishing to offer Internet Protocol — Virtual Private Network (IP-VPN) services. Consequently, we applied for permission to offer IP-VPN services, and the DOT, Government of India issued a letter of intent to us on December 30, 2004 regarding amendment of our existing ISP license to include provision of IP-VPN services. In January 2005, we paid a Rs.100 million onetime entry fee and submitted a financial bank guarantee of Rs.10 million as required by the letter of intent.

               On November 10, 2005, the GOI issued guidelines for obtaining National Long Distance (“NLD”) and International Long Distance (“ILD”) licenses including the terms and conditions for the licenses. These guidelines eliminated the IP-VPN license, entitling the Company to a full refund of the Rs.100 million entry fee, and permitting existing IP-VPN license holders to migrate to the NLD and ILD service licenses effective January 1, 2006.

               As the NLD and ILD licenses were under the regime of Department of Telecommunications, the notification of the GOI dated 7 November 2005 was required to be complied with to obtain NLD and ILD licenses. The primary condition set out in the notification among other conditions was that, the total composite foreign holding by the applicant should not exceed 74 %. Given that the foreign shareholding in Sify was higher than the aforesaid threshold limit, Sify Communications Limited (erstwhile subsidiary) decided to obtain the NLD and ILD licenses in its name and made necessary applications in this regard. To facilitate this, Sify divested its stake in Sify Communications Limited (erstwhile subsidiary) to the extent of 26% of its holding in Sify Communications Limited (erstwhile subsidiary), or 4.680 million shares, to Infinity Satcom Universal, a related party, for a sale consideration of Rs.139,810 during the quarter ended December 31, 2005. Infinity Satcom Universal, a company incorporated under the laws of India, is owned by Ananda Raju Vegesna, who is the brother of Raju Vegesna, Chairman of Sify’s Board of Directors and the principal of Infinity Capital Ventures, LP (“Infinity Capital”).

               On November 21, 2006, Sify Communications Limited(erstwhile subsidiary) executed two License Agreements with GOI, for NLD and ILD services respectively, which enabled Sify Communications Limited (erstwhile subsidiary) to provide IP-VPN services. Accordingly, the Company transferred its IP VPN business to Sify Communications Limited (erstwhile subsidiary) effective November 22, 2006 and the latter commenced the said services on the same day. Sify Communications Limited(erstwhile subsidiary) also furnished bank guarantees for Rs.200,000 each for NLD and ILD licenses to GOI. These licenses are valid for an initial period of 20 years and can be renewed for another 10 years at one time, upon request of the licensee made during the 19th year of license.

               Pursuant to the Shareholders approval at the meeting held on 12th February, 2009 which was convened as per the Orders of the Honorable High Court of Judicature at Madras (Court) and its Order in Company Petition Nos.30 and 31 of 2009 on 26th June 2009 sanctioning the Amalgamation Scheme, the assets and liabilities of Sify Communications Limited, whose principal business was providing digital certificate based authentication services for web sites, Corporates / individuals and consultancy services to Companies / Firms intending to set-up security systems for e-commerce transactions, were transferred to and vested in the Company with effect from the appointed date viz. 1st April 2008 in accordance with the Amalgamation Scheme so sanctioned. Effective upon the merger,NLD and ILD licenses of Sify Communications Limited (erstwhile subsidiary) have been transferred to the Company to provide IP-VPN services. Consequent to merger Infinity Capital and Infinity Satcom Universal Private Limited hold 26.06% and 27.24% of outstanding equity shares respectively. This has resulted in resident share holding of 27.24% post merger.

Organizational Structure

               We are not part of any group. A list of subsidiaries and relevant information about them is provided in Exhibit 8.1 to this Annual Report on Form 20-F.

Property, Plant and Equipment

               We own approximately 100,000 square feet corporate headquarters located in Chennai (Madras), India and an approximately 20,000 square feet regional office in Mumbai (Bombay). We have taken on lease approximately 3,500 square feet network operations center in Chennai, a 20,000 square feet data center in Vashi, Mumbai, 31,750 square feet data center in Airoli and a 6,000 square feet office space in Prabhadevi, Mumbai. Our Chennai facility houses our central network servers as well as our network staff which monitors network traffic, service quality and equipment at all our points of presence, or POPs, to ensure a reliable Internet service. We have POPs in 500 towns/cities across India. Most of our POPs are staffed 24-hours-a-day, seven-days-a-week. Our POPs average approximately 750 square feet at each location. We have backup power generators and software and hardware systems designed to prevent network downtime in the event of system failures. In the future, we may add additional facilities to supplement or add redundancy to our current network monitoring capability. Our property, plant and equipment is pledged towards obtaining loans / working capital facilities from banks.

Item 4A. Unresolved Staff Comments

               None.

Item 5. Operating and Financial Review and Prospects

               The financial statements of the Company included in this Annual Report on Form 20-F have been prepared in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board. The information set forth in Operating and Financial Review and Prospects is also for the Company’s three recent fiscal years. The discussion, analysis and information presented in this section should be read in conjunction with our financial statements included herein and the notes thereto.

Operating Results

               This information is set forth under the caption entitled ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ below and is incorporated herein by reference. Further, information relating to any governmental, economic policies or other factors which have materially affected, or could materially affect, directly or indirectly, the companies operations is set forth under the caption entitled ‘Risk Factors ’ above.

Liquidity and Capital Resources

               This information is set forth under the caption entitled ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ below and is incorporated herein by reference.

Research and Development

               This information is set forth under the caption entitled ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ below and is incorporated herein by reference.

Trend Information

               This information is set forth under the caption entitled ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ below and is incorporated herein by reference.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

               We are a leading Internet service provider engaged in Internet, Networking and e-Commerce services. We provide integrated end-to-end solutions for both corporates and consumers, with a range of products and services delivered over a common Internet backbone infrastructure, such as, Internet, connectivity, security and consulting, hosting and managed service solutions; Internet access services to homes and through cyber cafés; Online portal services and content offerings; web services , mass market products , e-learning software and infrastructure management services. Our clients rely on our solutions/products to enhance their business performance and/or secure their information systems.

               Our professionals deliver high quality solutions by leveraging our delivery model through which we divide projects into components that we execute simultaneously at client sites and at our development centers in India . We seek to optimize our cost structure by maintaining the flexibility to execute project components where it is most cost effective. Our sales, marketing and business development teams are organized to focus on specific regions and market segments and this helps us to customize our service offerings to our client’s needs. Our primary markets are India and to a limited extent in US. We serve clients in financial services, manufacturing, telecommunications, retail, utilities, logistics and other industries.

Corporate network/data services

               The demand for services / products of our corporate network/data services division has reduced during the second half of fiscal 2009 due to the economic slow down and the same trend is likely to continue during the current fiscal unless the recession is reversed. The bandwidth cost has reduced substantially during the period under review and the same trend is expected for current fiscal. We have launched our NLD/ILD voice services in August 2008 and this stream has the potential to provide a sizable momentum to our business. The opening of our new data centre in Mumbai (Airoli) has facilitated us to enhance our position in the market. The reduction in bandwidth prices in India has led us to revise bandwidth rates to our connectivity clients during the period under review and this trend is likely to continue in future . The reduced IT spending by our Corporate clients for connectivity business has impacted our revenue stream of hardware/software sales during the period under review. We may encounter excessive pressure from our Corporate clients for price reduction in the current fiscal . Certain of our Hosting services clients may opt out for outsourcing arrangements to reduce their costs and if this happens, our business may be affected.

Internet access services

               Broadband business has been impacted due to severe competition from the existing operators. The customer base is coming down. We have reduced our prices for our products and will continue to reduce further to reflect the prevailing prices.

               There are changes in the regulatory environment. The Government is introducing stringent KYC(Know Your Customer) norms on cybercafé users. The overall number of Cybercafe’s has declined in India due to regulatory norms, higher rental costs for the cybercafés run by the franchisees and the migration of cybercafe users to Home Broadband.

Online portal services and content offerings

               The last quarter of the fiscal 2009 has been a lean period for subscription based products such as mobile and domain registration and this trend is likely to continue during the current fiscal. The business is shrinking due to high competition and economic slowdown. Clicks to Matrimony, Job and real estate websites have come down during the period under review and this trend may be repeated unless the slowdown is reversed.

Other services-Infrastructure Management Services

               Market opportunity for remote infrastructure management services is growing. We wish to capitalize this trend by evaluating our pricing and engagement models

Other services-eLearning Services

               As the business environment continues to be challenging in the International markets, there will be pricing pressures on pricing from customers and this will also be driven by competition. On going Research & Development efforts are underway to develop new learning products. We have introduced a learning infrastructure proposition on a Services model .While the underlying need for eLearning products and services remains strong, there will be cutbacks and pressure on Customer learning budgets. Our large customers such as Microsoft, GE, NetApps and DELL have experienced contraction in their business due to global economic slowdown during the period under review and this trend is likely to continue further. To compensate the business loss from such customers, we are adopting a new strategy of expanding our client base through new verticals, segments and geographies, while improving cost efficiency with Business Process Knowledge Management .

               There are numerous risks and challenges affecting the business. These risks and challenges are discussed in detail in the section entitled ‘Risk Factors’ and elsewhere in this Annual Report on Form 20-F.

               As of March 31, 2009, we had 2,279 employees, as compared to approximately 2,397 employees as at March 31, 2008.

Revenues

               Corporate network/data services

               Our corporate network/data services revenues primarily include revenue from sale of hardware and software purchased from third party vendors, connectivity services revenue and, to a lesser extent, revenues from the installation of the connectivity link and other ancillary services, such as e-mail, document management and domain registration. Generally, these elements are

sold as a package consisting of all or some of the elements. We sell hardware and software purchased from third party vendors to our high value corporate clients. Our connectivity services include IPVPN services, Internet connectivity, last mile connectivity (predominantly through wireless), messaging services, security services and web hosting for businesses. We provide these services for a fixed period of time at a fixed rate regardless of usage, with the rate for the services determined based on the type of service provided, scope of the engagement and the Service Level Agreement, or SLA. Our web hosting service revenues are primarily generated from co-location services and connectivity services. Our security services revenues include revenue from consulting services, vulnerability assessment and penetration testing. We provide NLD (National Long Distance) and ILD (International Long Distance) services and carry voice traffic for Inter-connect Operators. Revenue is recognized based upon metered call units of voice traffic terminated on the Company’s network.

               Internet access services

               Internet access services revenues are generated from the Internet connectivity we provide to our retail customers through public access and home access services. Home access services are provided through dial-up packs and broadband connectivity, which is provided through arrangements with CTOs. Our public access services are provided through franchised and company-owned cybercafés. Additionally, we generate revenue by providing Internet telephony services, allowing customers to make international telephone calls over the Internet.

               Online portal services and content offerings

               Online portal services revenues include advertising revenues from the various channels of our Internet portal, www.sify.com. We enter into contracts with customers to serve advertisements in the portal, and we are paid on the basis of impressions, click-throughs or leads. Revenues also accrue from commissions earned on products and services rendered through www.sifymall.com, and also from value-added services that are rendered using our mobile telephone short code, 54545.

               Other services

               Other services include revenue from e-learning. We develop and upload content for e-learning to facilitate web-based learning in various organizations. We provide e-learning services on time-and-materials or on a fixed-price basis.

               In Note 34 to our Consolidated Financial Statements in this Annual Report on Form 20-F, we provide supplemental segment data, which provides separate revenue and operating income (loss) information for each of these business segments. This information is available in Item 18 — Financial Statements of this Annual Report on Form 20-F and is incorporated herein by reference.

Expenses

               Cost of goods sold and services rendered

               Corporate network/data services

               Cost of goods sold and services rendered for the corporate network/data services division consists of telecommunications costs necessary to provide services, customer support costs, cost of goods in respect of communication hardware and security services sold,the cost of providing network operations, the cost of voice termination for NLD/ILD voice services, the cost of voice termination for VoIP services and other costs. Telecommunications costs include the costs of international bandwidth procured from Tata Teleservices and satellite gateway providers and are required for access to the Internet, providing local telephone lines to our points of presence, the costs of using third-party networks pursuant to service agreements, leased line costs and costs towards spectrum fees payable to Wireless Planning Commission, or WPC, for provision of spectrum in the 5.7 GHz range to enable connectivity to be provided on the wireless mode for the last mile. Other costs include cost incurred towards Annual Maintenance Contract (AMC), cost of installation in connectivity business, cost incurred in providing Hosting services, and Document Management Services (DMS) cost for application services. In addition, the Government of India had imposed an annual license fee of 6% of the adjusted gross revenue generated from the provision of IPVPN services under our ISP license for the period January 11, 2005 to December 31, 2005 and 6% of the adjusted gross revenue for the period from January 1, 2006 for incomes generated from IPVPN business.

               Internet access services

               Cost of goods sold and services rendered for the Internet access services division consists primarily of recurring telecommunications costs necessary to provide service to subscribers, direct costs paid to franchisees for running the e-ports and to cable television operators for providing Internet services through cable to customers, the cost of goods sold and services rendered share paid to franchisees and cable television operators, voice termination charges for VoIP services. The Government of India also has imposed an annual license fee of 6% of the adjusted gross revenue from the provision of VoIP services for the period January 11, 2005 to December 31, 2005 and 6% of the adjusted gross revenue of the VoIP from January 1, 2006 onwards. Another recurring cost included in cost of goods sold and services rendered is the personnel and related operating expenses associated with customer support and network operations.

               Online portal services and content offerings

               Cost of goods sold and services rendered for the online portal services and content offerings division includes the cost of procuring and managing content for the websites and cost of ringtones downloaded by using our mobile telephone short code 54545 and the cost of bandwidth used for online portal services.

               Selling, general and administrative expenses

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

               Depreciation and amortization

               We depreciate our tangible assets on a straight-line basis over the useful life of assets, ranging from two to eight years and, in the case of buildings, 28 years.

               Impairment

               The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at 31 December.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating units on a reasonable and consistent basis.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a pro rata basis.

               Inventories comprising traded hardware and software are measured at the lower of cost (determined using first-in first-out principle) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

               Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they

reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

               Stock compensation expense

               A total of 5.73 million equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). As of March 31, 2009, we had outstanding an aggregate of 1,211,900, options (net of 160,167 options forfeited by employees) under our ASOP with a weighted average exercise price equal to approximately Rs.152.51 ($2.99) per equity share. The unamortized stock compensation expense related to these grants amounted to Rs.55.84 million as of March 31, 2009.

Results of Operations

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

Results of year ended March 31, 2009 compared to year ended March 31, 2008

               Revenues. We recognized Rs.6,162.16 million ($120.94 million) in revenues for the year ended March 31, 2009, as compared to Rs.6,006.22 million for the year ended March 31, 2008, representing an increase of Rs.155.94 million ($3.06 million), or 2.59 %.

               The revenues generated by our corporate network/data services businesses increased by Rs.483.10 million ($9.48 million), or 12.64 %, from Rs.3,822.11 million for the year ended March 31, 2008 to Rs.4,305.21 million for the year ended March 31,2009. The increase is attributable to increases in (i) Voice services revenues of Rs.247.26 million ($4.85 million) due to new business, (ii) Hosting services revenues of Rs.137.50 million ($2.69 million) as a result of acquisition of new contracts and capacities sold from new data center, (iii) connectivity revenues of Rs.119.53 million ($2.34 million) due to increase in the sales from new and existing customers, including, (iv) Application services revenues of Rs.41.13 million ($ 0.80 million) primarily due to increased focus in DMS business ,(v) Digital certification services revenues of Rs.14.33 million ($ 0.28 million) due to addition of new clients and renewal of repeat orders from the existing clients and (vi) other services revenues of Rs.3.06 million ($0.06 million). The above increase is offset by a decrease in revenues from Hardware/Software sales of Rs.79.71 million ($1.56 million) caused by absence of bundled contract orders during the year under review.

               Revenue from Consumer One services comprising of Internet Access services and Online Portal services, has decreased by Rs 450.48 million ($8.84 million) or 25.62 % from Rs 1,755.99 million for the year ended March 31, 2008 to Rs 1,305.51

million for the year ended March 31, 2009. This is caused by a drop of Rs 417.04 million ($8.18 million) or 26.99 % in the revenue from our Internet Access services and by Rs.33.44 million ($0.65 million) or 15.87 % in revenue from Portal services.

               Our Internet Access services accounted for Rs.1,128.18 million ($22.14 million) of revenues for the year ended March 31, 2009, as compared to Rs.1,545.23 million for the year ended March 31, 2008, representing a decrease of Rs.417.04 million ($8.18 million), or 26.99% Such decrease is primarily on account of (i) decrease of Rs.163.25 million ($3.20 million) in broadband services revenues due to decrease in subscribers (ii) decrease of Rs.190.48 million ($3.73 million) in cybercafe revenues due to closure of active cybercafés caused by unexpected rent increases in the current year incurred by the franchisees for cybercafe premises and economic slow down ,(iii) decrease of Rs.49.70 million ($0.97 million) in voice revenues due to price reductions offered to our customers to retain the existing customers and/or attract new customers to combat competition and (iv) decrease of Rs.13.61million ($ 0.26 million) from Internet Access other services .

               During the course of the year, the number of active cybercafés decreased from 2,165 to 1,791 as of March 31, 2009. The subscribers of the high speed Internet access to homes decreased by 24.65 % during the year, from 218,000 as of March 31, 2008 to 165,000 as of March 31, 2009. The cybercafés are owned and operated by the franchisees. The franchisee procures the retail space, invests in furniture, interior decor, personal computers, point of sale signage and employs/trains the staff. The franchisee is responsible for the maintenance of the premises and interface with customers. Sify provides the complete back-end support, including bandwidth, the authentication / usage engine and the billing / collection system. Sify has discretion in establishing prices and determines the service specifications. Sify also reserves the right to make any change, alteration, modification in the services, business exploitation model, revenue generation, models, charges, policies, specifications etc at its sole discretion and the same is binding on the franchisee. Under the terms of the agreement, Sify is required to pay a commission at approximately 70% of the revenue generated by the franchisees from internet usage at cybercafés. The revenue earned from internet usage at cybercafés is recognized based on usage by the customer on a gross basis with the corresponding commission being recorded as an expense. The aforesaid revenue recognition policy is based on the principles set out in IAS 18 “Revenue”.

               Our Online portal and content offerings division accounted for Rs.177.33 million ($3.48 million) of revenues for the year ended March 31, 2009, as compared to Rs.210.77 million for the year ended March 31, 2008, representing a decrease of Rs.33.44 million ($0.65 million), or 15.87%. This decrease was on account of (i) a drop by Rs.26.44 million ($0.51 million) caused by reduction in corporate orders and (ii) a decrease of Rs.7.00 million ($0.14 million) in revenues from travel services caused by depressed aviation market for air traffic between US and India as well as on account of increased competition from the existing operators.

               Corporate orders operate with small profit margins and large number of orders are required. Due to the slowdown in the economic environment, the margins on some of the orders were becoming unattractive. Management opted out of such orders resulting in lower volumes. The revenue from corporate orders decreased by Rs 26.44 million as compared to the previous year and did not have a material effect on the Company’s revenues.

               Revenues from our other businesses increased by Rs.123.33 million ($2.42 million) from Rs 428.12 million for the year ended March 31, 2008 to Rs 551.45 million ($10.82 million), or 28.81 % for the year ended March 31, 2009. This is driven by Rs 74.14 million ($1.45 million) or 43.34 % increase in the revenue from our IMS services and Rs.49.19 million ($ 0.96 million) or 19.14 % increase in the revenue from our E-learning services. These increases are attributed to new projects and high volume of the business from the existing customers.

               Other income. Other income was Rs.89.10 million ($1.74 million) for the year ended March 31, 2009, compared to Rs.46.15 million for the year ended March 31,2008, representing an increase of Rs.42.95 million ($0.84 million), or 93.06%. Other income primarily comprises of income derived from duty credit entitlements under the “Served from India Scheme” (issued by the Government of India) in respect of the foreign exchange earnings from export of services. Increase in duty credit entitlement is primarily on account of increase in export revenues during the current year as compared to the previous year ended March 31, 2008.

               Cost of goods sold and services rendered. Cost of goods sold and services rendered was Rs.3,613.35 million ($70.91 million) for the year ended March 31, 2009, compared to Rs. 3,419.12 million for the year ended March 31, 2008, representing an increase of Rs.194.23 million ($3.81 million), or 5.68%. This increase was due to (i) a Rs.156.78 million ($3.07 million) increase in bandwidth costs, (ii) a Rs.180.66 million ($3.54 million) increase in directly attributable personnel costs to the technology , (iii) a Rs.11.06 million ($0.21 million) increase in revenue share paid to TRAI .These increases have been partly offset by a decrease of Rs.154.27 million ($ 3.02 million) in other costs.

               The cost of goods sold and services rendered by our corporate network / data services increased by Rs.258.91 million ($5.08 million) from Rs.2,062.92 million for the year ended March 31,2008 to Rs.2,321.83 million ($45.57 million) for the year

ended March 31, 2009, representing an increase of 12.55 %, on account of (i) increase of Rs.156.92 million ($3.07 million) in carrier cost and interconnect charges due to increase in volume of business (ii) increase of Rs. 75.50 million($1.48 million) in bandwidth costs due to increase in usage, (iii) increase of Rs.126.22 million($2.47 million) in the employee cost due to increase in the number of employees deployed for domestic projects,(iv) increase of Rs.16.55 million ($0.32 million) in the revenue share paid to TRAI,(v) increase of Rs.44.12 million($0.86 million) in the cost of software due to proportional increase in the sales of Sify secure, (vi) increase of Rs.11.01 million ($0.21 million) in the cost of hardware due to proportional increase in the sales of application services , (vii) increase of Rs.10.65 million($0.20 million) in the royalty amount paid to Verisign due to increase in business and (viii) increase of Rs.2.75 million($0.05 million) in the cost of site development . These increases have been offset by a decrease of (a) Rs. 119.42 million ($2.34 million) in the cost of hardware purchased for connectivity business due to slump in the business, (b) Rs.32.07 million($0.62 million) in the cost of safedox ( a tool to secure data) purchased due to reduced market requirements, (c) Rs.18.51 million($0.36 million) in the revenue share paid to Power Grid Corporation of India Limited (PGCIL) due to reduction in the business (d) Rs.2.72 million($0.05 million) in the cost of hardware incurred towards hosting business and (e) Rs. 12.09 million($0.23 million) from others.

               The cost of goods sold and services rendered for our corporate Internet Access services decreased from Rs.1,038.10 million for the year ended March 31,2008 to Rs.969.64 million ($19.03 million) for the year ended March 31, 2009, representing a decrease of Rs.68.46 million($1.34 million) or 6.59 %, due to a decrease of (i) Rs.162.93 million($3.19 million) in the cost of revenue share paid to CTOs due to reduction in business from Cable Television Operators (CTOs) ,(ii) Rs.3.16 million($0.06 million) in the cost of revenue share paid to TRAI on account of reduction in the volume of business , (iii) Rs.15.22 million($0.29 million) in the line maintenance charges due to reduction in tele-centers for whom Line Maintenance Charges are paid for the connection and maintenance of last mile, (iv) Rs.12.74 million($0.25 million) in the Voice termination costs due to a drop in the Voice revenues, and (v) Rs.7.24 million($0.14 million) in the revenue share paid to Games business due to drop in Gaming revenue. These decreases have been offset by an increase of (a) Rs.57.43 million ($1.12 million) in the technology man power resources ,(b) Rs.72.31 million($1.41 million) in bandwidth cost and (c) Rs.3.09 million (0.06 million) in other costs.

               The cost of goods sold and services rendered for our portal business decreased by Rs.47.84 million($0.93 million) from Rs.121.00 million for the year ended March 31, 2008 to Rs.73.16 million ($1.43 million) for the year ended March 31, 2009, representing a decrease 39.53 %, due to a decrease of (i) Rs.18.45 million($0.36 million) in cost of vouchers sold on account of a drop in corporate orders, (ii) Rs.25.04 million($0.49 million) in the content costs due to contents sourced at lower costs from various sources (iii) Rs.0.68 million ($0.01 million) in the cost of payment gateways due to processing of lesser number of transactions caused by business reduction , (iv) Rs.0.68 million(0.01 million) in bandwidth cost due to reduction in business and (v) Rs.2.99 million ($0.05 million)in man power resources.

               The cost of goods sold and services rendered for other services increased by Rs.51.62 million($1.01 million) from Rs.197.10 million for the year ended March 31,2008 to Rs.248.72 million($4.88 million) for the year ended March 31, 2009, representing an increase 26.16 %, due to increase of (i) Rs.42.39 million($0.83 million) in cost of direct associates due to additional employees deployed for project in IMS revenue stream,(ii) Rs.12.31 million($0.24 million) in cost of direct associates due to additional employees deployed for e-learning projects. This increase has been impacted by a decrease of Rs.3.08 million ($0.06 million) in other costs.

               Selling, general and administrative expenses: Selling, general and administrative expenses were Rs.2,813.42 million ($55.21 million) for the year ended March 31, 2009, compared to Rs.2,434.72 million for the year ended March 31, 2008, representing an increase of Rs. 378.70 million($7.43 million) or 15.55%. The increase is primarily on account of increase in (a) manpower costs by Rs. 178.26 million($3.49 million) due to annual wage increases given to the employees (b) facilities and other indirect expenses by Rs. 131.06 million($2.57 million) due to increase in number of offices and increase in rent and maintenance charges for the existing offices, (c) Operating costs by Rs. 124.43 million($2.44 million) on account of an increase in the size of operations in Network and DC services (d) marketing expenses by Rs 76.49 million($1.50 million) on account of enlarged marketing efforts undertaken in connection with brand logo change and (e) Rs.28.74 million($0.56 million) in other costs. This increase is partially offset by a reduction of (i) Rs.36.00 million($0.70 million) in legal expenses , (ii) Rs.5.67 million($0.11 million) in selling expenses, (iii) Rs.23.62 million($0.46 million) in contracts payments ,(iv) Rs.54.33 million($1.06 million) foreign exchange loss on account of covering of forward contracts caused by significant rupee depreciation,(v) Rs.40.65 million($0.80 million) in provision for doubtful debts.

               Depreciation and Amortization expenses: Depreciation and amortization expenses were Rs.498.87 million($9.79 million) for the year ended March 31,2009, compared to Rs.394.34 million for the year ended March 31,2008, representing an increase of Rs.104.53 million ($2.05 million), or (26.50%). The increase is attributable to an increase of Rs.97.00 million ($1.90 million) in depreciation due to addition of fixed assets as well as an increase of Rs.7.53 million ($0.15 million) in amortization expense due to addition of system software.

          Impairment loss: The Company has performed impairment test with respect to goodwill relating to Globe Travels business consequent to which, a Rs. 15.20 million ($0.3 million) impairment charge was recorded during the year.

          Net finance income. The net finance loss was Rs.129.09 million ($2.53 million)for the year ended March 31, 2009, compared to an income of Rs.104.10 million for the year ended March 31, 2008, representing a decrease of Rs.233.19 million ($4.57 million), or (224.00 %). The finance income was Rs.122.57 million($2.40 million) for the year ended March 31, 2009, compared to Rs.161.78 million for the year ended March 31,2008, representing a decrease of Rs.39.21 million($0.76 million) caused by a decrease in the interest income on bank deposits on account of closure for such deposits. The finance expense was Rs.251.66 million ($4.93 million) for the year ended March 31, 2009, compared to Rs.57.68 million for the year ended March 31, 2008, representing an increase of Rs.193.98 million ($3.80 million) caused by an increase Rs.193.56 million ($3.79 million) in bank charges on account of increased borrowings, including demand loans against the deposits, fund based working capital facilities and non-fund based limits and a decrease of Rs.0.42 million in interest paid towards finance leases.

          Share of profit of investment in associate. The share of profit of investment in associate was Rs.64.09 million($1.26 million) for the year ended March 31, 2009, compared to Rs.181.12 million for the year ended March 31,2008, representing a decrease of Rs. 117.03 million ($2.30 million), or 64.61%. The decrease was due to poor financial performance of MF Global Sify Securities India Private Limited caused by sluggish stock market conditions.

          Income tax expense. The income tax expense was Rs.97.05 million($1.90 million) for the year ended March 31, 2009, compared to Rs. 63.97 million for the year ended March 31, 2008. The income tax expense represents the current tax and utilization of deferred tax assets created in respect of the carry forward business loss of Sify Communications Limited (erstwhile subsidiary) relating to previous years. This utilization was due to the taxable profits earned by the erstwhile subsidiary.

          Profit. The net loss for fiscal 2009 is Rs.851.63 million($16.71 million) compared to a net profit of Rs.25.44 million for fiscal 2008 and is attributable to (i) an increase of Rs.378.70 million($7.43 million) in selling, general and administrative expenses, (ii) an increase of Rs. 119.83 million($2.35 million) in depreciation/amortization/impairment expenses, (iii) a decrease of Rs.233.19 million($4.57 million) from net finance income , (iv) a decrease of Rs.117.04 million($2.30 million) from the share of profit of equity accounted investee and (v) an increase of Rs.33.08 million ($0.64 million) in income tax expense.

Results of year ended March 31, 2008 compared to year ended March 31, 2007

          Revenues. We recognized Rs.6,006.22 million ($150.08 million) in revenues for the year ended March 31, 2008, as compared to Rs.5,447.35 million for the year ended March 31, 2007, representing an increase of Rs.558.87 million, or 10.26 %.

          The revenues generated by our corporate network/data services businesses increased by Rs.799.83 million, or 26.46 %, from Rs.3,022.28 million for the year ended March 31, 2007 to Rs.3,822.11 million for the year ended March 31,2008. The increase is attributable to increases in (i) connectivity revenues of Rs.258.77 million due to increase in the sales from new and existing customers, including Oriental Insurance Corporation Limited (OICL), ICICI, and Bajaj Allianz; (ii) hardware and software sales of Rs.279.96 million owing to high value orders from corporate clients, including from OICL; (iii) Hosting services revenues of Rs.106.37 million as a result of acquisition of high value contracts including from AT&T and Futura Groups; (iv) Voice services revenues of Rs.100.85 million due to high value contracts including from Sutherland and Cognizant Technology Solutions (CTS); (v) Application services revenues of Rs.77.20 due to increased focus in DMS business as well as a large order secured in Forum and (vi) other services revenues of Rs.11.20 million, which offset a decrease in revenues from assurance services of Rs.34.52 million caused by loss of projects executed by Sify Assure. We currently have more than 2,380 corporate customers of our connectivity services.

          Revenue from Consumer One services comprising of Internet Access services and Online Portal services, has decreased by Rs 353.33 million or 16.75 % from Rs 2,109.32 million for the year ended March 31, 2007 to Rs 1,755.99 million for the year ended March 31, 2008. The revenues from Internet access services decreased from Rs.1,846.42 million for the year ended March 31, 2007 to Rs.1,545.23 million for the year ended March 31, 2008. The decrease was Rs.301.19 million, or 16.31%, over the previous year. The decrease was as a result of decreases in (i) dial-up revenues of Rs.76.40 million due to change over of most of the customers from dial-up facilities to broadband services, (ii) cyber cafe revenues of Rs.135.57 million, due to unexpected rent increases on the cybercafe premises, (iii) voice revenues of Rs.126.39 million due to reduction in prices effected to meet the competitors who offer competitive prices to attract the customers and (iv) other services of Rs.14.90 million. These decreases have been offset by an increase of Rs.49.99 million from broadband services due to increased utilisation of services and Rs.2.08 million from other services.

          During the course of the year, the number of cybercafés increased from 3,638 to 3,887 as of March 31, 2008. The subscribers of the high speed Internet access to homes increased by more than 6.84% during the year, from approximately 215,000 as of March 31, 2007 to more than 218,000 as of March 31, 2008.

          Our online portal and content offerings division accounted for Rs.210.76 million of revenues for the year ended March 31, 2008, as compared to Rs.262.90 million for the year ended March 31, 2007, representing a decrease of Rs.52.14 million, or 19.83%. This decrease was on account of revenues from Corporate orders decreasing by Rs.35.50 million due to (i) a drop in corporate orders on account of the management decision to slow down the business for a reason of stress on operations and (ii) a decrease of Rs.12.72 million in revenues from travel services due to increased competition from the existing operators and (iii) a decrease in the revenue from other e-commerce activities amounting to Rs.3.92 million.

          Revenues from our other businesses increased by Rs.112.38 million from Rs 315.74 million for the year ended March 31,2007 to Rs 428.12 million, or 35.59 % for the year ended March 31,2008 on account of an increase of increase in the E-learning revenues due to new projects and high volume of the business from the existing customers.

          Other income. Other income was Rs.46.15 million for the year ended March 31, 2008, compared to Rs.66.32 million for the year ended March 31,2007, representing a decrease of Rs.20.17 million, or 30.41%. Other income primarily comprises of income derived from duty credit entitlements under the “Served from India Scheme” (issued by the Government of India) in respect of the foreign exchange earnings from export of services. Decrease in duty credit entitlement is primarily on account of reduction of export revenues during the current year as compared to the previous year ended March 31, 2007.

          Cost of goods sold and services rendered. Cost of goods sold and services rendered was Rs.3,419.12 million for the year ended March 31, 2008, compared to Rs. 2,939.33 million for the year ended March 31, 2007, representing an increase of Rs.479.79 million, or 16.56%. This increase was due to (i) a Rs.278.62 million increase in hardware and software costs, (ii) a Rs.154.86 million increase in bandwidth costs, (iii) a Rs.122.35 million increase in directly attributable personnel costs to the technology and e-learning departments, (iv) a Rs.16.07 million increase in content cost, (v) a Rs.31.79 million increase in site development expenses, (vi) a Rs.10.54 million increase in revenue share paid to Telecom Regulatory Authority of India (TRAI) and (vii) a Rs. 7.23 million increase in other costs. These increases have been partly offset by a decrease of (a) Rs 17.68 million in termination costs for VoIP services, (b) Rs.78.40 million in revenue share paid to franchisees and cable television operators, (c) Rs 25.65 million in the cost of vouchers sold through the online portals and (d) Rs.16.28 million in software purchased.

          The cost of goods sold and services rendered for our corporate network / data services increased by Rs.645.56 million from Rs.1,417.36 million for the year ended March 31,2007 to Rs.2,062.92 million for the year ended March 31, 2008, representing an increase of 46.70%, on account of (i) increase of Rs.251.90 million in cost of hardware to support the increased connectivity business, (ii) increase of Rs. 215.30 in bandwidth costs due to increase in capacity utilisation, (iii) increase of Rs.62.56 million in voice termination costs (costs incurred in providing ‘voice services’ to customers) due to increased volume of business, (iv) increase of Rs.46.20 million in other costs such as cost of AMC, cost of installation for connectivity business, cost of Hosting services provided to customers and the cost of DMS for Application services due to increased volume of business, (v) increase of Rs.24.40 million in the cost of software due to proportional increase in the sales of Sify secure, (vi) increase of Rs.21.70 million in the cost of hardware due to proportional increase in the sales of application services, (vii) increase of Rs.52.53 million in the domestic employee cost due to increase in the number of employees deployed and (viii) increase of Rs.25.40 million in direct employees cost on account of additional employees deployed for IMS projects. These increases have been offset by a decrease of (a) Rs. 14.10 million in the cost of safedoxx (a tool to ensure security of data) due to a reduced market requirements, (b) Rs.11.70 million in Broadband installation charges due to inclusion of this into the overall installation charges, (c) Rs.10.70 million in the direct cost of Sify Assure due to an exit of a large number of employees and (d) Rs. 14.27 million from others.

The cost of goods sold and services rendered for our corporate Internet Access services decreased by Rs.209.31 million from Rs.1,247.41 million for the year ended March 31,2007 to Rs.1,038.10 for the year ended March 31, 2008, representing a decrease of Rs.209.31 million, or 16.78%, due to a decrease of (i) Rs.18.90 million in cost of equipment sold on account of a drop in equipment sales, (ii) Rs.77.30 million in the cost of goods sold and services rendered share paid to franchisees due to a drop in the cybercafe revenue, (iii) Rs.61.50 million in the Voice termination costs due to a drop in the Voice revenue, (iv) Rs.62.90 million in the bandwidth due to better management of bandwidth, (v) Rs.9.70 million in other iway costs primarily due to reduction in cost of iway cards. These decreases have been offset by an increase of (a) Rs.11.10 million in the cost of goods sold and services rendered share paid to broadband business associates due to increase in broadband revenue and (b) Rs.5.80 million in line maintenance charges due to increase Line Maintenance Charges (LMC) revenues and Rs 4.09 million from other costs.

The cost of goods sold and services rendered for our portal business decreased by Rs.2.02 million from Rs.123.02 million for the year ended March 31, 2007 to Rs.121.00 million for the year ended March 31, 2008, representing a decrease 1.64 %, due to a decrease of Rs.25.70 million in cost of vouchers sold on account of a drop in corporate orders. This decrease has been impacted by

an increase of (i) Rs.17.00 million in the content costs due to an increase in the number of ‘City Live’ program, (ii) Rs.2.70 million in the cost of payment gateways due to an increase in the revenue of sify mall, (iii) Rs.2.60 million in bandwidth cost iv) Rs 1.38 million from others.

The cost of goods sold and services rendered for other services increased by Rs.45.56 million from Rs.151.54 million for the year ended March 31,2007 to Rs.197.10 million for the year ended March 31, 2008, representing an increase 30.06 %, due to (i) Rs.40.96 million increase in cost of direct associates due to additional employees deployed for project in E-Learning revenue stream and (ii) Rs.4.60 million increase in other costs.

          Selling, general and administrative expenses. Selling, general and administrative expenses were Rs.2,434.72 million for the year ended March 31, 2008, compared to Rs.2,094.91 million for the year ended March 31, 2007, representing an increase of Rs. 339.75 million or 16.22%. The increase is primarily on account of increase in (a) manpower costs by Rs. 91.45 million due to addition of manpower resources (b) legal expenses by Rs 130.20 million due to one time payment in connection with the pending litigation with Yahoo, (c) facilities and other indirect expenses by Rs. 108.23 million due to increase in number of offices and increase in rent and maintenance charges for the existing offices, (d) Operating costs by Rs. 44.24 million on account of an increase in the operations and (e) travel expenses by Rs 29 million. This increase is partially offset by a reduction in selling and marketing expenses by Rs. 63.54 million.

          Depreciation and Amortization expenses. Depreciation and amortization expenses were Rs.394.34 million for the year ended March 31,2008, compared to Rs.463.78 million for the year ended March 31,2007, representing a decrease of Rs.69.44 million, or (14.97%). The decrease is attributable to a reduction of Rs.56.69 million in depreciation as well as a decrease of Rs.13.16 million in amortization expense. The depreciation expense decreased by Rs.110.31 million due the changes made to the estimated economic life of certain assets and the decrease has been impacted by an increase of Rs.67.14 million on account of addition of new assets. The reduction in the amortization expense is due to the carrying amount of intangibles in respect of technical know-how and portals and web content reached the residual value requiring no further amortization.

          Net finance income. The net finance income was Rs.104.10 million for the year ended March 31, 2008, compared to Rs.128.64 million for the year ended March 31, 2007, representing a decrease of Rs.24.54 million, or (19.08 %). The finance income was Rs.161.78 million for the year ended March 31,2008,compared to Rs.154.19 million for the year ended March 31,2007, representing an increase of Rs.7.59 million caused by a rise in the interest income on bank deposits on account of increase in the rates of interest for such deposits. The finance expense was Rs. 57.68 million for the year ended March 31, 2008,compared to Rs.25.55 million for the year ended March 31, 2007, representing an increase of Rs.32.13 million caused by an increase of Rs.31.70 million in bank charges on account increase in borrowings, including demand loans against the deposits, fund based working capital facilities and non-fund based limits and Rs.0.43 million in interest paid towards finance leases.

          Share of profit of investment in associate. The share of profit of investment in associate was Rs.181.13 million for the year ended March 31,2008,compared to Rs.61.03 million for the year ended March 31,2007, representing an increase of Rs. 120.1 million, or 196.78%. The increase was due to improved financial performance of MF Global Sify Securities India Private Limited.

          Income tax expense. The income tax expense was Rs.63.98 million for the year ended March 31,2008,compared to a benefit of Rs. 66.11 million for the year ended March 31, 2007. The income tax expense represents the current tax and utilization of deferred tax assets created in respect of the carry forward business loss of its subsidiary, Sify Communications Limited. This utilization was due to the taxable profits earned by the subsidiary.

Foreign Exchange Fluctuations and Forwards

          We enter into forward exchange forward contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in U.S.dollars. We enter into forward contracts where the counter party is a bank. These contracts generally mature between one to six months. These contracts do not qualify for hedge accounting under IFRS. Foreign exchange contracts are marked to market as at the balance sheet date and recognized in the consolidated income statement.

Liquidity and Capital Resources

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

          Our growth has been financed largely by cash generated from operations and bank borrowings and, to a lesser extent, from the proceeds from the issuance of equity. In 1999, we raised approximately $79.2 million in aggregate proceeds from our initial public offering of ADS in the United States. In 2000, we raised an additional $ 141.2 million in aggregate proceeds from our secondary public offering of ADSs in the United States.

          As of March 31, 2009, we had a cash and cash equivalents of Rs.312.71 million ($6.13 million), including a negative working capital of Rs.175.99 million ($3.45 million), cash and bank balances of Rs.1,710.79 million ($33.57 million), and bank borrowings of Rs.1,384.16 million ($27.16 million). We intend to augment our current working capital through additional bank borrowings and effective working capital management to meet our requirements for the next 12 months.

          Our principal sources of liquidity are our borrowings from banks. Our cash and cash equivalents comprise of cash and bank deposits. The restricted cash balance was Rs.1,330.75 million primarily represents fixed deposits pledged for availing bank borrowings ($26.11 million), Rs.878.58 and Rs.939.83 million as at March 31, 2009, 2008 and 2007 respectively

          Our external sources of credit include facilities sanctioned to us by Indian banks. We have working capital facilities in the form of short term loans, cash credit and overdraft facilities of Rs. 750 million which has been fully utilized as at March 31, 2009. Further, we were provided non-funded limits of Rs.1350.00 million (primarily in the form of bank guarantees and letters of credit) out of which Rs.213.00 million remained unutilized as of the reporting date. Our ongoing working capital requirements are significantly affected by the profitability of our operations and we continue to periodically evaluate existing and new sources of liquidity and financing.

          We are taking all steps to improve the cash position to meet our currently known requirements at least over the next twelve months. In light of the highly dynamic nature of our business, however, we cannot assure you that our capital requirements and sources will not change significantly in the future

          Net cash used in operating activities for the year ended March 31, 2009 was Rs.371.55 million ($7.29 million).This is mainly attributable to Increase in trade and other receivables by Rs.314.35 million ($6.16 million), increase in inventories by Rs.1.33 million ($0.02 million) , decrease in other assets by Rs.224.62 million ($4.40 million) , decrease in trade and other payables by Rs.171.26 million ($3.36 million) , increase in employee benefits by Rs.17.70 million ($0.34 million) and decrease in deferred revenue by Rs13.55 million ($0.26 million) .

          Cash used in operating activities during fiscal year 2008 was Rs.839.87 million. This is primarily attributable to increase in trade and other receivables by Rs.678.05 million on account of increase in corporate taxes paid by Rs. 168.43 million, deposit of Rs.550.00 million paid towards Special Economic Zone (SEZ) land and increase in trade and other payables by Rs. 460.21 millions.

          Cash provided by operating activities during fiscal year 2007 was Rs.116.26 million. This is primarily attributable to cash profits made from operating activities amounting to Rs. 709.23 million, partly offset by an increase in trade and other receivables by Rs. 651.65 millions and increase in other assets by Rs. 21.90 million.

          Net cash used in investing activities for the year ended March 31, 2009 was Rs.1,174.16 million ($23.05 million) primarily on account of purchase of routers, modems, ports, servers and other capital equipments for 2009 was Rs.1,170.8 million ($22.98 million).

          Cash used in investing activities during fiscal year 2008 was Rs. 756.30 million, primarily as a result of expenditure on network equipment, servers, base stations and wireless equipments in connection with the expansion of our network of Rs.849.09 million and purchase of intangible assets of software licenses of Rs 30.24 million, partly offset on account of finance income of Rs. 121.16 million.

          Cash used in investing activities during fiscal year 2007 was Rs. 708.32 million, principally as a result of expenditure on purchase of routers, modems, ports, servers and other capital equipment in connection with the expansion of our network of Rs.686.32 million and purchase of intangible assets of software licenses of Rs.65.47 million.

          Net cash provided by financing activities for fiscal year 2009 was Rs.968.80 million ($19.01 million) on account of increase in borrowings from banks. The Company has not met certain financial covenants relating to the term loan as of 31 March 2009. Subsequent to the balance sheet date, the bank has neither called the loan nor demanded the loan for not meeting the financial covenants. As per the terms of the loan agreement, no financial penalty is leviable.

          Cash used in financing activities for fiscal year 2008 was Rs.585.2 million, which consisted of net proceeds from issuance of common stock of Rs.116.81 million, and were offset by net repayment of borrowings from bank by Rs. 643.58 million.

          Cash provided by financing activities for fiscal year 2007 was Rs. 847.94 million, which consisted of net proceeds from issuance of common stock of Rs. 72.65 million, and borrowings from bank Rs. 800 million.

Capital expenditure

          We incurred Rs.1460 million towards capital expenditure for the year ended March 31, 2009. During the current fiscal, we have already incurred Rs. 293.6 million. We also anticipate incurring further expenditure in the 3^rd and 4^th quarter of the current fiscal for about Rs. 660 million mainly on Airoli and Bangalore data centers, network assets and wireless equipments. This will be funded out of limits sanctioned by State Bank of India and through lease financing by strategic vendors.

Research and development

          The Company does not have research and development activities and has also not undertaken any sponsored research and development activities.

Trends

          The information is set forth under the caption ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ included under Item 5 — ‘Operating and Financial review and Prospects’.

Off-balance sheet arrangements

None.

Contractual obligations

Set forth below are our contractual obligations as of March 31, 2009:

Recent Accounting Pronouncements

Critical Accounting Policies

Our accounting policies affecting our financial condition and results of operations are more fully described in Note 3 to our Consolidated Financial Statements included in Item 18 of this Annual Report on Form 20-F. Certain of Sify’s accounting policies require the application of judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Sify believes the following are the critical accounting policies and related judgments and estimates used in the preparation of its Consolidated Financial Statements. Management has discussed the application of these critical accounting estimates with our Board of Directors and Audit Committee.

Revenue Recognition

          Various streams of revenue are described below:

          Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual terms of the contract of sale.

Revenue from services rendered is recognized in the Income statement in proportion to the stage of completion of the transaction at the reporting date.

The revenue recognition in respect of the various streams of revenue is described below:

(i) Corporate network/data services

Corporate network service revenues primarily include connectivity services and sale of hardware and software (purchased from third party vendors), and to a lesser extent, installation of a link, and other ancillary services such as e-mail and domain

registration. Generally these elements are sold as a package consisting all or some of the elements. In these cases the Group applies the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction with different revenue allocations for each component. These multiple element arrangements are recognized as separable elements because each element constitutes a separate earnings process, each element has a fair value that is reliable, verifiable and objectively determinable, and the undelivered element is not essential to functionality of the delivered elements. In this arrangement involving delivery of multiple elements, the units of accounting are determined based on whether the delivered items have a value to the customer on a stand alone basis, whether there is objective and reliable evidence of fair value of the undelivered elements and if the arrangement includes a general right of return relative to the delivered item, whether delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Group. The arrangement consideration is allocated to the units of accounting based on their relative fair values. Revenue on delivered items is recognized when the revenue recognition criteria applicable to that unit of accounting are met.

The Group provides connectivity for a fixed period of time at a fixed rate regardless of usage. Connectivity is the last element that is provided in the case of a bundled contract. The connectivity charges are the same when sold alone or as part of a package. The revenue attributable to connectivity services is recognized ratably over the period of the contract. The hardware and software are standard products that are freely traded in and purchased from the market, have standard specifications and are not otherwise customized for the specific needs of a customer. The software sold by the Group is off-the-shelf software, such as antivirus utilities and firewalls. The fair value for the hardware and software is available from the market. The revenue attributable to hardware/software is recognized on delivery. Installation consists of commissioning of the last mile connectivity to the customer premises either through the Group’s wireless mode of broadband delivery or through the carrier exchange. However, once commissioned this last mile connectivity can be used by the customer to access any other service provider. When the customer has such last mile connectivity, the Group does not charge any installation fee. Due to the short duration, the revenue attributable to the installation of the link is recognized on completion of the installation work. Revenue from ancillary services such as e-mail and domain registration are recognized over the period such facilities are provided. All revenues are shown exclusive of sales tax and service tax.

Web hosting service revenues primarily include co-location services and connectivity services. On occasions, the Group also sells related hardware/software to its web hosting customers. At all times, such hardware and software belongs to the customer. This hardware as well as software are purchased from outside vendors and are freely traded in the market. The Group treats each element as a separate component of the arrangement which have separate earnings process. The value of the hosting service is determined based on fair value from similar services provided separately by the Group. When hardware and/or software is also included with hosting services and sold as a package, the revenue is allocated to the respective element based on their relative fair values. Revenue from hosting services is recognized over the period during which the service is provided.

The Group remotely manages the Information Technology infrastructure of global enterprises from India. The contracts are on time and material basis. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract.

The Company provides NLD (National Long Distance) and ILD (International Long Distance) services through company’s network. The Company carries voice traffic, both national and international, using the IP back-bone and delivers voice traffic to Direct Inter-connect Operators. Revenue is recognized based upon metered call units of voice traffic terminated on the Company’s network.

(ii) Internet access services

Internet access services include Internet access at homes and businesses through dial-up or cable operator and internet access through a network of cybercafés. It also includes revenues from Voice over Internet Protocol (‘VoIP’) or Internet telephony.

Dial-up Internet access is sold to customers either for a specified number of hours or for an unlimited usage within a specified period of time. Customers purchase “user accounts” or “top-ups” that enable them to access the Internet for a specified quantum of usage or for a specified period of time all within a contracted period. The amount received from customers on the sale of these user accounts or top-ups are not refundable. The revenue from sale of user accounts or top-ups is measured based on usage (where access is for a specified quantum of usage) or based on the time of usage (where access is for a specified period of time) by the customer. Any unused hours at the end of the contracted period are recognized as revenue.

VoIP services are mainly provided through Internet Telephony Booths at e-ports cybercafés and to a smaller extent through Cable TV operators, (CTOs). The user purchases the packs that enable them to use the Internet telephone facility through CTOs and

revenue is recognized on the basis of usage by the customer. The customers use Internet telephony facilities at the iway cybercafés and make the payment to the extent of usage of the facility.

Internet access at homes and businesses through cable networks is provided through a franchised network of cable operators in India. Customers buy “user accounts” for a specified usage or volume of data transfer or for a specified period of time all within a contracted period. Revenues are recognized on actual usage by customer (where access is for a specified quantum of usage) and based on time (where access is for a specified period of time). Any unused hours at the end of the contracted period are recognized as revenue.

In the case of franchised cybercafé operators, the Group enters into an agreement with the franchisee that establishes the rights and obligations of each party and grants each franchisee a non-exclusive license to operate the cybercafé using the Group’s logo, brand and trade names. The cybercafés are owned and operated by the franchisees. The franchisee procures the retail space, invests in furniture, interior decor, PCs, and point of sale signage and employs and trains the franchisee staff. The franchisee is responsible for the maintenance of the premises and interface with customers. The Group provides the complete backend support, including bandwidth, the authentication/usage engine and the billing and collection system.

In the case of franchised cable network operators and franchised cybercafé operators, the Group enters into a standard arrangement with franchisees that provides for the payment to the Company, of an initial non-refundable franchisee fee in consideration for establishing the franchisee relationship and providing certain initial services. The fee covers the following upfront services rendered by the Group:

The initial franchisee fee revenue is recognized as revenue when all of the obligations required of the Group has been substantially accomplished or provided. Internet access revenue and Internet telephony revenues are recognized based on usage by the customer.

(iii) Online portal services

The Group enters into contracts with customers to serve advertisements in its portal and the Group is paid on the basis of impressions, click-throughs or leads and in each case the revenue is recognized based on actual impressions/click-throughs/leads delivered. Revenue from advertisements displayed on portals is recognized ratably over the period of contract

In the case of electronic commerce transactions, there are no performance obligations or minimum guarantees. The Group acts in the capacity of an agent rather than as the principal for these transactions, and the revenue recognized on a net basis is the amount of the commission earned by the Group.

In the case of value-added services that are rendered using Sify’s mobile telephone short code 54545, are recognized upon delivery of the content/ring tones to the end subscriber and confirmation by the mobile phone service provider.

(iv) Other services

The Group provides e-learning software development services to facilitate web-based learning in various organizations. These customized services vary in size from customer to customer and relate to computer based and web based training in accordance with the customer specification. These services include information presentation, structured content delivery, content digitization and simulation based training. These services are generally provided on a fixed price basis. Revenue under such contracts is recognized when the outcome of the transaction can be estimated reliably by reference to the stage of completion of transaction at the reporting date. The stage of completion being determined based on the actual time spent to the total estimated time.

Accounting Estimates

          While preparing financial statements we make estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period.

Our estimate of liability relating to pending litigation is based on currently available facts and our assessment of the probability of an unfavorable outcome. Considering the uncertainties about the ultimate outcome and the amount of losses, we re-assess our estimates as additional information becomes available. Such revisions in our estimates could materially impact our results of operations and our financial position. Management believes that the estimates used in the preparation of the Consolidated Financial Statements are prudent and reasonable. The actual results could differ from these estimates.

Allowance for accounts receivable

          The receivables primarily constitute dues from corporate connectivity and portals related customers. We maintain allowances for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make contractually agreed payments. We also make allowances for a specific account receivables if the facts and circumstances indicate that such account receivable is unlikely to be collected.

          We estimate the amount of uncollectible receivables each period and establish an allowance for uncollectible amounts. The amount of the allowance is based on the age of unpaid amounts, information about the creditworthiness of customers, current economic trends and other relevant information. The assessments reflect management’s best assumptions and estimates. Significant management judgment is involved in estimating these factors, and they include inherent uncertainties. Management periodically evaluates and updates the estimates based on the conditions that influence these factors. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus our accounting estimates may change from period to period. Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known.

Business Combinations, Goodwill and Intangible Assets

          We account for business combinations in accordance with IFRS 3, Business Combinations. Cash and fair value of other purchase consideration given plus costs directly attributable to acquisition is included in determining the cost of acquisition. A liability for contingent consideration is recognized as soon as payment becomes probable and the amount can be reliably measured. The assets acquired and liabilities and contingent liabilities assumed generally are recognized at fair value.

          Goodwill represents the cost of business acquisition in excess of the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. We generally seek the assistance of independent valuation experts in determining the fair value of the identifiable tangible and intangible net assets of the acquired business.

          When the acquirer’s interest in the net fair value of the assets acquired and liabilities and contingent liabilities assumed exceeds the cost of acquisition (negative goodwill), any excess is recognized in profit or loss immediately after reassessing the identification and measurement of the assets acquired.

     We amortize intangible assets on straight line basis over their respective individual estimated useful lives. Our estimates of the useful lives of identified intangible assets are based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.

Estimated Useful Lives of Property, Plant And Equipment

          In accordance with IAS 16, Property, Plant and Equipment, we estimate the useful lives of plant and equipment in order to determine the amount of depreciation expense to be recorded during any reporting period. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected, the useful lives could be extended. This could result in a reduction of depreciation expense in future periods.

Impairment

Financial assets:

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset is considered to be impaired and impairment losses are recognized if objective evidence indicates that one or more events such as a loss event, the significant financial difficulty of the issuer, a breach of contract, the disappearance of an active market, which have had a negative effect on the estimated future cash flows of that asset. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

Financial assets measured at amortized cost

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Available-for-sale financial assets

Significant or prolonged decline in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. The cumulative loss that was recognized in the equity is transferred to the income statement upon impairment.

Loans and receivables

Impairment loss in respect of loans and receivables measured at amortized cost are calculated as the difference between their carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognized in the income statement.

Reversal of impairment loss

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.

Non-financial assets:

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at 31 December.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a pro rata basis.

Reversal of impairment loss

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Item 6. Directors, Senior Management and Employees

Directors and Executive Officers

          The following table sets forth the name, age and position of each director and senior management executive officer of our company as of March 31, 2009:

          Raju Vegesna, Chairman and Managing Director, has been served as a Director of our company since November 2005. He was appointed as the Chief Executive Officer and Managing Director of the company effective July 18, 2006. Mr. Vegesna is a Silicon Valley entrepreneur who founded several leading edge technology companies, including Server Works Corporation, acquired by Broadcom in 2001. After that acquisition, and a brief stint with Broadcom, Mr. Vegesna founded and currently serves as CEO and Chairman of Server Engines, LLC, company engaged in the development of innovative enterprise computing products. He holds a BS in Electrical Engineering from the University of Bangalore and holds an MS in Computer Engineering from Wayne State University, USA, and holds several patents in Microprocessor and Multiprocessor technology. He is also a Director of Server Engines LLC, Nulife Corp, USA., Raju Vegesna Infotech & Industries Private Limited and Server Engines (India) Private Limited.

          Mr Ananda Raju Vegesna, brother of Mr Raju Vegesna, Chairman and Managing Director, has served as an Executive Director of our company since June 2007. He is the Managing Director of M/s Infinity Satcom Universal Private Limited and a Director of M/s Raju Vegesna Infotech & Industries Limited and Server Engines India (Private) Limited.

          C.B. Mouli has served as a Director of our company since July 2005. Mr. Mouli is a member of the Institute of Chartered Accountants of India and also holds a Bachelor of Law Degree. Mr Mouli, a partner of C.B. Mouli & Associates, a Chartered Accountants firm and he is currently the Chairman of the Audit Committee of GVK Jaipur Kishangarh Expressway Limited, an infrastructure company. He is a Director of Taj GVK Hotels & Resorts Limited, GVK Jaipur Kishangarh Expressway Limited, Ammana Bio Pharma Limited, Ammana Equity Fund Private Limited and ATC Beverages Private Limited.

          S.K. Rao has served as a Director of our company since July 2005. Mr Rao, currently is the Director General, Administrative Staff College of India, Hyderabad. Mr Rao previously worked at the Commonwealth Secretariat in London in various diplomatic capacities. He also acted as the Consultant for the United Nations and represented the Commonwealth Secretariat as an Observer at the meetings of the UN General Assembly. Mr. Rao holds a MA and a Ph.D in Economics from Trinity College, Cambridge, U.K.

          T.H. Chowdary has served as a Director of our company since February 1996. Dr. Chowdary retired as the Chief Executive Officer of Tata Teleservices. He has held key positions in the ITU, Intelsat and other international telecommunications organizations during the course of his career, and was involved in the establishment of the Centre for Telecommunications Management Studies (CTMS) at Hyderabad. Dr. Chowdary is also a director in Softsol India Limited and Tera Software Limited.

          P. S. Raju has served as a Director of our company since February 2006. Mr P S Raju is a member of the Institute of Chartered Accountants of India. Mr Raju is an independent practicing accountant. He is also a Director of Server Engines (India) Private Limited, Surya Shakti Agro Tech Private Limited and Moven Minerals & Metals Private Limited.

          Mr S R Sukumara has served as a Director of our company since January 2007. Prior to joining the Company, Mr. Sukumara was the Director General of Police with the Indian Police Service and served 36 years in the Police Department. Presently, he is practicing as a consultant.

          M P Vijay Kumar has served as Chief Financial Officer since October 2007 and has over 15 years of experience in corporate audits, financial/management consulting, legal advisory services, management audit and investment banking. He is Chartered Accountant and a Fellow Member of the Institute of Chartered Accountants of India, Fellow Member of the Institute of Company Secretaries of India, Associate member of the Institute of Cost and Works Accountants of India and the Bharathidasan Institute of Management.

          C V S Suri has served as Chief Operating Officer since August 2006 and has over 23 years of experience in marketing, operations, commercial and regulatory matters. Suri is a graduate of Delhi University with an Honors Degree in Economics, and has a Masters in Human Resource Management from XLRI, Jamshedpur.

          Pijush Kanti Das has served as President — Corporate Affairs since May 2006. Pijush started his career with the State Bank of India, rising to hold various senior level positions including Chief Dealer of State Bank of India Singapore and Head of Debt at SBI Mutual Fund before leaving them to work as Head of Treasury with Fina Bank, Nairobi, between 2003 and 2005

          P J Nath has served as Executive President — Enterprise Solutions since April 2007. He has over 22 years of experience in Information Technology, ISP and Telecommunications Services. His experience includes roles in Sales, Product and Project Management, Customer Support. He holds a Masters in Management Studies degree from BITS Pilani.

          Baskar R Sayyaparaju has served as Chief Technology Officer since August 2006. He handles broad experience across infrastructure operations, network management, process development, application development/deployment, database management, website operations, desktop support operations and data center management. Mr. Bhaskar has an M.S in Computer Science from Alabama A&M University.

          Aravind Mathur joined Sify in April 2007 as Chief Architect-Global Infrastructure Services. He has 17 years of experience in telecommunications and networking. He is a Masters Degree in Electrical Communication Engineering from the Indian Institute of Science, Bangalore and a Masters Degree in Physics from the Indian Institute of Technology, Delhi specializing in Optical Communication and Optoelectronics.

          Naresh Ajwani has served as President — Government Relations and Potential Business since May 1999. He holds a degree in Marketing Management.

          David Appasamy has served as the Chief Communications Officer of Sify Technologies Limited since January 2000,, and is responsible for the all aspects of Corporate Communications of the company, as well as the ‘Sify’ brand in terms of identity and image. He has over 20 years of experience in business management and service and consumer brand marketing.

          Venkata Rao Mallineni has served as Head, Portals and Consumer services Marketing since September 2006. He has more than 15 years of experience in IT and Communications He is a Graduate in Engineering in Industrial Products and also a Post Graduate in Technology.

          Ajith K N has served as Head HR and has over 14 years of experience across various functions in Human Resources, Industrial Relations and Total Quality Management. Mr. Ajith has a Masters degree in Personnel Management and Industrial Relations, and a diploma in Training & Development.

     We believe Infinity Capital Ventures, LP beneficially owned 41.81 % of our equity shares as of March 31, 2009. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our company. The Subscription Agreement provides that, among other things, the company shall appoint Mr Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of Directors and for so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company securities, without the consent of Infinity Capital. In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed as Chairman of our Board of Directors. In February 2006, the company also appointed Mr. P.S.Raju as the second nominee of Infinity Capital to the Board of Directors.

Director Compensation

          Our Articles of Association provide that each of our directors may receive a sitting fee not exceeding the maximum limits prescribed under the provisions of the Indian Companies Act, 1956. Accordingly, our Directors, other than the Chairman and the Managing Director have been receiving Rs.20,000 for each Board and Committee meeting attended by them, effective October 2005. Mr Raju Vegesna, who is our Chairman and Managing Director, does not receive any compensation for his service on our Board of Directors. Similarly, Mr Ananda Raju Vegesna, who is employed as our Executive Director, also does not receive any compensation for his service on our Board of Directors. Directors are reimbursed for travel and out-of-pocket expenses in connection with their attendance at Board and Committee meetings. T. H. Chowdary, a Director of our company, has been receiving Rs.20,000 per month effective February 1, 2004 for the technical services rendered by him to us, after obtaining requisite Governmental permission for the same.

Officer Compensation

          The following table sets forth all compensation paid by us during the fiscal year ended March 31, 2009 to our executive officers:

During the fiscal year ended 31 March 2009, no stock options were granted to any of the executive officers.

          As per the service contracts entered into with the employees (including executive officers), the Company provides the following retirement benefits: (a) Provident fund contributions and (b) Gratuity.

          Provident fund contribution is a defined contribution plan governed by a statute in India. Under this, both employer and employee make monthly contributions (determined in relation to the basic salary of the respective employees) to a fund administered by the Government of India.

          Gratuity is a defined benefit retirement plan covering all employees and provides for lump sum payment to employees at retirement or termination (computed based on the respective employees last drawn basic salary and years of employment with the Company). Liability for gratuity is accrued based on an actuarial valuation on an overall Company basis.

          The Directors (who are not executive officers) are not entitled for any remuneration including any pension, retirement or similar benefit schemes.

The details of our contribution to provident fund in respect of the executive officers are set out below:

          Gratuity expense is determined at an overall Company level based on an actuarial valuation performed by an independent actuary. Thus, the cost for the year ended March 31, 2009 in respect of gratuity and compensated absences towards executive officers of the Company was not separately determined. Gratuity cost relating to such executive officers is not estimated to be material.

          We make bonus payments to employees including executive officers upon satisfactory achievement of the following two performance criteria.

          (i) Performance of the Company: Represents bonus payable on achievement of overall revenue and net profit targets for the Company. These performance targets were not achieved for the year ended March 31, 2009 and no bonus was paid under this category.

          (ii) Performance of the individual: Represents bonus payable on achievement of the individual’s Key Responsibility Areas (KRA) and Key Performance Indicators (KPI). These KRAs and KPIs vary in relation to each employee including executive officers and include both financial and non-financial parameters.

          We have provided for Rs. 26 million towards bonus payable for the year ended March 31, 2009 to employees including executive officers who have achieved the KRAs and KPIs.

Board Composition

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

          On July 15, 2005, we appointed Messrs. S.K. Rao and C.B. Mouli as independent Directors of the Board to comply with the applicable Nasdaq rules.

          Mr S R Sukumara was appointed as an independent Director effective January 22, 2007. Dr T H Chowdary is also an independent director of the Board.

          These Directors continue to remain independent as on date as per Nasdaq Rule 5605.

          Infinity Capital Ventures, LP, acquired the entire holding from Satyam Computer Services. In addition, in terms of the Subscription Agreement dated November 10, 2005 executed by the company with them, they have acquired an additional 6,720,260 shares of the company on a private transaction. At the conclusion of this transaction, their ownership in the company was at 42%. Messrs. Raju Vegesna and P.S. Raju are the nominees of Infinity Capital Ventures, LP. However; the above share holding of 42% has been reduced to 26.06% consequent to transfer of shares of 4.00 million shares on a private transaction to Infinity Satcom Universal Limited as well as allotment of 10.53 million shares to Infinity Satcom Universal Private Limited as purchase consideration on the merger of Sify with erstwhile Sify Communication Limited in which Infinity Satcom Private Limited was a minority share holder.

The terms of Messrs. Raju Vegesna and S K Rao expires at our ensuing Annual General Meeting to be held in September 2009 and being eligible, they offer themselves for reappointment. The terms of Messrs. T H Chowdary and S R Sukumara will expire at our Annual General Meeting to be held in September 2009 and they are eligible for reelection.

          Mr. C B Mouli and Mr. Ananda Raju Vegesna are subject to retirement by rotation and are eligible for re-election by the shareholders at the Annual General Meeting to be held in September 2010. The Company has service contracts with Mr. Raju Vegesna, Chief Executive Officer and Managing Director and Mr. Ananda Raju Vegesna, Executive Director. The Company does not have any service contract with any other Director of the Board of Directors. The service contracts with Mr. Raju Vegesna and Mr. Ananda Raju Vegesna do not provide for any benefits either during or upon termination of employment

Board Committees

Details relating to Audit, Compensation and Nominating Committees of our board are provided below:

Audit Committee

Our Audit Committee is comprised of three independent directors, as determined under applicable Nasdaq rules. They are:

Dr.S.K.Rao;

Mr. C.B.Mouli; and

Mr.S.R.Sukumara

The primary objective of the audit committee is to monitor and provide effective supervision of our financial reporting process with a view towards ensuring accurate, timely and proper disclosures and the transparency, integrity and quality of financial reporting. Our audit committee oversees the work carried out in the financial reporting process by our management, including the internal auditors and the independent auditor and reviews the processes and safeguards employed by each. In addition our audit committee has the responsibility of oversight and supervision over our system of internal control over financial reporting, audit process, and process for monitoring the compliance with related laws and regulations. The audit committee recommends to our shareholders the appointment of our independent auditors and approves the scope of both audit and non-audit services. All members of the Audit Committee meet the independence and financial literacy requirements as defined by applicable Nasdaq and SEC rules. The Audit Committee held five meetings in person during fiscal 2009. The Audit Committee has adopted a charter.

See Item 18 for the report of the Audit Committee.

Compensation Committee

Our Compensation Committee consists entirely of non-executive, independent directors as determined under applicable Nasdaq rules, and consists of:

Dr.S.K.Rao;

Mr.T.H.Chowdary;

Mr.S.R.Sukumara; and

Mr. P.S.Raju

The Compensation Committee of the Board of Directors determines the salaries, benefits and stock option grants for our employees, consultants, directors and other individuals compensated by our company. The Compensation Committee also administers our compensation plans.

The Compensation Committee held four meetings in person during fiscal 2009.

The Compensation Committee has adopted a charter.

Nominating Committee

The Nominating Committee of the board consists exclusively of the following non-executive, independent directors as determined under applicable Nasdaq rules:

Dr.S.K.Rao;

Mr.T.H.Chowdary; and

Mr.S.R.Sukumara

The purpose of our Nominations Committee is to oversee our nomination process for our top level management and specifically to identify, screen and review individuals qualified to serve as our Executive Directors, Non Executive Directors and Independent Directors consistent with criteria approved by our board and to recommend, for approval by our board, nominees for election at our annual meeting of shareholders.

No meetings were held during the year 2008- 2009 as there was no requirement to any new Director.

The Nominations Committee has adopted a charter

Employees

     As of March 31, 2009, we had 2,279 employees, compared with 2,397 as of March 31, 2008. Of our current employees, 116 are administrative, 505 form our sales and marketing staffs, 283 are in product and content development, 1269 are dedicated to

technology and technical support, and 106 are in business process and customer care. None of our employees are represented by a union. We believe that our relationship with our employees is good.

Stock Ownership

     The following table sets forth information with respect to the beneficial ownership of our equity shares as of September 21, 2009 by each director and our senior management executives. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to equity shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all equity shares beneficially owned.

Other than the above, none of the executive officers of the Company hold any shares in the company.

Employee Stock Option Plan

     We have an Associate Stock Option Plan, or ASOP, which provides for the grant of options to employees of our company. The ASOP 2007 was approved by our Board of Directors and our shareholders in September 2007 and 2,000,000 shares were reserved for issuance under the plan. This was in addition to the earlier ASOP Plans of 2000, 2002 and 2005. A total of 5.73 million equity shares are currently reserved for issuance under our ASOP Plans. As of March 31, 2009, we had outstanding an aggregate of 1,211,900 options (net of 160,167 options forfeited by employees ) under our ASOP Plans with a weighted average exercise price equal to approximately Rs.152.51 ($2.99) per equity share.

     The ASOP Plans are administered by the Compensation Committee of our Board of Directors. On the recommendation of the Compensation Committee, we issue option letters to identified employees, with the right to convert the issued options into our equity shares at the rates indicated in the options. The consideration for transfer of the options is Rs.1 per option to be paid by the employee before transfer of the options.

     An employee holding options may apply for exercise of the options on a date specified therein which is referred to as the conversion date. The options are not transferable by an employee. The options lapse in the event of cessation of employment due to reasons of non-performance or otherwise. The equity shares transferred to the employee after conversion from options is the absolute property of the employee and will be held by the employee.

Item 7. Major Shareholders and Related Party Transactions

Principal Shareholders

     The following table sets forth information with respect to the beneficial ownership of our equity shares as of September 05, 2009 by each person or group of affiliated persons who is known by us based on our review of public filings to beneficially own 5% or more of our equity shares. The table gives effect to equity shares issuable within September 30, 2009 upon the exercise of all options and other rights beneficially owned by the indicated shareholders on that date. Beneficial ownership is determined in

accordance with the rules of the SEC and includes voting and investment power with respect to equity shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all equity shares beneficially owned. The information below is based on a review of filings made by such persons with the SEC.

     Mr Raju Vegesna, the Co-Trustee of the Vegesna Family Trust, which is the owner of Infinity Capital Venture Management LLC, which is the general partner of Infinity Capital Ventures, LP, exercise voting control and dispositive power over the equity shares owned by Infinity Capital Ventures, LP. Mr Raju Vegesna, CEO and MD of our company, is affiliated with Infinity Capital Ventures, LP.

     Infinity Satcom Universal P.Ltd is owned and controlled by Mr. Ananda Raju Vegesna, Executive Director of the Company and the brother of Mr.Raju Vegesna ,Chairman and Managing Director of the Company. Mr. Ananda Raju Vegesna is the Managing Director of the Infinity Satcom Universal (P).Ltd.

Details of significant change in the percentage ownership held by the major shareholders:

The Company has not issued any shares having differential voting rights and hence the company’s major shareholders do not have differential voting rights.

United States Shareholders

     As of March 31, 2009, 38,819,430 of our ADSs were held in the United States and we had approximately 19,126 shareholders in the United States. Each ADS represents one equity share.

Host country Shareholders

     As on March 31, 2009, 14,530,652 of our equity shares were held in India and we had 18 shareholders of record in India. Each equity share has a par value of Rs.10/- each.

Control of Registrant

     Based on our review of filings made with the SEC, we believe Infinity Capital Ventures, LP beneficially owned 41.81 % of our equity shares as of March 31, 2009. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our company. The Subscription Agreement provides that, among other things, the company shall appoint Mr Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of Directors and for so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company securities, without the consent of Infinity Capital. In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed as Chairman of our Board of Directors. In February 2006, the company also appointed Mr. P.S.Raju as the second nominee of Infinity Capital to the Board of Directors.

     These shareholders are presently able to exercise significant influence over many matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions. Under Indian law, a simple majority is sufficient to control all shareholder actions except for those items, which require approval by a special resolution. If a special resolution is required, the number of votes cast in favor of the resolution must be not less than three times the number of votes cast against it. Examples of actions that require a special resolution include:

     Circumstances may arise in which the interests of Infinity Capital Ventures, LP or a subsequent purchaser of their shares could conflict with the interest of our other shareholders or holders of our ADSs. These shareholders could prevent or delay a change in control of our company even if a transaction of that sort would be beneficial to our other shareholders, including the holders of our ADSs.

Forfeiture of equity shares issued in a private placement

     During the year ended March 31, 2008, Sify proposed a scheme of amalgamation to merge Sify Communications Limited (erstwhile subsidiary) with the Company and made applications to the appropriate authorities in India for approval of the proposed scheme of amalgamation with a to take over the IP-VPN services from Sify Communications Limited ( erstwhile subsidiary) upon the consummation of the merger. Under the provisions of the local telecom regulations, a company engaged in the business of providing IP-VPN services was required to maintain Indian shareholding at atleast 26% of the total paid up share capital of the Company. In order to maintain the Indian shareholding at 26% in Sify consequent to the approval of the proposed scheme of amalgamation, Sify and Infinity Satcom Universal, an Indian entity (the Purchaser) entered into a Subscription Agreement (effective March 24, 2008), whereby the Company agreed to sell, and Infinity agreed to purchase, 12,817,000 equity shares of the Company (herein after referred to as ‘the Share Purchase’), at a per share purchase price of USD $4.46/ — per share (referred to as ‘the Purchased Shares’), equivalent to Rs. 175/- per share in Indian Rupees.

     In connection with the private placement of shares to Infinity Satcom Universal, the independent directors of the Board of the Directors waived the provision of the Standstill Agreement dated November 10, 2005 prohibiting Infinity Capital Ventures, Raju Vegesna and any Affiliate from acquiring additional shares of the Company. Each of Messrs. Raju Vegesna and Ananda Raju Vegesna abstained from voting on the waiver.

     The Company received a sum of Rs.112,149 (comprising of Rs.12,817 towards face value and Rs.99,332 towards securities premium) and called up a sum of Rs.448,595 (comprising of Rs.25,634 towards face value and Rs.422,961 towards securities premium). Subsequent to fiscal 2008, the Company withdrew its applications made to appropriate authorities for the approval of the proposed scheme of amalgamation with Sify Communications Limited (erstwhile subsidiary). Consequent upon the withdrawal of the merger, Infinity Satcom Universal communicated to Sify that they would not contribute to calls already made and any balance monies which would become payable under the Subscription Agreement. Hence, the Board of Directors forfeited the shares allotted and the monies collected (Rs. 112,149 including sums towards capital and premium) at the meeting held on August 29, 2008.

Sale of shares in a private transaction

     Pursuant to a Share Purchase Agreement dated May 31, 2009 between Infinity Capital Venture Management and Infinity Satcom Universal Private Limited, a company owned and controlled by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO & MD of the Company, Raju Vegesna has sold 4,000,000 Equity Shares of Rs.10/- each of the Company to Infinity Satcom for a consideration of USD 3,000,000 in a private transaction.

Merger of Sify Communications Limited with Sify Technologies Limited

In November 2008, the Board of Directors of Sify Technologies Limited and Sify Communications limited decided to merge Sify Communications with Sify Technologies in view of the benefits accruing due to synergy of combined operations, availing of tax benefits, maximising the utilisation of the infrastructural facilities, human, financial and other resources etc. Based on a petition for the Scheme of Amalgamation filed with the High Court of Madras, India, the Court has approved the Scheme vide its order

dated 26^th June, 2009. Consequent upon the consummation of merger, the Company has taken over the assets and liabilities of Sify Communications (erstwhile subsidiary) and Sify Communications ceased to exist and got dissolved without winding up.

As per the Scheme, Sify Technologies has issued and allotted 10,530,000 Equity Shares of Rs.10/- each to Infinity Satcom, the only outside shareholder, towards the consideration for the assets and liabilities taken over by the Company.

Related Party Transactions

     The related parties where control / significant influence exists are subsidiaries and associates. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director whether executive or otherwise.

     In addition to the transactions described above regarding Mr. Raju Vegesna and Mr. Ananda Raju Vegesna, we engaged in the following transaction with an entity affiliated with Mr. Raju Vegesna.

     VALS Developers Private Limited (“VALS”).VALS is owned and controlled by Raju Vegesna Infotech & Industries Private Limited , in which Mr. Raju Vegesna , our principal share holder and Chief Executive Officer, is holding 94.66% equity in his personal capacity. During the year ended March 31, 2009, Sify entered into a memorandum of understanding with VALS Developers Private Limited to obtain land and building which is in the process of being constructed on a long term lease. The lease agreement, when final and executed, is expected to have an initial non-cancellable term of 5 years, with a further option for Sify to renew or cancel the lease for two five year terms. In connection with this memorandum of understanding, Sify has paid a security deposit of Rs.125,700 and advance rental of Rs.157,125 to VALS. The security deposit will be refunded at the end of lease term and the advance rental would be adjusted over 15 months from the commencement of lease term. It is customary in India that whenever a premises is taken up on lease for commercial purpose, a rental advance is paid in multiple months of rent (e.g.) 10 months of rent, which shall be refunded at the time of vacating the premises without any interest.

Loans to employees

     We provide salary advances to our employees in India who are not executive officers or directors.

The annual rate of interest for these loans is 0 %. Loans aggregating Rs.5.4 million were outstanding as of March 31, 2009.

Item 8. Financial Information

Financial Statements

     We have elected to provide financial statements pursuant to Item 18 of Form 20-F. No significant change has occurred since the date of our annual financial statements for fiscal 2008.

Legal Proceedings

     (i) The Group and certain of its officers and directors are named as defendants in securities class action lawsuit filed in the United States District Court for the Southern District of New York. This action, which is captioned In re Satyam Infoway Ltd. Initial Public Offering Securities Litigation, also names several of the underwriters involved in Sify’s initial public offering of American Depositary Shares as defendants. This class action is brought on behalf of a purported class of purchasers of Sify’s ADSs from the time of Sify’s Initial Public Offering (“IPO”) in October 1999 through December 2000. The central allegation in this action is that the underwriters in Sify’s IPO solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased Sify’s ADSs in the IPO and the aftermarket. The complaint also alleges that Sify violated the United States Federal Securities laws by failing to disclose in the IPO prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 300 issuers have been named in similar lawsuits.

In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers was filed by the entire group of issuer defendants in these similar actions. In October 2002, the cases against the Group’s executive officers who were named as defendants in this action were dismissed without prejudice. In February 2003, the court in this action issued its decision on defendants’ omnibus motion to dismiss. This decision denied the motion to dismiss the Section 11 claim as to the Group and virtually all of the other issuer defendants. The decision also denied the motion to dismiss the Section 10(b) claim as to numerous issuer defendants, including the Group. On June 26, 2003, the plaintiffs in the consolidated IPO class action lawsuits currently pending against Sify and over 300 other issuers who went public between 1998 and 2000, announced a proposed

settlement with Sify and the other issuer defendants. The proposed settlement provided that the insurers of all settling issuers would guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment banks who acted as underwriters in those offerings. In the event that the plaintiffs did not recover $1 billion, the insurers for the settling issuers would make up the difference. This proposed settlement was terminated on June 25, 2007, following the ruling by the United States Court of Appeals for the Second Circuit on December 5, 2006, reversing the District Court’s granting of class certification.

On August 14, 2007, the plaintiffs filed Amended Master Allegations. On September 27, 2007, the Plaintiffs filed a Motion for Class Certification. Defendants filed a Motion to Dismiss the focus cases on November 9, 2007. On March 26, 2008, the Court ruled on the Motion to Dismiss, holding that the plaintiffs had adequately pleaded their Section 10(b) claims against the Issuer Defendants and the Underwriter Defendants in the focus cases. As to the Section 11 claim, the Court dismissed the claims brought by those plaintiffs who sold their securities for a price in excess of the initial offering price, on the grounds that they could not show cognizable damages, and by those who purchased outside the previously certified class period, on the grounds that those claims were time barred. This ruling, while not binding on the Group’s case, provides guidance to all of the parties involved in this litigation. On October 2, 2008, plaintiffs requested that the class certification motion in the focus cases be withdrawn without prejudice. On October 10, 2008, the Court signed an order granting that request.

On April 2, 2009, the parties lodged with the Court a motion for preliminary approval of a proposed settlement between all parties, including the Company and its former officers and directors. The proposed settlement provides the plaintiffs with $586 million in recoveries from all defendants. Under the proposed settlement, the Issuer Defendants collectively would be responsible for $100 million, which would be paid by the Issuers’ insurers, on behalf of the Issuer Defendants and their officers and directors. Accordingly, any direct financial impact of the proposed settlement is expected to be borne by the Company’s insurers. On June 12, 2009, the Federal District Court granted preliminary approval of the proposed settlement. On September 10, 2009, the Federal District Court held the fairness hearing for final approval of the settlement. At the hearing it was noted that out of the seven million people who were sent notices of the settlement, only 140 people objected. The objectors had five main arguments: (1) the class definition is overbroad and does not exclude individuals who participated in the scheme; (2) the requested attorney’s fees are excessive; (3) the awards requested by the lead plaintiffs are excessive; (4) the settlement amount is insufficient and thus the recovery to class members is too small; and (5) the notice is insufficient, in part because it does not disclose the amounts requested by individual lead plaintiffs. The Court did not rule on the motion for final approval at the hearing and did not indicate when it planned to do so. The preliminarily approved settlement is subject to final approval by the Federal District Court overseeing the IPO Litigation and, if final approval is granted, it may potentially be subject to appellate review by United States Court of Appeals for the Second Circuit. Any direct financial impact of the preliminary approved settlement is expected to be borne by the Company’s insurers. The Group believes, the maximum exposure under this settlement is approximately U.S.$ 338,983.05, an amount which the Group believes is fully recoverable from the Group’s insurer.

(ii) The Group is a party to other legal actions arising in the ordinary course of business. Based on the available information, as of March 31, 2009, the Group believes that it has adequate legal defenses for these actions and that the ultimate outcome of these actions will not have a material adverse effect on it.

Dividends

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

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

Item 9. The Offer and Listing

Trading Markets

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

Price History

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

Prior Fiscal Years

Quarters of Prior Fiscal Years

Most recent six months

The initial public offering of our ADSs was priced on October 18, 1999 at a price of $18.00 per ADS.