INFOSYS TECHNOLOGIES LTD, 424B4, 1999-03-11

INFOSYS TECHNOLOGIES LTD
424B4, 1999-03-11
COMPUTER PROGRAMMING SERVICES

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<PAGE>

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-72195

1,800,000 American Depositary Shares

[INFOSYS LOGO]

Representing 900,000 Equity Shares

Each American Depositary Share ("ADS") offered hereby (the "Offering")
represents one-half of one Equity Share, par value Rs.10 per share, of Infosys
Technologies Limited, a public company with limited liability incorporated in
the Republic of India ("Infosys" or the "Company"). The ADSs are evidenced by
American Depositary Receipts ("ADRs"). See "Description of Equity Shares" and
"Description of American Depositary Shares."

All of the ADSs offered hereby are being sold by the Company. The Company's
Equity Shares are traded in India on the Stock Exchange, Mumbai, the Bangalore
Stock Exchange and the National Stock Exchange (collectively, the "Indian
Stock Exchanges"). On March 10, 1999, the last reported sale price per Equity
Share was $74.35 (as adjusted to reflect a 2-for-1 stock split declared by the
Company on December 20, 1998, with a record date of March 5, 1999) on the
Stock Exchange, Mumbai, equivalent to a price of $37.18 per ADS, assuming an
exchange rate of Rs.42.50 per dollar. See "Price Range of Equity Shares" and
"Exchange Rates." Prior to the Offering, there has been no public market for
the ADSs or the Equity Shares of the Company in the United States. See
"Underwriting" for a discussion of the factors considered in determining the
public offering price.

The ADSs have been approved for quotation on the Nasdaq National Market,
subject to official notice of issuance, under the symbol "INFY."

See "Risk Factors" commencing on page 10 for a discussion of certain factors
that should be considered by prospective purchasers of the ADSs offered
hereby.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) (2) Company (2)
- --------------------------------------------------------------------------------

<S> <C> <C> <C>
Per American Depositary Share.......... $34.00 $1.68 $32.32
Total (3).............................. $61,200,000 $3,024,000 $58,176,000
</TABLE>

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

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company, estimated at $1,750,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 270,000 additional ADSs solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the Price to Public will total
$70,380,000, the Underwriting Discount will total $3,477,600 and the
Proceeds to Company will total $66,902,400. See "Underwriting."

The ADSs are offered by the several Underwriters named herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of the ADRs evidencing the
ADSs will be made against payment therefor at the office of NationsBanc
Montgomery Securities LLC, on or about March 16, 1999.

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

NationsBanc Montgomery Securities LLC

BancBoston Robertson Stephens

BT Alex. Brown

Thomas Weisel Partners LLC

March 10, 1999
<PAGE>

[INFOSYS LOGO]

A map of the world with India highlighted and brought to the foreground
appears here. The map shows the locations of the Company's corporate
headquarters, development centers and marketing offices. Pictures of two
satellites, a notebook computer and computer keyboards appear in the
background. A legend of the countries and cities where the Company's offices
are located appears below the map.

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

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE AMERICAN
DEPOSITARY SHARES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
AMERICAN DEPOSITARY SHARES TO COVER SYNDICATE SHORT POSITIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

2
<PAGE>

CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS

In this Prospectus, all references to "Indian rupees," "rupees" and "Rs."
are to the legal currency of India and all references to "U.S. dollars,"
"dollars" and "$" are to the legal currency of the United States. For the
convenience of the reader, this Prospectus contains translations of certain
Indian rupee amounts into U.S. dollars which should not be construed as a
representation that such Indian rupee or U.S. dollar amounts referred to
herein could have been, or could be, converted into U.S. dollars or Indian
rupees, as the case may be, at any particular rate, the rates stated below, or
at all. Except as otherwise stated herein, all translations from Indian rupees
to U.S. dollars contained in this Prospectus have been based on the noon
buying rate in the City of New York for cable transfers in Indian rupees as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on the date stated. The Noon Buying Rate on March 10, 1999
was Rs.42.50 per $1.00. The exchange rates used herein for translations of
Indian rupee amounts into U.S. dollars for convenience purposes differ from
the actual rates used in the preparation of the Company's consolidated
financial statements, and U.S. dollar amounts used in this Prospectus differ
from the actual U.S. dollar amounts that were translated into Indian rupees in
the preparation of such financial statements. Except as otherwise stated
herein, all monetary amounts in this Prospectus are presented in U.S. dollars.
For historical information regarding rates of exchange between Indian rupees
and U.S. dollars, see "Exchange Rates."

The Company's financial statements are presented in Indian rupees and
translated into U.S. dollars and are prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP"). In this Prospectus,
any discrepancies in any table between totals and the sums of the amounts
listed are due to rounding. In this Prospectus, references to a particular
"fiscal" year are to the Company's fiscal year ended March 31 of such year.

In this Prospectus, unless the context otherwise requires, references to
"Infosys" and the "Company" are to Infosys Technologies Limited. References to
"U.S." or "United States" are to the United States of America, its territories
and its possessions. References to "India" are to the Republic of India, and
references to the "Government of India" are to the Government of the Republic
of India. References to "Indian GAAP" are to Indian generally accepted
accounting principles. Infosys is a registered Indian trademark of the
Company. Yantra Corporation, a Delaware corporation ("Yantra"), in which the
Company holds a minority interest, is considered a subsidiary of the Company
for purposes of Indian GAAP. All other trademarks or trade names used in this
Prospectus are the property of their respective owners.

ENFORCEMENT OF CIVIL LIABILITIES

The Company is a limited liability company under the laws of the Republic of
India. Substantially all of the Company's directors and executive officers
(and certain experts named in this Prospectus) reside outside the United
States, and a substantial portion of the assets of the Company and of such
persons are located outside the United States. As a result, it may be
difficult for investors to effect service of process upon such persons within
the United States or to enforce against the Company or such persons in U.S.
courts judgments obtained in U.S. courts, including judgments predicated upon
the civil liability provisions of the federal securities laws of the United
States.

India is not a party to any international treaty in relation to the
recognition or enforcement of foreign judgments. The Company has been advised
by its Indian legal counsel, Crawford Bayley & Co., that in India the
statutory basis for recognition of foreign judgments is found in Section 13 of
the Indian Code of Civil Procedure 1908 (the "Civil Code") which provides that
a foreign judgment shall be conclusive as to any matter directly adjudicated
upon except: (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the
merits of the case; (iii) where the judgment appears on the face of the
proceedings to be founded on an incorrect view of international law or a
refusal to recognize the law of India in cases where such law is applicable;
(iv) where the proceedings in which the judgment was obtained were opposed to
natural justice; (v) where the judgment has been obtained by fraud; or (vi)
where the judgment sustains a claim founded on a breach of any law in force in
India. Section 44A of the Civil Code provides that

3
<PAGE>

where a foreign judgment has been rendered by a court in any country or
territory outside India which the Government of India has by notification
declared to be a reciprocating territory, it may be enforced in India by
proceedings in execution as if the judgment had been rendered by the relevant
court in India. The United States has not been declared by the Government of
India to be a reciprocating territory for purposes of Section 44A.
Accordingly, a judgment of a court in the United States may be enforced in
India only by a suit upon the judgment, not by proceedings in execution. The
suit must be brought in India within three years from the date of the judgment
in the same manner as any other suit filed to enforce a civil liability in
India. It is unlikely that a court in India would award damages on the same
basis as a foreign court if an action is brought in India. Furthermore, it is
unlikely that an Indian court would enforce foreign judgments if it viewed the
amount of damages awarded as excessive or inconsistent with Indian practice. A
party seeking to enforce a foreign judgment in India is required to obtain
approval from the Reserve Bank of India (the "RBI") under the Foreign Exchange
Regulation Act, 1973 ("FERA") to execute such a judgment or to repatriate any
amount recovered. The Company has also been advised by its Indian counsel that
a party may file suit in India against the Company, the directors or the
executive officers as an original action predicated upon the provisions of the
federal securities laws of the United States. To the Company's knowledge, no
such suit has ever been brought in Indian courts.

REPORTS TO SECURITY HOLDERS

Upon consummation of the Offering, the Company will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), applicable to foreign private issuers, and in accordance
therewith will file reports, including annual reports on Form 20-F, reports on
Form 6-K and other information with the Securities and Exchange Commission
(the "Commission"). In addition, the Company has agreed in the Underwriting
Agreement relating to the Offering to submit to the Commission quarterly
reports, which will include unaudited quarterly consolidated financial
information, on Form 6-K for the first three quarters of each fiscal year and
to file its annual report on Form 20-F within the time periods prescribed
under Section 13 of the Exchange Act for the filing by domestic issuers of
quarterly reports on Form 10-Q and annual reports on Form 10-K, respectively.
Such reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the regional offices of the Commission at Seven World Trade Center,
13th Floor, New York, New York 10048; Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. The
Commission also maintains a web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, such as the Company, that make electronic filings with the
Commission. As a foreign private issuer, the Company will be exempt from the
rules under the Exchange Act prescribing the furnishing and content of proxy
statements, and its executive officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act.

The Company will furnish the Depositary referred to under "Description of
American Depositary Shares" with annual reports, which will include annual
audited consolidated financial statements prepared in accordance with U.S.
GAAP, and quarterly reports, which will include unaudited quarterly
consolidated financial information prepared in accordance with U.S. GAAP. The
Depositary has agreed with the Company that, upon the Company's request, it
will promptly mail such reports to all registered holders of ADSs. The Company
will also furnish to the Depositary all notices of shareholders' meetings and
other reports and communications that are made generally available to
shareholders. The Depositary will arrange for the mailing of such documents to
record holders of ADSs. See "Description of American Depositary Shares" and
"Additional Information."

4
<PAGE>

SUMMARY

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors" and consolidated financial
statements and notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise indicated, the information contained in this Prospectus makes certain
assumptions. First, this Prospectus reflects the Company's 2-for-1 stock split
by means of a stock dividend which the Company declared on December 20, 1998,
with a record date of March 5, 1999. The Company's Equity Shares began trading
on the Indian Stock Exchanges on a post-stock split basis as of February 20,
1999. Second, this Prospectus assumes that all stock purchase rights issued
under the Company's Employees Stock Offer Plan have been exercised. Such
exercises are scheduled to occur prior to the effective date of the Offering.
Third, this Prospectus assumes no exercise of the Underwriters' over-allotment
option.

The Company

Infosys Technologies Limited ("Infosys" or the "Company"), one of India's
leading information technology ("IT") services companies, utilizes an extensive
non-U.S. based ("offshore") infrastructure to provide managed software
solutions to clients worldwide. Headquartered in Bangalore, India, the Company
has 11 state-of-the-art offshore software development facilities located
throughout India that enable it to provide high quality, cost-effective
services to clients in a resource-constrained environment. The Company's
services, which may be offered on a fixed-price, fixed-time frame or time-and-
materials basis, include custom software development, maintenance (including
Year 2000 conversion) and re-engineering services as well as dedicated offshore
software development centers ("OSDCs") for certain clients. In each of its
service offerings, the Company assumes full project management responsibility
in order to strengthen client relationships, offer higher value-added services
and enhance its profitability. In addition, the Company develops and markets
certain Company-owned software products. As a result of its extensive network
of offshore software development facilities, its quality systems, its
disciplined processes and its significant investment in people, the Company has
built a platform from which it has been able to achieve significant growth to
date. The Company completed its initial public offering on the Bangalore Stock
Exchange in 1993. From fiscal 1994 to fiscal 1998, the Company experienced
compound annual revenue and net income growth rates of 63.6% and 46.8%,
respectively, and grew from approximately 480 IT professionals to approximately
2,200.

Through its worldwide sales headquarters in Fremont, California and 16 other
sales offices located in the United States, Canada, the United Kingdom,
Germany, Japan and India, the Company markets its services to large IT-
intensive businesses. During the fiscal year ended March 31, 1998, the Company
derived 82.3% of its revenues from North America, 9.0% from Europe and 2.6%
from India. While the Company derives its revenues primarily from the United
States, Infosys maintains a diversified client base, with its largest client
representing 10.5% of fiscal 1998 revenues. As of December 31, 1998, the
Company had approximately 130 clients. This diversified client base is
comprised primarily of Fortune 500 companies and other multinational companies.
Clients include Bell Atlantic Corporation, NCR Corporation, Nordstrom, Inc.,
Southern California Edison Company, Goldman, Sachs & Co., Northern Telecom
Limited, Salomon S.A. and Toshiba Corporation. During fiscal 1998 and for the
nine months ended December 31, 1998, these clients accounted for 34.8% and
28.7%, respectively, of the Company's revenues. As a result of its commitment
to quality and client service, the Company enjoys a high level of repeat
business. For fiscal 1997 and 1998, existing clients from the previous fiscal
year generated approximately 82.3% and 83.1%, respectively, of the Company's
revenues.

5
<PAGE>

. Pursue World Class Operating Model. Management believes that one of the
most critical factors to the Company's success has been its commitment to
pursue the highest quality standards in all aspects of its business. In
its services and operations, the Company achieves quality through
rigorous adherence to highly evolved processes, having been certified
under ISO 9001 and TickIT. In addition, the Company has been measured
against the Capability Maturity Model, a software specific total quality
management model that was developed by the Software Engineering Institute
of Carnegie Mellon University (the "Capability Maturity Model") and
defines five levels of process maturity for a software organization.
Infosys has been certified at Level 4, a level achieved by only 2% of the
more than 1,000 software companies tested under the Capability Maturity
Model. Similarly, Infosys also adheres to high quality standards in its
investor relations. For example, the Company was one of the first public
Indian companies to adopt U.S. GAAP reporting in fiscal 1995 and
quarterly audited Indian financial statements in fiscal 1998. In
recognition of its efforts, the Company was voted "Best Managed Company"
in India by Asiamoney in each of the last two years, was selected as the
"Company of the Year" by The Economic Times Awards for Corporate
Excellence and was awarded the Silver Shield in each of the last three
years by the Institute of Chartered Accountants of India as the Indian
company with the best presentation of financial statements by a non-
financial company.

. Invest Heavily in Human Resources. The Company invests heavily in its
personnel by adopting progressive employee-oriented practices, fostering
a collegial atmosphere and informal culture, offering challenging
assignments and ongoing training and providing one of the first stock
option plans adopted by a public Indian company. As a result, management
believes the Company has become one of the most sought after employers
for Indian engineering graduates and that its attrition rate is
significantly below the industry average. As evidence of this, during
fiscal 1998, the Company received approximately 70,870 job applications,
tested approximately 21,350 applicants, interviewed approximately 5,800
and extended job offers to approximately 1,790, of whom approximately
1,300 accepted. Since India is home to the world's second largest
population of English-speaking technical talent, management believes that
its ability to recruit is a significant competitive advantage.

. Focus on Managed Software Solutions. The Company is dedicated to
providing managed software solutions, many of which are offered on a
fixed-price, fixed-time frame basis. By taking full project management
responsibility on every project, the Company enables its clients to
receive high quality, cost-effective solutions with lower risk. Such
services offer the Company the opportunity to build client confidence
with the potential benefit of enhanced margins.

. Capitalize on Well-Established Offshore Development Model. As one of the
pioneers of the offshore development model, the Company has made
significant investments in its infrastructure and has developed the
advanced processes and expertise necessary to manage and successfully
execute projects in multiple locations. As a result, the Company is able
to execute approximately 80% of its project work in India while
maintaining high levels of client satisfaction.

. Maintain Disciplined Focus on Business and Client Mix. Infosys provides a
wide range of IT services and maintains a disciplined focus on its
business mix in an effort to avoid service or client concentration.

. Pursue Growth Opportunities. As part of its growth strategy, the Company
intends to: (i) broaden its service offerings by continuously evaluating
emerging technologies, particularly in the areas of packaged applications
implementation, e-commerce and Internet/intranet services; (ii) increase
business with existing clients by both increasing the volume and scope of
its projects and expanding the breadth of its service offerings; (iii)
develop new clients; (iv) increase revenue per IT professional by
building expertise in vertical markets and refining its software
development tools and methodologies; (v) expand and diversify its base of
IT professionals by building new facilities near large pools of talent
and expanding its recruiting from other disciplines; and (vi) pursue
selective strategic acquisitions.

6
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Worldwide and Indian Software Services Market

Dataquest has estimated that the worldwide market for IT consulting,
development, integration and outsourcing will increase to $291 billion in 2001
from $177 billion in 1998. Simultaneously with this significant increase in
demand for IT services, the supply of qualified IT professionals has decreased
in most developed countries, particularly the United States, Western Europe and
Japan. According to the United States Department of Education, from 1986 to
1995, the number of bachelor degrees in computer science awarded annually at
U.S. universities fell by 41.7%, from 41,889 to 24,404. This shortage of IT
professionals, along with recent advances in telecommunications, has led to the
increasing acceptance and use of offshore IT service providers and to the
growing globalization of the IT services market.

According to a survey of U.S. software services vendors conducted by the
World Bank, India is the leading offshore destination for companies seeking to
outsource software development or other IT projects. The increased popularity
of and rapid growth in India's software services market can be attributed to
three key factors. First, India has a large, highly skilled labor pool that is
available at a relatively low labor cost. With over four million engineers,
India ranks second only to the United States as the country with the largest
population of English-speaking technical personnel. In contrast to the
declining number of computer science degrees awarded annually in the United
States, according to India's National Association of Software and Service
Companies ("NASSCOM"), approximately 68,000 engineers graduate annually from
the more than 1,800 engineering and technical institutes in India. Furthermore,
according to Software Productivity Research, the average annual wage for
software professionals in India is approximately 15% of the average U.S. rate.
Second, Indian IT firms have developed the capability to deliver a high quality
product. Many of India's leading software and IT services companies have been
measured against international quality standards and have received
certification and recognition for their processes and quality controls.
Finally, recent Indian governments have recognized the importance of the IT
sector to the Indian economy and have implemented policies and a variety of
incentives to stimulate growth in this sector. As a result of these factors,
according to NASSCOM, India's export revenues from software, including software
services, are projected to reach $4.0 billion in fiscal 2000, up from
approximately $1.8 billion in fiscal 1998.

The Company was organized under the laws of India in July 1981 as Infosys
Consultants Private Limited. The Company's principal executive offices are
located at Electronics City, Hosur Road, Bangalore, Karnataka, India 561 229,
and its telephone number at that address is +91-80-852-0261.

The Offering

<TABLE>
<S> <C>
Securities offered by
the Company............ 1,800,000 ADSs representing 900,000 Equity Shares
Equity Shares to be
outstanding after the
Offering............... 32,934,400 Equity Shares (1)
Use of proceeds......... For capital expenditures to expand the Company's
facilities and telecommunications infrastructure and
for other general corporate purposes, including working
capital. See "Use of Proceeds."
Dividend policy......... Consistent with many Indian public companies, the
Company has declared and paid dividends. The
declaration, payment and amount of dividends are
subject to the recommendation of the Company's Board of
Directors and the approval of its shareholders. Holders
of Equity Shares or ADSs will be entitled to dividends
paid in respect thereof. See "Dividend Policy" and
"Description of American Depositary Shares--Dividends,
Other Distributions and Rights."
Proposed Nasdaq National
Market symbol.......... INFY
</TABLE>
- --------
(1) Based on the number of Equity Shares outstanding as of March 10, 1999.
Includes 668,700 Equity Shares allocated to employees subject to vesting
provisions and 208,800 Equity Shares held by the trust responsible for
management of the Company's 1994 Employees Stock Offer Plan (the "ESOP")
which are reserved for issuance upon the exercise of stock purchase rights
to be granted by such trust in the future. See "Management--Benefit Plans."

7
<PAGE>

The following summary consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The information
presented below reflects the Company's 2-for-1 stock split by means of a stock
dividend which the Company declared on December 20, 1998, with a record date of
March 5, 1999. The Company's Equity Shares began trading on the Indian Stock
Exchanges on a post-stock split basis as of February 20, 1999.

Summary Consolidated Financial Data
(In thousands, except per Equity Share data)

<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended March 31, Ended December 31,
-------------------------------------- -------------------
1994 1995 1996 1997 1998 1997 1998
------ ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data (1):
Revenues................ $9,534 $18,105 $26,607 $39,586 $68,330 $ 48,412 $ 86,101
Cost of revenues........ 5,621 10,606 15,638 22,615 40,157 28,280 47,002
------ ------- ------- ------- ------- --------- ---------
Gross profit............ 3,913 7,499 10,969 16,971 28,173 20,132 39,099
Operating expenses:
Selling, general and
administrative
expenses............. 1,315 3,344 4,350 7,010 13,225 9,108 13,707
Amortization of
deferred stock
compensation expense
(2).................. -- 46 361 768 2,567 2,105 2,404
------ ------- ------- ------- ------- --------- ---------
Total operating ex-
penses.............. 1,315 3,390 4,711 7,778 15,792 11,213 16,111
------ ------- ------- ------- ------- --------- ---------
Operating income........ 2,598 4,109 6,258 9,193 12,381 8,919 22,988
Other income, net....... 322 747 1,460 769 801 606 1,212
------ ------- ------- ------- ------- --------- ---------
Income before income
taxes.................. 2,920 4,856 7,718 9,962 13,182 9,525 24,200
Provision for income
taxes (3).............. 250 893 894 1,320 770 977 3,532
Subsidiary preferred
stock dividends (4).... -- -- -- -- 68 34 151
------ ------- ------- ------- ------- --------- ---------
Net income.............. $2,670 $ 3,963 $ 6,824 $ 8,642 $12,344 $ 8,514 $ 20,517
====== ======= ======= ======= ======= ========= =========
Earnings per Equity
Share (5):
Basic................. $0.10 $0.14 $0.24 $0.30 $0.41 $0.29 $0.67
Diluted............... $0.10 $0.14 $0.23 $0.29 $0.41 $0.28 $0.67
Equity Shares used in
computing earnings per
Equity Share (5):
Basic................. 26,816 28,292 29,034 29,036 29,788 29,416 30,540
Diluted............... 26,816 28,376 29,284 29,704 30,404 30,260 30,625
Cash dividend per Equity
Share (6).............. $0.03 $0.04 $0.04 $0.04 $0.07 $0.02 $0.03
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998
-----------------------
Actual As Adjusted (7)
------- ---------------
<S> <C> <C>
Balance Sheet Data (1):
Cash and cash equivalents............................... $22,798 $ 79,224
Total assets............................................ 76,582 133,008
Total long-term debt.................................... -- --
Total shareholders' equity.............................. 63,265 119,691
</TABLE>

8
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Footnotes continued from previous page

the voting stock of Yantra. As a result, all of Yantra's operating losses
through October 20, 1998 were recognized in the Company's consolidated
financial statements. For fiscal 1998 and for the nine months ended December
31, 1998, the Yantra losses recognized in the Company's consolidated
financial statements were $1.6 million and $2.0 million, respectively. On
October 20, 1998, the Company sold a portion of the Yantra shares held by the
Company, thereby reducing the Company's interest to less than one-half of the
voting stock of Yantra. As a result, Yantra's results after October 20, 1998
are not recognized in the Company's consolidated financial statements under
U.S. GAAP. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Investment in Yantra Corporation " and "--
Principles of Currency Translation."

(2) In September 1994, the Company adopted the ESOP. Indian GAAP does not
require the Company to recognize a compensation expense in connection with
the grant of stock purchase rights to purchase Equity Shares under the ESOP
with an exercise price less than the market price of the Equity Shares on
the date of grant. However, under U.S. GAAP, the difference between the
exercise price and the market price on the date of grant is required to be
treated as a non-cash compensation expense and amortized over the
applicable vesting period of the Equity Shares underlying the stock
purchase rights. In fiscal 1998, the Company recognized $2.6 million in
compensation expense in connection with stock purchase rights granted under
the ESOP, including a compensation expense of $1.6 million recognized in
the third quarter of fiscal 1998. Charges were higher in that quarter
because Equity Shares issued to participants in the ESOP as part of a
declared stock dividend were not subject to vesting, and accordingly, the
compensation expense for such Equity Shares was accelerated in one quarter
rather than amortized over the remaining vesting period. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Deferred Stock Compensation Expense."

(3) The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws, which have historically resulted
in an effective tax rate for the Company well below statutory rates. See
"Risk Factors--Effect of Deferred Stock Compensation Expense Under U.S.
GAAP; Loss Expected to be Reported for Fourth Quarter of Fiscal 1999," "--
Risks Related to Investments in Indian Securities" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Income Tax Matters."

(4) Represents accrued dividends on preferred stock issued in September 1997 by
the Company's formerly majority-owned subsidiary, Yantra. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Investment in Yantra Corporation."

(5) All earnings per share calculations have been computed per Equity Share,
each of which is equivalent to two of the ADSs offered hereby. As of
December 31, 1998, after giving effect to the Company's stock dividend
declared in December 1998, the Company's outstanding Equity Shares included
877,500 Equity Shares held by the trust responsible for management of the
ESOP. Of such shares, 668,700 were allocated to employees subject to
vesting provisions and 208,800 were reserved for future grants. None of
such shares have been included in the basic earnings per share
calculations, and only the 668,700 Equity Shares allocated to employees
have been included in the diluted earnings per share calculations.

(6) It is customary for public companies in India to pay cash dividends,
although the amount may vary. Dividends are declared in Indian rupees.
Amounts presented have been translated into U.S. dollars, and historical
amounts reflect dividends paid per Equity Share, each of which is
equivalent to two ADSs offered hereby. See "Dividend Policy."

(7) Adjusted to give effect to the sale by the Company of 1,800,000 ADSs
(representing 900,000 Equity Shares) offered hereby and the application of
the estimated net proceeds therefrom at the public offering price per ADS
of $34.00. The Company has sought and received approval from its
shareholders and the Government of India for an offering with aggregate
proceeds of up to $75 million, inclusive of the Underwriters' over-
allotment option. See "Use of Proceeds" and "Capitalization."

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RISK FACTORS

Management of Growth

The Company has experienced significant growth in recent periods. The
Company's revenues increased 77.9% in the nine months ended December 31, 1998
as compared to the nine months ended December 31, 1997. As of December 31,
1998, the Company employed approximately 3,000 IT professionals worldwide with
11 software development facilities in India as compared to approximately 2,050
with nine facilities as of December 31, 1997 and 1,240 with six facilities as
of December 31, 1996. In fiscal 1998, the Company approved major expansions to
its existing facilities and the building of new facilities. The Company's
growth is expected to place significant demands on its management and other
resources and will require the Company to continue to develop and improve its
operational, financial and other internal controls, both in India and
elsewhere. In particular, continued growth increases the challenges involved
in: recruiting and retaining sufficient skilled technical, marketing and
management personnel; providing adequate training and supervision to maintain
the Company's high quality standards; and preserving the Company's culture and
values and its entrepreneurial environment. The Company's inability to manage
its growth effectively could have a material adverse effect on the quality of
the Company's services and projects, its ability to attract clients as well as
skilled personnel, its business prospects and its results of operations and
financial condition. See "Use of Proceeds," "Business--Growth Strategy" and
"--Facilities."

Potential Fluctuations in Future Operating Results

The Company's operating results historically have fluctuated and may
fluctuate in the future depending on a number of factors, including: the size,
timing and profitability of significant projects; the proportion of services
that are performed at client sites rather than at the Company's offshore
facilities; the accuracy of estimates of resources and time required to
complete ongoing projects, particularly projects performed under fixed-price,
fixed-time frame contracts; a change in the mix of services provided to its
clients or in the relative proportion of services and product revenues; the
timing of tax holidays and other Government of India incentives; the effect of
seasonal hiring patterns and the time required to train and productively
utilize new employees; the size and timing of facilities expansion;
unanticipated increases in wage rates; the Company's success in expanding its
sales and marketing programs; and currency exchange rate fluctuations and
other general economic factors. A high percentage of the Company's operating
expenses, particularly personnel and facilities, are fixed in advance of any
particular quarter. As a result, unanticipated variations in the number and
timing of the Company's projects or in employee utilization rates may cause
significant variations in operating results in any particular quarter. The
Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Due to all of the foregoing factors, it is
possible that in some future quarter the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the market price of the Equity Shares and ADSs would likely be materially
adversely affected. See "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Effect of Deferred Stock Compensation Expense Under U.S. GAAP; Loss Expected
to be Reported for Fourth Quarter of Fiscal 1999

The Company's reported income under U.S. GAAP (but not Indian GAAP) has been
and will continue to be affected by the grant of stock purchase rights under
the Company's ESOP. Under the terms of the ESOP, employees are granted rights
to purchase Equity Shares at a substantial discount to the current market
value. Such grants require the Company to record non-cash compensation
expenses under U.S. GAAP, amortized over

10
<PAGE>

the vesting period of the stock purchase rights. As of December 31, 1998,
208,800 stock purchase rights remained to be granted. If the market price of
the Equity Shares increases materially, the Company would be required to
record a significantly increased compensation expense in connection with the
grant of future stock purchase rights to purchase Equity Shares under the
ESOP, which would adversely affect the Company's reported operating results
under U.S. GAAP.

Stock dividends declared by the Company affect the timing for the
recognition of deferred stock compensation expense. Historically, when the
Company has declared a stock dividend, the dividend shares distributed to ESOP
participants have not been subject to vesting. As a result, a portion of the
compensation expense recognized under U.S. GAAP is accelerated into the period
in which the stock dividend is made rather than amortized over the vesting
period. This occurred in the third quarter of fiscal 1998, when the Company
declared a stock dividend and consequently recognized a substantial
compensation expense for such quarter. This will occur again in the fourth
quarter of fiscal 1999, pursuant to a scheduled stock dividend declared on
December 20, 1998. As a result, the Company expects to recognize a deferred
stock compensation expense in the approximate amount of $13.7 million for the
fourth quarter of fiscal 1999 and $16.1 million for fiscal 1999. The size of
this charge may cause the Company to report negative operating income and
negative net income for the fourth quarter of fiscal 1999 for purposes of U.S.
GAAP. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Deferred Stock Compensation Expense."

Risks Related to Investments in Indian Securities

The Company is incorporated in India, and substantially all of its assets
and a substantial majority of employees are located in India. Consequently,
the Company's performance and the market price of the ADSs will be affected by
changes in exchange rates and controls, interest rates, Government of India
policies, including taxation policy, as well as political, social and economic
developments affecting India.

Political and Economic Environment. During the past decade and in particular
since 1991, the Government of India has pursued policies of economic
liberalization, including significantly relaxing restrictions on the private
sector. Nevertheless, the role of the Indian central and state Governments in
the Indian economy as producers, consumers and regulators has remained
significant. Additionally, since 1996, the Government of India has changed
three times. The current Government of India, formed in March 1998, has
announced policies and taken initiatives that support the continued economic
liberalization policies that have been pursued by the previous governments and
has set up a special IT task force to promote the IT industry. However, the
rate of economic liberalization could change, and specific laws and policies
affecting IT companies, foreign investment, currency exchange rates and other
matters affecting investment in the Company's securities could change as well.
Further, there can be no assurance that the liberalization policies will
continue in the future. A significant change in the Government of India's
economic liberalization and deregulation policies could adversely affect
business and economic conditions in India generally and the Company's business
in particular. On May 13, 1998, the United States imposed economic sanctions
against India in response to India's testing of nuclear devices. While the
economic sanctions imposed on India to date have not had a material impact on
the Company, there can be no assurance that additional economic sanctions of
this nature will not be imposed, or that such sanctions will not have a
material adverse effect on the Company's business or on the markets for its
Equity Shares in India and ADSs in the United States. Furthermore, financial
turmoil in certain Asian countries, Russia and elsewhere in the world has
affected market prices in the world's securities markets, including the United
States and Indian markets. Continued or increased financial downturns in these
countries could cause further decreases in securities prices on the United
States and Indian exchanges, including the market prices of the Company's
Equity Shares and the ADSs. Southeast Asia has from time to time experienced
instances of civil unrest and hostilities among neighboring countries. Events
of this nature in the future could influence the Indian economy and could have
a material adverse effect on the market for securities of Indian companies and
on the business of the Company.

Government of India Incentives and Regulation. The Company benefits from a
variety of incentives given to software firms in India, such as relief from
import duties on hardware, a tax exemption for income derived from software
exports, and tax holidays and infrastructure support for companies, such as
Infosys, operating in

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<PAGE>

specially designated "Software Technology Parks." There can be no assurance
that these incentives will be provided in the future. Further, there is a risk
that changes in tax rates or laws affecting foreign investment, currency
exchange rates or other regulations will render the Government of India's
regulatory scheme less favorable to the Company and could adversely affect the
market price of the ADSs. Should the regulations and incentives promulgated by
the Government of India become less favorable to the Company, the Company's
results of operations and financial condition could be adversely affected. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Income Tax Matters."

Restrictions on Foreign Investment. Foreign investment in Indian securities
is generally regulated by FERA. In certain emerging markets, including India,
Global Depositary Shares and ADSs may trade at a discount or premium, as the
case may be, to the underlying shares, in part because of restrictions on
foreign ownership of the underlying shares. In addition, under current Indian
laws and regulations, the Depositary cannot accept deposits of outstanding
Equity Shares and issue ADRs evidencing ADSs representing such Equity Shares.
Therefore, a holder of ADSs who surrenders ADSs and withdraws Equity Shares is
not permitted subsequently to deposit such Equity Shares and obtain ADSs nor
would a holder to whom such Equity Shares are transferred be permitted to
deposit such Equity Shares. This inability to convert Equity Shares into ADSs
increases the probability that the price of the ADSs will not trade on par
with the price of the Equity Shares as quoted on the Indian Stock Exchanges.
Holders who seek to convert the rupee proceeds from a sale in India into
foreign currency and repatriate such foreign currency from India will have to
obtain RBI approval for each such transaction. Further, under current Indian
regulations and practice, the approval of the RBI is required for the sale of
Equity Shares underlying ADSs by a non-resident of India to a resident of
India as well as for renunciation of rights to a resident of India. There can
be no assurance that any such approval can be obtained. Equity Shares which
are withdrawn from the Depositary also may not be sold on the Indian Stock
Exchanges until the Equity Shares underlying the ADSs have been listed on
those exchanges, a process which will be completed within two weeks after the
Offering. See "Description of American Depositary Shares," "Restrictions on
Foreign Ownership of Indian Securities" and "Government of India Approvals."

Exchange Rate Fluctuations. The exchange rate between the rupee and the U.S.
dollar has changed substantially in recent years and may fluctuate
substantially in the future. During the four-year period from December 31,
1994 through December 31, 1998, the value of the rupee against the U.S. dollar
declined by approximately 39.5%. For fiscal 1998 and the nine months ended
December 31, 1998, the Company's U.S. dollar-denominated revenues represented
90.0% and 89.2%, respectively, of total revenues. The Company expects that a
majority of its revenues will continue to be generated in U.S. dollars for the
foreseeable future and that a significant portion of the Company's expenses,
including personnel costs as well as capital and operating expenditures, will
continue to be denominated in rupees. Consequently, the Company's results of
operations will be adversely affected to the extent the rupee appreciates
against the U.S. dollar. The Company has sought to reduce the effect of
exchange rate fluctuations on operating results by periodically purchasing
foreign exchange forward contracts to cover a portion of outstanding accounts
receivable. For the first three quarters of fiscal 1999, the Company purchased
foreign exchange forward contracts in an aggregate notional amount of $5.5
million. As of December 31, 1998, the Company had no such forward contracts
outstanding. These contracts typically mature within three months, must be
settled on the day of maturity and may be canceled subject to the payment of
any gains or losses in the difference between the contract exchange rate and
market exchange rate on the date of cancellation. The Company uses these
instruments only as a hedging mechanism and not for speculative purposes.
There can be no assurance that the Company will purchase contracts adequate to
insulate itself from foreign exchange currency risks or that any such
contracts will perform adequately as a hedging mechanism. Devaluations of the
rupee will result in foreign currency translation losses. For example, for
fiscal 1998 and the nine months ended December 31, 1998, the Company's foreign
currency translation losses were approximately $3.5 million and $2.3 million,
respectively. Fluctuations in the exchange rate between the rupee and the U.S.
dollar also will affect the U.S. dollar conversion by the Depositary of any
cash dividends paid in rupees on the Equity Shares represented by the ADSs. In
addition, fluctuations in the exchange rate between the Indian rupee and the
U.S. dollar will affect the U.S. dollar equivalent of the Indian rupee price
of Equity Shares on the Indian Stock Exchanges and, as a result, are likely to
affect the market prices of the ADSs in the United States, and vice versa.
Such fluctuations will also affect the dollar value of the proceeds a holder
would receive upon the sale in India of any Equity Shares withdrawn from the
Depositary under the Depositary Agreement. There can be no assurance that
holders will be able to convert rupee proceeds into U.S. dollars or any other
currency or

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<PAGE>

with respect to the rate at which any such conversion could occur. See
"Exchange Rates" and "Government of India Approvals."

Substantial Investment in New Facilities

The Company has budgeted aggregate capital expenditures of $32.4 million for
the fourth quarter of fiscal 1999 through fiscal 2000 to acquire, build and
equip new facilities. As of December 31, 1998, the Company had contractual
commitments of $6.3 million for such capital expenditures. Since such an
expansion will significantly increase the Company's fixed costs, the Company's
results of operations will be materially adversely affected if the Company is
unable to grow its business proportionately. Although the Company has
successfully developed new facilities in the past, there can be no assurance
that the Company will not encounter cost overruns or project delays in
connection with any or all of the new facilities. Furthermore, there can be no
assurance that future financing for additional facilities, whether within
India or elsewhere, would be available on attractive terms or at all. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Business--
Facilities."

Restrictions on U.S. Immigration

The Company's professionals that work on-site at client facilities in the
United States on temporary and extended assignments are typically required to
obtain visas. As of December 31, 1998, substantially all of the Company's
personnel in the United States were working pursuant to H-1B visas (231
persons) or L-1 visas (111 persons). Although there is no limit to new L-1
petitions, there is a limit to the number of new H-1B petitions that the
United States Immigration and Naturalization Service may approve in any
government fiscal year. In years in which this limit is reached, the Company
may be unable to obtain H-1B visas necessary to bring critical Indian IT
professionals to the United States on an extended basis. This limit was
reached in May 1998 for the U.S. government's fiscal year ending September 30,
1998. While the Company anticipated that such limit would be reached prior to
the end of the U.S. government's fiscal year and made efforts to plan
accordingly, there can be no assurance that the Company will continue to be
able to obtain a sufficient number of H-1B visas. Changes in existing U.S.
immigration laws that make it more difficult for the Company to obtain H-1B
and L-1 visas could impair the Company's ability to compete for and provide
services to clients and could have a material adverse effect on the Company's
results of operations and financial condition. See "Business--Human
Resources."

Risks Related to International Operations

While to date all of the Company's software development facilities are
located in India, the Company intends to develop new software development
facilities in other regions, including potentially Southeast Asia, Latin
America and Europe. The Company has not yet made substantial contractual
commitments to develop such new software development facilities, and there can
be no assurance that the Company will not significantly alter or reduce its
proposed expansion plans. The Company's lack of experience with facilities
outside of India subject the Company to further risk with regard to foreign
regulation and overseas facilities management. Increasing the number of
software development facilities and the scope of operations outside of India
subjects the Company to a number of risks, including, among other things,
difficulties relating to administering its business globally, managing foreign
operations, currency exchange rate fluctuations, restrictions against the
repatriation of earnings, export requirements and restrictions, and multiple
and possibly overlapping tax structures. Such developments could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--Facilities."

Dependence on Skilled Personnel; Risks of Wage Inflation

The Company's ability to execute project engagements and to obtain new
clients depends, in large part, on its ability to attract, train, motivate and
retain highly skilled IT professionals, particularly project managers,
software engineers and other senior technical personnel. An inability to hire
and retain additional qualified personnel will impair the Company's ability to
bid for or obtain new projects and to continue to expand its business. The
Company believes that there is significant competition for IT professionals
with the skills necessary to perform the services offered by the Company.
There can be no assurance that the Company will be

13
<PAGE>

able to assimilate and manage new IT professionals effectively. Any increase
in the attrition rates experienced by the Company, particularly the rate of
attrition of experienced software engineers and project managers, would
adversely affect the Company's results of operations and financial condition.
There can be no assurance that the Company will be successful in recruiting
and retaining a sufficient number of replacement IT professionals with the
requisite skills to replace those IT professionals who leave. Further, there
can be no assurance that the Company will be able to redeploy and retrain its
IT professionals to keep pace with continuing changes in IT, evolving
standards and changing client preferences. Historically, the Company's wage
costs in India have been significantly lower than wage costs in the United
States for comparably skilled IT professionals. However, wage costs in India
are presently increasing at a faster rate than those in the United States. In
the long-term, wage increases may have an adverse effect on the Company's
profit margins unless the Company is able to continue increasing the
efficiency and productivity of its professionals. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Effects of
Inflation."

Client Concentration

The Company has derived and believes that it will continue to derive a
significant portion of its revenues from a limited number of large corporate
clients. For fiscal 1998 and the nine months ended December 31, 1998, the
Company's largest client accounted for 10.5% and 6.7%, respectively, of the
Company's revenues and its five largest clients accounted for 35.1% and 29.2%,
respectively, of the Company's revenues. The volume of work performed for
specific clients is likely to vary from year to year, particularly since the
Company is usually not the exclusive outside service provider for its clients.
Thus, a major client in one year may not provide the same level of revenues in
any subsequent year. The loss of any large client could have a material
adverse effect on the Company's results of operations and financial condition.
Since many of the contracted projects are critical to the operations of its
clients' businesses, any failure to meet client expectations could result in a
cancellation or nonrenewal of a contract. However, there are a number of
factors other than the Company's performance that could cause the loss of a
client and that may not be predictable. For example, in 1995, the Company
chose to reduce significantly the services provided to its then-largest client
rather than to accept the price reductions and increased Company resources
sought by such client. In other circumstances, the Company reduced
significantly the services provided to its client when the client either
changed its outsourcing strategy by moving more work in-house and reducing the
number of its vendors, or replaced its existing software with packaged
software supported by the licensor. There can be no assurance that the same
circumstances may not arise in the future.

Fixed-Price, Fixed-Time Frame Contracts

As a core element of its business strategy, the Company continues to offer a
significant portion of its services on a fixed-price, fixed-time frame basis,
rather than on a time-and-materials basis. Although the Company uses specified
software engineering processes and its past project experience to reduce the
risks associated with estimating, planning and performing fixed-price, fixed-
time frame projects, the Company bears the risk of cost overruns, completion
delays and wage inflation in connection with these projects. The Company's
failure to estimate accurately the resources and time required for a project,
future rates of wage inflation and currency exchange rates or its failure to
complete its contractual obligations within the time frame committed could
have a material adverse effect on the Company's results of operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."

Infrastructure and Potential Disruption in Telecommunications

A significant element of the Company's business strategy is to continue to
leverage its various software development centers in Bangalore, Bhubaneswar,
Chennai, Mangalore and Pune, India and to expand the number of such centers in
India as well as outside India. The Company believes that the use of a
strategically located network of software development centers will provide the
Company with cost advantages, the ability to attract highly skilled personnel
in various regions, the ability to service clients on a regional and global
basis and the ability to provide 24-hour service to its clients. Pursuant to
its service delivery model, the Company must

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<PAGE>

maintain active voice and data communications between its main offices in
Bangalore, the offices of its clients and its other software development
facilities. Although the Company maintains redundant software development
facilities and satellite communications links, any significant loss of the
Company's ability to transmit voice and data through satellite and telephone
communications would have a material adverse effect on the Company's results
of operations and financial condition. See "--Year 2000 Compliance,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance" and "Business--The Infosys Offshore
Development Model."

Expected Decrease in Demand for Year 2000 Services

Year 2000 conversion projects represented 23.3% and 21.4% of the Company's
revenues for fiscal 1998 and the nine months ended December 31, 1998,
respectively. The Company expects that Year 2000 conversion projects will
continue to represent a material portion of the Company's business in the
remainder of fiscal 1999 and 2000. The high demand for these time-sensitive
projects results in pricing and margins that are favorable to the Company. The
Company believes that demand for Year 2000 conversion services will begin to
diminish rapidly after fiscal 1999 as many Year 2000 conversion solutions are
implemented and tested. There can be no assurance that the Company will be
successful in generating additional business from its Year 2000 clients for
other services, that the Company will be successful in replacing Year 2000
conversion projects with other projects as the Year 2000 business declines or
that margins from any such future projects will be comparable to those
obtained from Year 2000 conversion projects. There is an additional risk that
the Company may be unable to retrain and redeploy IT professionals who are
currently assigned to Year 2000 conversion projects involving legacy computer
systems after such projects are completed. Furthermore, as Year 2000
conversion projects are completed, there is a likelihood of increased
competition for other types of projects from firms formerly dependent on Year
2000 business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview" and "Business--Services and
Products."

Competition

The market for IT services is highly competitive. Competitors include IT
services companies, large international accounting firms and their consulting
affiliates, systems consulting and integration firms, temporary employment
agencies, other technology companies and client in-house MIS departments.
Competitors include international firms as well as national, regional and
local firms located in the United States, Europe and India. The Company
expects that future competition will increasingly include firms with
operations in other countries, potentially including countries with lower
personnel costs than those prevailing in India. Part of the Company's
competitive advantage has historically been a cost advantage relative to
service providers in the United States and Europe. Since wage costs in India
are presently increasing at a faster rate than those in the United States, the
Company's ability to compete effectively will become increasingly dependent on
its reputation, the quality of its services and its expertise in specific
markets. Many of the Company's competitors have significantly greater
financial, technical and marketing resources and generate greater revenue than
the Company, and there can be no assurance that the Company will be able to
compete successfully with such competitors and will not lose existing clients
to such competitors. The Company believes that its ability to compete also
depends in part on a number of factors outside its control, including the
ability of its competitors to attract, train, motivate and retain highly
skilled IT professionals, the price at which its competitors offer comparable
services and the extent of its competitors' responsiveness to client needs.
See "Business--Competition."

Dependence on Key Personnel

The Company's success depends to a significant degree upon the continued
contributions of members of the Company's senior management and other key
research and development and sales and marketing personnel. The Company
generally does not enter into employment agreements with its senior management
and other key personnel that provide for substantial restrictions on such
persons leaving the Company. The loss of any of such persons could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management--Employment Agreements."

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<PAGE>

Potential Liability to Clients; Risk of Exceeding Insurance Coverage

Many of the Company's contracts involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. Any failure in a client's system could result in a
claim for substantial damages against the Company, regardless of the Company's
responsibility for such failure. Although the Company attempts to limit its
contractual liability for damages arising from negligent acts, errors,
mistakes or omissions in rendering its services, there can be no assurance the
limitations of liability set forth in its service contracts will be
enforceable in all instances or will otherwise protect the Company from
liability for damages. The Company maintains general liability insurance
coverage, including coverage for errors or omissions; however, there can be no
assurance that such coverage will continue to be available on reasonable terms
or will be available in sufficient amounts to cover one or more large claims,
or that the insurer will not disclaim coverage as to any future claim. The
successful assertion of one or more large claims against the Company that
exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's results of
operations and financial condition.

Risks Associated with Possible Acquisitions

The Company intends to evaluate potential acquisitions and strategic
investments on an ongoing basis. As of the date of this Prospectus, however,
the Company has no understanding, commitment or agreement with respect to any
material future acquisition or investment. Since the Company has not made any
acquisitions in the past, there can be no assurance that the Company will be
able to identify suitable acquisition candidates available for sale at
reasonable prices, consummate any acquisition or successfully integrate any
acquired business into the Company's operations. Further, acquisitions may
involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel and clients, unanticipated
events or circumstances, legal liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect
on the Company's results of operations and financial condition. Under Indian
law, except in certain limited circumstances, the Company may not make any
acquisition of or investment in a non-Indian company without RBI and, in most
cases, Government of India approval. Even if the Company does encounter an
attractive acquisition candidate, there can be no assurance that RBI and, if
required, Government of India approval can be obtained.

Risks Related to Software Product Sales

In fiscal 1998, the Company derived 5.9% of its revenues from the sale of
software products. The development of the Company's software products requires
significant investment costs. The markets for the Company's primary software
product are competitive and currently located in developing countries, and
there can be no assurance that such product will continue to be commercially
successful. In addition, there can be no assurance that any new products
developed by the Company will be commercially successful or that the costs of
developing such new products will be recouped. A decrease in the Company's
product revenues or margins could adversely affect the Company's results of
operations and financial condition. Additionally, software product revenues
typically occur in periods subsequent to the periods in which the costs are
incurred for development of such products. There can be no assurance that such
delayed revenues will not cause periodic fluctuations of the Company's results
of operations and financial condition.

Restrictions on Exercise of Preemptive Rights by ADS Holders

Under the Indian Companies Act, 1956 (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
Company's shareholders. U.S. 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 (the "Securities Act"),
is effective with respect to such rights or an exemption

16
<PAGE>

from the registration requirements of the Securities Act is available. The
Company's decision to file a registration statement will depend on the costs
and potential liabilities associated with any such registration statement as
well as the perceived benefits of enabling the holders of ADSs to exercise
their preemptive rights and any other factors the Company considers
appropriate at the time. No assurance can be given that the Company would file
a registration statement under these circumstances. If the Company issues any
such securities in the future, such securities may be issued to the
Depositary, which may sell such securities for the benefit of the holders of
the ADSs. There can be no assurance as to the value, if any, the Depositary
would receive upon the sale of such securities. 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 the Company
would be reduced. See "Description of American Depositary Shares."

Intellectual Property Rights

The Company relies upon a combination of non-disclosure and other
contractual arrangements and copyright, trade secret and trademark laws to
protect its proprietary rights in technology. Ownership of software and
associate deliverables created for clients is generally retained by or
assigned to the client, and the Company does not retain an interest in such
software and deliverables. The Company also develops foundation and
application software products, or software "tools," which are licensed to
clients and remain the property of the Company. The Company has obtained
registration of INFOSYS as a trademark in India but not in the United States,
and does not have any patents or registered copyrights in the United States.
The Company currently requires its IT professionals to enter into non-
disclosure and assignment of rights agreements to limit use of, access to and
distribution of its proprietary information. There can be no assurance that
the steps taken by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.

Although the Company believes that its services and products do not infringe
upon the intellectual property rights of others, there can be no assurance
that such a claim will not be asserted against the Company in the future.
Assertion of such claims against the Company could result in litigation, and
there can be no assurance that the Company would prevail in such litigation or
be able to obtain a license for the use of any infringed intellectual property
from a third party on commercially reasonable terms. There can be no assurance
that the Company will be able to protect such licenses from infringement or
misuse, or prevent infringement claims against the Company in connection with
its licensing efforts. The Company expects that the risk of infringement
claims against the Company will increase if more of the Company's competitors
are able to obtain patents for software products and processes. Any such
claims, regardless of their outcome, could result in substantial cost to the
Company and divert management's attention from the Company's operations. Any
infringement claim or litigation against the Company could, therefore, have a
material adverse effect on the Company's results of operations and financial
condition. See "Business--Intellectual Property."

Control by Principal Shareholders, Officers and Directors; Anti-Takeover
Provisions

Following the Offering, the Company's officers and directors, together with
members of their immediate families, in the aggregate, will beneficially own
approximately 30.8% of the Company's issued Equity Shares. As a result, such
persons, acting together, will likely still have the ability to exercise
significant control over most matters requiring approval by the shareholders
of the Company, including the election and removal of directors and
significant corporate transactions. Such control by the Company's officers and
directors could delay, defer or prevent a change in control of the Company,
impede a merger, consolidation, takeover or other business combination
involving the Company, or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company. See
"Management" and "Principal Shareholders."

The Indian Companies Act and the Company's Articles of Association (the
"Articles") require that: (i) at least two-thirds of the Company's directors
shall serve for a specified term and shall be subject to re-election by the
Company's shareholders at the expiration of such terms; and (ii) at least one-
third of the Company's directors who are subject to re-election shall be up
for re-election at each annual meeting of the Company's shareholders.

17
<PAGE>

In addition, the Company's Articles provide that Mr. N.R. Narayana Murthy, one
of the Company's principal founders and its Chairman of the Board and Chief
Executive Officer, shall serve as the Company's Chairman of the Board and
shall not be subject to re-election as long as he and his relatives, own at
least 5% of the Company's outstanding equity securities. Furthermore, any
amendment to the Company's Articles would require the affirmative vote of
three-fourths of the Company's shareholders. Finally, foreign investment in
Indian companies is highly regulated. These provisions could delay, defer or
prevent a change in control of the Company, impede a business combination
involving the Company or discourage a potential acquiror from attempting to
obtain control of the Company. See "Risks Related to Investments in Indian
Securities--Restrictions on Foreign Investment," "Management," "Principal
Shareholders" and "Restrictions on Foreign Ownership of Indian Securities."

Year 2000 Compliance

Many existing computer systems, software applications and other control
devices use only two digits to identify a year in the date field, without
considering the impact of the upcoming change in the century. Others do not
correctly process "leap year" dates. As a result, such systems and
applications could fail or create erroneous results unless modified so that
they can correctly process data related to the year 2000 and beyond. While the
Company has evaluated each of its IT services and software products and
believes that each is substantially Year 2000 compliant, there can be no
assurance that the Company's IT services and products are or will ultimately
be Year 2000 compliant. The Company relies on its systems, computer
applications and devices to operate and monitor all major aspects of its
business, including financial systems (such as general ledger, accounts
payable and payroll), customer services, infrastructure, materials requirement
planning, master project scheduling, networks and telecommunications systems.
Although the Company has converted its financial applications software to
programs certified by the suppliers as Year 2000 compliant and is currently in
the process of modifying and upgrading all other affected systems, there can
be no assurance that such modifications and upgrades will be completed in a
timely manner at reasonable costs, or that such modifications and upgrades
will be able to anticipate all of the problems resulting from the actual
impact of the year 2000. The Company relies directly and indirectly on systems
utilized by its suppliers for telecommunications, utilities, electronic
hardware and software applications. Although the Company maintains redundant
software facilities and satellite communications links, any significant loss
of the Company's ability to transmit voice and data through satellite and
telephone communications would have a material adverse effect on the Company's
business, results of operations and financial condition. Any failure of these
third party suppliers to resolve their Year 2000 problems in a timely manner
could disrupt the Company's operations, which could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "--Infrastructure and Potential Disruption in
Telecommunications" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."

Possible Volatility of ADS Price

Future announcements concerning the Company or its competitors, government
regulations, litigation, quarterly variations in the Company's operating
results or changes in earnings estimates by analysts as well as market
conditions in the technology and emerging growth company sectors, may cause
the ADS market price to fluctuate substantially. For example, stock prices for
many technology companies have fluctuated widely for reasons unrelated to
their operating results. These fluctuations as well as currency fluctuations
and general economic, political and market conditions in both the United
States and India, such as recessions or international currency fluctuations,
may adversely affect the ADS market price. See "Price Range of Equity Shares."

The Indian securities markets are smaller than the securities markets in the
United States and Europe and have experienced volatility from time to time.
The regulation and monitoring of the Indian securities market and the
activities of investors, brokers and other participants differs, in some cases
significantly, from those in the United States and certain European countries.
Indian stock exchanges have experienced problems, including temporary exchange
closures, broker defaults, settlement delays and strikes by brokerage firm
employees, which, if such or similar problems were to continue or recur, could
affect the market price and liquidity of the securities of Indian companies,
including the Equity Shares, in both domestic and international markets.

18
<PAGE>

Absence of Prior U.S. Public Market; Potential Limited Liquidity

Prior to the Offering, there has been no public market for the ADSs or the
Equity Shares in the United States. After the Offering, there will be no
public market for the Equity Shares in the United States. Although ADS holders
are entitled to withdraw the Equity Shares underlying the ADSs from the
Depositary at any time, under current Indian law, Equity Shares may not be re-
deposited into the Depositary. Therefore, the number of outstanding ADSs will
decrease to the extent that Equity Shares are withdrawn from the Depositary,
which may adversely affect the market price and the liquidity of the market
for the ADSs. The public offering price was determined by negotiation between
the Company and the Representatives of the Underwriters and may bear no
relationship to the price at which the ADSs will trade upon completion of the
Offering. Although the ADSs have been approved for quotation on the Nasdaq
National Market subject to official notice of issuance, there can be no
assurance that any active trading market for the ADSs will develop or be
sustained after the Offering, or that the public offering price will
correspond to the price at which the ADSs will trade in the public market
subsequent to the Offering. See "Underwriting."

Equity Shares Eligible for Future Sale

Sales of a substantial number of Equity Shares into the public market
following the Offering (whether on the Indian Stock Exchanges or into the
United States market by conversion of outstanding Equity Shares into ADSs, if
permitted in the future by the Government of India) could adversely affect the
market price of the ADSs. Upon consummation of the Offering, 32,934,400 Equity
Shares will be issued and outstanding, including 900,000 Equity Shares
represented by 1,800,000 ADSs issued in connection with the Offering. Of the
32,034,400 Equity Shares issued and outstanding prior to the issuance of the
ADSs, holders of approximately 10,144,200 Equity Shares (including all shares
held by directors and their families and executive officers) have agreed not
to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of, or agree to dispose of, any such Equity Shares for a period of 180
days following the date of this Prospectus. NationsBanc Montgomery Securities
LLC may release such shares from the lock-up in its sole discretion at any
time and without prior public announcement. Substantially all of the Equity
Shares that are not subject to such lock-ups will be freely tradeable in India
immediately after the Offering. Upon expiration of the lock-up period (or
earlier with such consent), substantially all of the Equity Shares will be
available for sale on the Indian Stock Exchanges. Sales of substantial amounts
of Equity Shares, or the availability of such shares for sale, could adversely
affect the market price of the ADS. See "Equity Shares Eligible for Future
Sale" and "Underwriting."

Dividend Policy; Effect on Equity Shares Underlying ADSs

Under Indian law, a corporation pays cash dividends upon a recommendation by
the Board of Directors and approval by a majority of the shareholders, who
have the right to decrease but not increase the amount of the dividend
recommended by the Board of Directors. With respect to Equity Shares issued by
the Company during a particular fiscal year (including the Equity Shares
underlying the ADSs issued to the Depositary in connection with the Offering),
cash dividends declared and paid for such fiscal year generally will be
prorated from the date of issuance to the end of such fiscal year. As a
result, holders of ADSs will receive little or no dividend for fiscal 1999.
This disparity in dividend treatment increases the probability that the price
of the ADSs will not trade on par with the price of the Equity Shares as
quoted on the Indian Stock Exchanges and may adversely affect the liquidity of
the ADSs. Although the Company has typically paid cash dividends and has no
current intention to discontinue such dividend payments, there can be no
assurance that any future dividends will be declared or paid or the amount
thereof. See "Dividend Policy," "Description of Equity Shares--Dividends" and
"Taxation--United States Federal Taxation--Dividends."

19
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,800,000 ADSs to be
sold in the Offering are estimated to be $56.4 million ($65.2 million if the
Underwriters' over-allotment option is exercised in full), at the public
offering price of $34.00 per ADS and after deducting the underwriting discount
and estimated offering expenses. The Company has sought and received approval
from its shareholders and the Government of India for an offering with
aggregate proceeds of up to $75 million, inclusive of the Underwriters' over-
allotment option.

The Company currently intends to use the net proceeds from the Offering to
partially fund the expansion of its existing Indian facilities and
telecommunications infrastructure in Bangalore, Bhubaneswar, Chennai,
Mangalore and Pune and to develop new facilities. For these purposes, the
Company has budgeted for the fourth quarter of fiscal 1999 through fiscal
2000, capital expenditures of $22.4 million to fund the expansion of existing
facilities and additional telecommunications infrastructure in India and $10.0
million to fund development of new facilities outside India. The Company has
not yet made contractual commitments for the majority of its budgeted capital
expenditures, and there can be no assurance that the Company will not
significantly alter or reduce its proposed expansion plans. The Company
intends to use the remaining net proceeds, if any, from the sale of the ADSs
primarily for general corporate purposes, including working capital. Pending
application of the net proceeds as described above, the Company intends to
invest the net proceeds from the Offering in short-term, interest-bearing,
investment-grade securities or interest-bearing deposit accounts. See "Risk
Factors--Substantial Investment in New Facilities" and "Business--Facilities."

DIVIDEND POLICY

Although the amount varies, it is customary for public companies in India to
pay cash dividends. Under Indian law, a corporation pays dividends upon a
recommendation by the Board of Directors and approval by a majority of the
shareholders, who have the right to decrease but not increase the amount of
the dividend recommended by the Board of Directors. Under the Indian Companies
Act, dividends may be paid out of profits of a company in the year in which
the dividend is declared or out of the undistributed profits of previous
fiscal years. In the last three fiscal years, the Company declared an
aggregate of approximately $0.15 per Equity Share, as adjusted to reflect the
Company's stock dividend in December 1998, in cash dividends (equivalent to
approximately $0.075 per ADS). Although the Company has no current intention
to discontinue dividend payments, there can be no assurance that any future
dividends will be declared or paid or that the amount thereof will not be
decreased. Owners of ADSs will be entitled to receive dividends payable in
respect of the Equity Shares represented by such ADSs. The Equity Shares
represented by ADSs will rank pari passu with existing Equity Shares of the
Company in respect of dividends. Cash dividends in respect of the Equity
Shares represented by the ADSs will be paid to the Depositary in rupees and,
except as otherwise described under "Description of American Depositary
Shares--Dividends, Other Distributions and Rights," will be converted by the
Depositary into U.S. dollars and distributed, net of Depositary fees and
expenses, to the holders of such ADSs.

With respect to Equity Shares issued by the Company during a particular
fiscal year (including the Equity Shares underlying the ADSs issued to the
Depositary in connection with the Offering), dividends declared and paid for
such fiscal year generally will be prorated from the date of issuance to the
end of such fiscal year. Once a cash dividend is declared, Equity Shares
entitled to prorated dividends are quoted on the Indian Stock Exchanges at the
same price as Equity Shares entitled to full dividends. However, upon sale of
and payment for Equity Shares entitled to a prorated dividend, the selling
broker will deduct the difference between the full dividend and the prorated
dividend from the sale price of such shares. Holders of ADSs will only receive
dividends prorated from the date of issuance of the underlying Equity Shares
to the end of the fiscal year for which such dividends are declared and paid.
As a result, holders of ADSs will receive little or no dividend for fiscal
1999. Until dividends for fiscal 1999 have been paid, this disparity in
dividend treatment increases the probability that the price of the ADSs will
not trade on par with the price of the Equity Shares as quoted on the Indian
Stock Exchanges. ADSs withdrawn from the Depositary in exchange for the
underlying Equity Shares will receive proceeds reduced by the difference
between the full dividend and the prorated dividend, upon sale of and payment
for such Equity Shares. See "Risk Factors--Dividend Policy; Effect on Equity
Shares Underlying ADSs" and "Description of Equity Shares--Dividends."

20
<PAGE>

PRICE RANGE OF EQUITY SHARES

The Equity Shares issued and outstanding prior to the Offering are listed
and traded on the Indian Stock Exchanges. The prices for Equity Shares as
quoted in the official list of each of the Indian Stock Exchanges are
expressed in Indian rupees. The ADSs to be issued hereby, each representing
one-half of one Equity Share, have been approved for quotation on the Nasdaq
National Market subject to notice of issuance. The Equity Shares underlying
the ADSs will be listed on the Indian Stock Exchanges within two weeks of the
Offering. The information presented in the table below is adjusted to reflect
the Company's 2-for-1 stock splits by means of stock dividends which the
Company declared in October 1997 and December 1998 and represents, for the
periods indicated: (i) the reported high and low sales prices quoted in Indian
rupees for the Equity Shares on the Stock Exchange, Mumbai; (ii) the imputed
high and low sales prices for the Equity Shares based on such high and low
sales prices, translated into U.S. dollars based on the Noon Buying Rate on
the last date of each period presented; and (iii) the average trading volume
for the Equity Shares on the Stock Exchange, Mumbai.

<TABLE>
<CAPTION>
Price per Price per
Equity Share (1) Equity Share
----------------------- ------------- Average Daily
Fiscal Year Ended March Equity Share
31, High Low High Low Trading Volume(2)
- ----------------------- ----------- ----------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
1997
First Quarter......... Rs. 179.56 Rs. 117.50 $ 5.07 $ 3.33 5,918
Second Quarter........ 178.94 158.00 5.00 4.42 3,862
Third Quarter......... 191.25 157.75 5.32 4.44 3,644
Fourth Quarter........ 294.06 191.25 8.20 5.33 7,508
1998
First Quarter......... Rs. 478.50 Rs. 253.25 $13.35 $ 7.07 18,224
Second Quarter........ 798.50 481.06 22.07 13.30 17,402
Third Quarter......... 798.50 559.50 20.32 14.24 43,180
Fourth Quarter........ 913.88 540.38 23.12 13.67 38,908
1999
First Quarter......... Rs.1,253.50 Rs. 948.38 $29.50 $22.32 128,918
Second Quarter........ 1,375.00 1,088.88 31.92 25.51 149,324
Third Quarter......... 1,486.88 1,104.88 34.92 26.06 124,890
Fourth Quarter
(through March 10,
1999)................ 3,450.00 1,488.13 81.27 35.75 82,355
</TABLE>
- --------
(1) Data from the Stock Exchange, Mumbai, as reported by Bloomberg. The prices
quoted on the Bangalore Stock Exchange and National Stock Exchange may be
different.
(2) Data from the Stock Exchange, Mumbai, as reported by the Center for
Monitoring the Indian Economy. The average trading volumes reported on the
Bangalore Stock Exchange and National Stock Exchange may be different.

On March 10, 1999, the closing price of Equity Shares on the Stock Exchange,
Mumbai was Rs.3,160.00, equivalent to $74.35 per Equity Share ($37.18 per ADS
on an imputed basis), translated at the Noon Buying Rate of Rs.42.50 per $1.00
on March 10, 1999. See "Risk Factors--Possible Volatility of ADS Price" for a
discussion of factors that may adversely affect the market price of the ADSs.

As of December 31, 1998, there were approximately 6,600 holders of record of
Equity Shares of the Company, of which 31 had registered addresses in the
United States and held an aggregate of approximately 3,200,000 Equity Shares.

Trading Practices and Procedures on the Indian Stock Exchanges

The Stock Exchange, Mumbai ("BSE") and The National Stock Exchange ("NSE")
together account for more than 80% of the total trading volume on the Indian
stock exchanges. Trading on both of these exchanges is accomplished through
on-line execution. These two stock exchanges handle over 100,000 trades per
day with volumes in excess of Rs.20 billion. Trading is done on a five-day
fixed settlement basis on most of the exchanges, including the BSE and NSE.
Any outstanding amount at the end of the settlement period is settled by
delivery

21
<PAGE>

and payment. However, institutional investors are not permitted to "net out'
their transactions and must trade on a delivery basis only.

The BSE permits carry forwards of trades in certain securities by non-
institutional investors with an associated charge. In addition, orders can be
entered with a specified term of validity that may last until the end of the
session, day or settlement period. Dealers must specify whether orders are for
a proprietary account for a client. The BSE specifies certain margin
requirements for trades executed on the exchange, including margins based on
the volume or quantity of exposure that the broker has on the market, as well
as mark-to-market margins payable on a daily basis for all outstanding trades.
Trading on the BSE takes place from 10:00 a.m. to 3:30 p.m. on all weekdays,
except holidays. The NSE does not permit carry forwards of trades. It has
separate margin requirements based on the net exposure of the broker on the
exchange. The NSE trades from 9:30 a.m. until 4:00 p.m. on weekdays, except
holidays. The NSE and BSE also have separate online trading systems and
separate clearing houses.

The BSE was closed from January 11 through January 13, 1993 due to a riot in
Mumbai. It was also closed on March 12, 1993 due to a bomb explosion within
the premises of the BSE. From December 14 through December 23, 1993 the BSE
was closed due to a broker's strike, and from March 20 through March 22, 1995,
the Governing Board of the BSE closed the market due to a default of one of
the broker members. There have been no closures of the Indian Stock Exchanges
in response to "panic" trading or large fluctuations. Most of the Indian Stock
Exchanges do, however, have a specific price band for each security listed.
When a price fluctuation exceeds the specified limits of the price band,
trading of the security is stopped. Such price volatility controls and the
specific price bands are decided by each individual exchange and may differ.

EXCHANGE RATES

Fluctuations in the exchange rate between the Indian rupee and the U.S.
dollar will affect the U.S. dollar equivalent of the Indian rupee price of the
Equity Shares on the Indian Stock Exchanges and, as a result, will likely
affect the market price of the ADSs in the United States, and vice versa. Such
fluctuations will also affect the U.S. dollar conversion by the Depositary of
any cash dividends paid in Indian rupees on the Equity Shares represented by
the ADSs.

The Company's operations are conducted in 20 countries around the world. As
a result, the Company's net income in Indian rupee terms and the presentation
thereof in U.S. dollars can be significantly affected by movements in currency
exchange rates, in particular the movement of the Indian rupee against the
U.S. dollar. See "Risk Factors--Risks Related to Investments in Indian
Securities" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Principles of Currency Translation."

The following table sets forth, for the fiscal years indicated, certain
information concerning the exchange rates between Indian rupees and U.S.
dollars based on the Noon Buying Rate:

<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Period End (1) Average (1) (2) High Low
- --------------------------- -------------- --------------- -------- --------
<S> <C> <C> <C> <C>
1994 (3)..................... Rs.31.37 Rs.31.52 Rs.31.75 Rs.31.37
1995 (3)..................... 31.43 31.38 31.90 31.37
1996......................... 34.35 33.47 38.05 31.36
1997......................... 35.88 35.70 36.85 34.15
1998......................... 39.53 37.37 40.40 35.71
1999 (through March 10,
1999)....................... 42.50 42.52 42.95 39.41
</TABLE>
- --------
(1) The Noon Buying Rate at each period end and the average rate for each
period differed from the exchange rates used in the preparation of the
Company's consolidated financial statements.
(2) Represents the average of the Noon Buying Rate on the last day of each
month during the period.
(3) From March 1, 1992 through August 19, 1994, the rupee was not permitted to
fully float and convert on the current account. Instead, a dual exchange
rate mechanism made the rupee partially convertible by permitting
conversion of 60% of the foreign exchange received on a trade or revenue
account at a market-determined rate and the remaining 40% at the official
Government of India rate.

22
<PAGE>

CAPITALIZATION

The following table sets forth, as of December 31, 1998, the consolidated
short-term borrowings and capitalization of the Company and the short-term
borrowings and capitalization of the Company adjusted to give effect to the
sale of the 1,800,000 ADSs (representing 900,000 Equity Shares) offered hereby
at the public offering price of $34.00 per ADS and application of the
estimated net proceeds therefrom.

<TABLE>
<CAPTION>
December 31, 1998
--------------------
Actual As Adjusted
------- -----------
(In thousands)
<S> <C> <C>
Short-term borrowings..................................... $ -- $ --
======= ========
Long-term debt, net of current maturities................. $ -- $ --
Shareholders' equity:
Equity Shares, par value $0.32, 50,000,000 shares autho-
rized, 32,034,400 shares issued and outstanding
(32,934,400 shares as adjusted) (1).................... 4,546 4,834
Additional paid-in capital.............................. 44,802 100,940
Deferred compensation--Employees Stock Offer Plan....... (25,814) (25,814)
Accumulated other comprehensive income.................. (9,385) (9,385)
Retained earnings....................................... 49,942 49,942
Loan to Trust........................................... (826) (826)
------- --------
Total shareholders' equity............................ 63,265 119,691
------- --------
Total capitalization................................ $63,265 $119,691
======= ========
</TABLE>

- --------
(1) Based on the number of Equity Shares outstanding as of March 10, 1999, and
reflecting (i) the Company's stock split declared on December 20, 1998 and
(ii) the increase to the Company's authorized Equity Shares from
30,000,000 to 50,000,000 Equity Shares on January 20, 1999. Includes
668,700 Equity Shares allocated to employees subject to vesting provisions
and 208,800 Equity Shares held by the trust responsible for management of
the Company's ESOP which are reserved for issuance upon the exercise of
stock purchase rights to be granted by such trust in the future. See
"Management--Benefit Plans."

23
<PAGE>

DILUTION

The net tangible book value of the Company as of December 31, 1998 under
U.S. GAAP was $63.3 million, or $0.99 per ADS. "Net tangible book value" per
ADS represents the amount of total tangible assets less total liabilities,
divided by the number of Equity Shares outstanding and adjusting for the ratio
of two ADSs per Equity Share. After giving effect to the net proceeds from the
sale by the Company of the 1,800,000 ADSs representing 900,000 Equity Shares
offered hereby at the public offering price of $34.00 per ADS, the net
tangible book value as of December 31, 1998 would have been $119.7 million, or
$1.82 per ADS. This represents an immediate increase in net tangible book
value of $0.83 per ADS to existing shareholders and an immediate dilution of
$32.18 per ADS to new investors purchasing ADSs. The following table
illustrates the per ADS dilution:

<TABLE>
<S> <C> <C>
Public offering price per ADS.................................. $34.00
Net tangible book value per ADS before the Offering.......... $0.99
Increase per ADS attributable to new investors............... 0.83
-----
Pro forma net tangible book value per ADS after the Offering... 1.82
------
Dilution per ADS to new investors.............................. $32.18
======
</TABLE>

The following table sets forth as of December 31, 1998, the number of Equity
Shares purchased from the Company, the total consideration and the average
price per Equity Share paid by the existing holders of Equity Shares and the
price to be paid by the new investors (before deducting the underwriting
discount and estimated offering expenses payable by the Company) on an as
adjusted basis:

<TABLE>
<CAPTION>
ADSs Purchased (1) Total Consideration
------------------- --------------------- Average Price
Number Percent Amount Percent per ADS (1)
--------- --------- ---------- ---------- -------------
(In thousands, except per ADS data)
<S> <C> <C> <C> <C> <C>
Existing shareholders... 64,069 97.3% $ 17,388 22.1% $ 0.27
New investors........... 1,800 2.7 61,200 77.9 34.00
--------- -------- ---------- --------
Total................. 65,869 100.0% $ 78,588 100.0%
========= ======== ========== ========
</TABLE>
- --------
(1) Prior to the Offering, the Company issued only Equity Shares that have not
been represented by ADSs. Equity Shares purchased and the average price
paid per Equity Share have been converted into ADS equivalents for
comparison purposes.

24
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per Equity Share data)

The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The consolidated
statements of income data for the fiscal years ended March 31, 1996, 1997 and
1998 and the consolidated balance sheet data as of March 31, 1997 and 1998
have been derived from the consolidated financial statements of the Company
included elsewhere in this Prospectus which have been audited by KPMG Peat
Marwick, India, independent accountants. The consolidated statements of income
data for the years ended March 31, 1994 and 1995 and the consolidated balance
sheet data as of March 31, 1994, 1995 and 1996 were derived from the unaudited
consolidated financial statements, which are not included herein, which were
prepared in accordance with Indian GAAP and have been restated in accordance
with U.S. GAAP. The consolidated balance sheet data as of December 31, 1998
and the consolidated statements of income data for the nine months ended
December 31, 1997 and 1998 are derived from the unaudited consolidated
financial statements included elsewhere in this Prospectus. The unaudited
consolidated financial statements have been prepared on substantially the same
basis as the audited consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations
for such periods. Historical results are not necessarily indicative of the
results to be expected in the future, and results of interim periods are not
necessarily indicative of results for the entire year. The information
presented below reflects the Company's 2-for-1 stock split by means of a stock
dividend which the Company declared on December 20, 1998, with a record date
of March 5, 1999. The Company's Equity Shares began trading on the Indian
Stock Exchanges on a post-stock split basis beginning February 20, 1999.

<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal Year Ended March 31, December 31,
-------------------------------------- ---------------
1994 1995 1996 1997 1998 1997 1998
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data (1):
Revenues................ $9,534 $18,105 $26,607 $39,586 $68,330 $48,412 $86,101
Cost of revenues........ 5,621 10,606 15,638 22,615 40,157 28,280 47,002
------ ------- ------- ------- ------- ------- -------
Gross profit............ 3,913 7,499 10,969 16,971 28,173 20,132 39,099
Operating expenses:
Selling, general and
administrative
expenses............. 1,315 3,344 4,350 7,010 13,225 9,108 13,707
Amortization of
deferred stock
compensation expense
(2).................. -- 46 361 768 2,567 2,105 2,404
------ ------- ------- ------- ------- ------- -------
Total operating ex-
penses.............. 1,315 3,390 4,711 7,778 15,792 11,213 16,111
------ ------- ------- ------- ------- ------- -------
Operating income........ 2,598 4,109 6,258 9,193 12,381 8,919 22,988
Other income, net....... 322 747 1,460 769 801 606 1,212
------ ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 2,920 4,856 7,718 9,962 13,182 9,525 24,200
Provision for income
taxes (3).............. 250 893 894 1,320 770 977 3,532
Subsidiary preferred
stock dividends (4).... -- -- -- -- 68 34 151
------ ------- ------- ------- ------- ------- -------
Net income.............. $2,670 $ 3,963 $ 6,824 $ 8,642 $12,344 $ 8,514 $20,517
====== ======= ======= ======= ======= ======= =======
Earnings per Equity
Share (5):
Basic................. $0.10 $0.14 $0.24 $0.30 $0.41 $0.29 $0.67
Diluted............... $0.10 $0.14 $0.23 $0.29 $0.41 $0.28 $0.67
Equity Shares used in
computing earnings per
Equity Share (5):
Basic................. 26,816 28,292 29,034 29,036 29,788 29,416 30,540
Diluted............... 26,816 28,376 29,284 29,704 30,404 30,260 30,625
Cash dividend per Equity
Share (6).............. $0.03 $0.04 $0.04 $0.04 $0.07 $0.02 $0.03
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
March 31, December 31, 1998
-------------------------------------- -----------------------
1994 1995 1996 1997 1998 Actual As Adjusted (7)
------ ------- ------- ------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (1):
Cash and cash equiva-
lents.................. $2,885 $ 8,046 $ 7,769 $ 8,320 $15,419 $22,798 $ 79,224
Total assets............ 9,400 23,051 27,261 32,923 48,782 76,582 133,008
Total long-term debt.... -- 1,398 526 -- -- -- --
Total shareholders' eq-
uity................... 8,852 19,668 23,925 30,640 41,146 63,265 119,691
</TABLE>

- --------
(1) The functional currency of the Company is the Indian rupee. For U.S. GAAP
reporting, the Company's financial statements that are prepared in rupees
are translated into U.S. dollars using the average monthly exchange rate
for revenues and expenses and the exchange rate at the end of the
reporting period for assets and liabilities. In addition, the consolidated
financial statements through the nine months ended December 31, 1998
include the results of the Company's formerly majority-owned subsidiary,
Yantra. Prior to October 20, 1998, the Company owned a majority of the
voting stock of Yantra. As a result, all of Yantra's operating losses
through October 20, 1998 were recognized in the Company's consolidated
financial statements. For fiscal 1998 and for the nine months ended
December 31, 1998, the Yantra losses recognized in the Company's
consolidated financial statements were $1.6 million and $2.0 million,
respectively. On October 20, 1998, the Company sold a portion of the
Yantra shares held by the Company, thereby reducing the Company's interest
to less than one-half of the voting stock of Yantra. As a result, Yantra's
results after October 20, 1998 are not recognized in the Company's
consolidated financial statements under U.S. GAAP. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Investment in Yantra Corporation " and "--Principles of Currency
Translation."

(2) In September 1994, the Company adopted the ESOP. Indian GAAP does not
require the Company to recognize a compensation expense in connection with
the grant of stock purchase rights to purchase Equity Shares under the
ESOP with an exercise price less than the market price of the Equity
Shares on the date of grant. However, under U.S. GAAP, the difference
between the exercise price and the market price on the date of grant is
required to be treated as a non-cash compensation expense and amortized
over the applicable vesting period of the Equity Shares underlying the
stock purchase rights. In fiscal 1998, the Company recognized $2.6 million
in compensation expense in connection with stock purchase rights granted
under the ESOP, including a compensation expense of $1.6 million
recognized in the third quarter of fiscal 1998. Charges were higher in
that quarter because Equity Shares issued to participants in the ESOP as
part of a declared stock dividend were not subject to vesting, and
accordingly, the compensation expense for such Equity Shares was
accelerated in one quarter rather than amortized over the remaining
vesting period. See "Risk Factors--Effect of Deferred Stock Compensation
Expense Under U.S. GAAP; Loss Expected to be Reported for Fourth Quarter
of Fiscal 1999," "--Risks Related to Investments in Indian Securities" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Deferred Stock Compensation Expense."

(3) The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws, which have historically resulted
in an effective tax rate for the Company well below statutory rates. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Income Tax Matters."

(4) Represents accrued dividends on preferred stock issued in September 1997
by the Company's subsidiary, Yantra. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Investment in
Yantra Corporation."

(5) All earnings per share calculations have been computed per Equity Share,
each of which is equivalent to two of the ADSs offered hereby. As of
December 31, 1998, after giving effect to the Company's stock dividend
declared in December 1998, the Company's outstanding Equity Shares
included 877,500 Equity Shares held by the trust responsible for
management of the ESOP. Of such shares, 668,700 were allocated to
employees subject to vesting provisions and 208,800 were reserved for
future grants. None of such shares have been included in the basic
earnings per share calculations, and only the 668,700 Equity Shares
allocated to employees have been included in the diluted earnings per
share calculations.

(6) It is customary for public companies in India to pay cash dividends,
although the amount may vary. Dividends are declared in Indian rupees.
Amounts presented have been translated into U.S. dollars and historical
amounts reflect dividends paid per Equity Share, each of which is
equivalent to two ADSs offered hereby. See "Dividend Policy."

26
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus and those set forth below.

Overview

Infosys is an India-based IT services company formed in 1981 that utilizes
an extensive offshore infrastructure to provide managed software solutions to
clients worldwide. The Company's services include custom software development,
maintenance (including Year 2000 conversion) and re-engineering services as
well as dedicated OSDCs for certain clients. From fiscal 1994 through fiscal
1998, revenues increased from $9.5 million to $68.3 million, the number of the
Company's IT professionals worldwide increased from approximately 480 to
approximately 2,200, and the number of its India software development centers
increased from two to nine.

The Company's revenues are generated principally from software services
provided on either a time-and-materials or a fixed-price, fixed-time frame
basis. Revenues from services provided on a time-and-materials basis are
recognized in the month that services are provided and costs are incurred.
Revenues from services provided on a fixed-price, fixed-time frame basis are
recognized upon the achievement of specified milestones identified in the
related contracts, which approximates the percentage of completion method.
Cost of completion estimates are subject to periodic revisions. Although from
time to time the Company has revised its project completion estimates, to date
such revisions have not had a material adverse effect on the Company's
operating results or financial condition. Since the Company bears the risk of
cost overruns and inflation with respect to its fixed-price, fixed-time frame
projects, the Company's operating results could be adversely affected by
inaccurate estimates of contract completion costs and dates, including wage
inflation rates and currency exchange rates that may affect cost projections.
The Company also develops and markets certain software products, including
banking software licensed primarily to clients in Asia and Africa. Such
software products represented 5.9% of revenues in fiscal 1998 and 4.3% of
revenues for the nine months ended December 31, 1998. During fiscal 1998, the
Company derived 82.3% of its revenues from North America, 9.0% from Europe and
2.6% from India.

In the nine months ended December 31, 1998 and in fiscal 1998, the Company
derived 21.4% and 23.3% of its revenues, respectively, from Year 2000
conversion projects. The Company expects that Year 2000 conversion projects
will continue to be a significant source of revenue through fiscal 1999 but
thereafter will decline substantially. Since this was foreseen, the Company
has consistently limited its dependence on Year 2000 conversion projects and
has only accepted such projects where there were opportunities to create more
extensive client relationships. The Company currently expects that Year 2000
conversion projects will be replaced with other projects from the same and
other clients and that the decline in Year 2000 conversion projects will not
have a material adverse effect upon the Company's business, financial
condition and results of operations. There can be no assurance, however, that
the Company will be successful in generating additional business from its Year
2000 clients for other services, that the Company will be successful in
replacing Year 2000 conversion projects with other projects as the Year 2000
business declines or that margins from any such future projects will be
comparable to those obtained from Year 2000 conversion projects.

Cost of revenues consists primarily of salary and other compensation
expenses, depreciation, data communications expenses, computer maintenance,
cost of software for internal use, certain pre-opening expenses for new
software development centers and foreign travel expenses. The Company
depreciates personal computers and servers over two years and mainframe
computers over three years. Third party software is expensed in the period in
which it is acquired.

The Company assumes full project management for each project that it
undertakes. Approximately 80% of the work on a project is performed at the
Company's facilities in India, and the balance of the work is performed

27
<PAGE>

at the client site. The proportion of work performed at Company facilities and
at client sites varies from quarter to quarter. The Company charges higher
rates and incurs higher compensation expenses for work performed at the client
site. Services performed at a client site typically generate higher revenues
per capita but at a lower gross margin than the same amount of services
performed at Company facilities in India. As a result, revenues, cost of
revenues and gross profit in absolute terms and as a percentage of revenues
fluctuate from quarter to quarter based on the proportion of work performed
offshore at Company facilities and at client sites.

Revenues and gross profit are affected by the rate at which employees are
utilized. Utilization rates are reduced by employee training, particularly
during the initial 14-week training course provided to new employees. Since a
large percentage of new hires begin initial training in the second quarter,
utilization rates historically have tended to be lower in the second and third
quarters of a fiscal year.

Selling, general and administrative expenses consist primarily of salary and
other compensation expenses, travel, marketing, telecommunications,
management, finance, administrative and occupancy costs.

Other income includes interest income and income from the sale of Special
Import Licenses. Under current export-import policy, exports by Indian
companies generate credits for the exporter called "Special Import Licenses."
These credits can be sold and also used for the import of goods included on a
"restricted list" maintained by the Government of India. The value of Special
Import Licenses has declined over time, as the restricted list has been
shortened. The Company's general policy is to sell Special Import Licenses in
the period in which it receives such credits.

Deferred Stock Compensation Expense; Anticipated Effect on Fourth Quarter of
Fiscal 1999

In 1994, the Company established the ESOP, one of the first employee stock
option plans in India. Aspects of the ESOP differ significantly from typical
U.S. option plans. To administer the ESOP, the Company created an employee
welfare trust (the "Trust") and issued to the Trust warrants to purchase
750,000 Equity Shares (3,000,000 Equity Shares after giving effect to the
Company's 1997 and 1998 stock dividends). In turn, the Trust from time to time
grants to Company employees stock purchase rights to purchase Equity Shares
held by or reserved for issuance to the Trust. Each stock purchase right
entitles the holder to purchase one Equity Share at a price of Rs.100
(representing $2.35 at the Noon Buying Rate in effect on March 10, 1999),
which is substantially below the market price of the Equity Shares. Neither
the Company nor the Trust may increase the exercise price of the stock
purchase rights. The stock purchase rights and the underlying Equity Shares
are subject to five-year vesting.

Indian GAAP does not require the Company to recognize a non-cash
compensation expense in connection with the grant of stock purchase rights
with an exercise price less than the market price of the underlying Equity
Shares on the date of grant. However, under U.S. GAAP and APB No. 25, the
difference between the exercise price and the market price on the date of
grant is required to be treated as a non-cash compensation expense and
amortized over the vesting period of the Equity Shares underlying the stock
purchase rights. Under U.S. GAAP, since fiscal 1995 the Company has recognized
non-cash compensation expense in connection with the grant of stock purchase
rights under the ESOP. In fiscal 1998, the Company recognized $2.6 million in
non-cash compensation expense in connection with stock purchase rights granted
under the ESOP, including a non-cash compensation expense of $1.6 million
recognized in the third quarter. Charges were higher in that quarter because
additional Equity Shares were issued to participants in the ESOP as part of
the Company's 1997 stock dividend. Since these additional Equity Shares were
not subject to vesting, the non-cash compensation expense for such shares was
accelerated in one quarter rather than amortized over the remaining vesting
period.

The Company expects to recognize substantial deferred stock compensation
expense in the fourth quarter of fiscal 1999, primarily as a result of the
stock dividend declared in December 1998 with a record date of March 5, 1999.
As in fiscal 1998, the Equity Shares issued to ESOP participants in connection
with the stock dividend will not be subject to vesting, and, as a result, one-
half of the deferred stock compensation expense that would have been amortized
over the remaining vesting periods for the Equity Shares issued under the ESOP
will be

28
<PAGE>

accelerated in the fourth quarter of fiscal 1999. As a result, the Company
expects to recognize deferred stock compensation expense in the approximate
amounts of $13.7 million for the fourth quarter of fiscal 1999 and $16.1
million for fiscal 1999. The size of this charge may cause the Company to
report negative operating income and negative net income for the fourth
quarter of fiscal 1999 for purposes of U.S. GAAP.

The Company may recognize additional deferred stock compensation expense in
the fourth quarter of fiscal 1999 to the extent that additional stock purchase
rights are granted in that quarter. As of December 31, 1998, the Trust held
208,800 Equity Shares reserved for issuance upon the exercise of stock
purchase rights which had not yet been granted but are expected to be granted
in the future. Any such grants will cause the Company to recognize deferred
stock compensation expense in amounts that will depend on the market value of
the Equity Shares on the dates such grants are made. See "Risk Factors--Effect
of Deferred Stock Compensation Expense Under U.S. GAAP; Loss Expected to be
Reported for Fourth Quarter of Fiscal 1999."

The grant of stock purchase rights under the ESOP does not generate any tax
benefit or deduction under Indian or U.S. law.

Investment in Yantra Corporation

Prior to October 20, 1998, the Company owned a majority of the voting stock
of Yantra which develops and markets an open system software package for
warehouse management. As a result, all of Yantra's operating losses through
October 20, 1998 were recognized in the Company's consolidated financial
statements. For fiscal 1998 and for the nine months ended December 31, 1998,
the Yantra losses recognized in the Company's consolidated financial
statements were $1.6 million and $2.0 million, respectively. On October 20,
1998, the Company sold a portion of the Yantra shares held by the Company,
thereby reducing the Company's interest to less than one-half of the voting
stock of Yantra. As a result, Yantra's results after October 20, 1998 will not
be recognized in the Company's consolidated financial statements under U.S.
GAAP. Yantra's revenues were $1.3 million and $2.0 million for fiscal 1998 and
the nine months ended December 31, 1998, respectively, while gross profits
were $574,000 and $546,000, respectively, for these same periods. Yantra's
revenues were 1.9% and 2.3% of the Company's consolidated revenues for fiscal
1998 and for the nine months ended December 31, 1998, respectively. Yantra's
gross profits were 2.0% and 1.4% of the Company's consolidated gross profits
for fiscal 1998 and for the nine months ended December 31, 1998, respectively.
No minority interest has been recorded because all of the common stock is
owned by the Company.

Principles of Currency Translation

In fiscal 1998, over 90% of the Company's revenues were generated in U.S.
dollars and European currencies. A majority of the Company's expenses were
incurred in rupees, and the balance was incurred in U.S. dollars and European
currencies. The functional currency of the Company is the Indian rupee.
Revenues generated in foreign currencies are translated into Indian rupees
using the exchange rate prevailing on the date the revenue is recognized.
Expenses of overseas operations incurred in foreign currencies are translated
into Indian rupees at either the monthly average exchange rate or the exchange
rate on the date the expense is incurred, depending on the source of payment.
Assets and liabilities of foreign branches held in foreign currency are
translated into Indian rupees at the end of the applicable reporting period.

For U.S. GAAP reporting, the financial statements are translated into U.S.
dollars using the average monthly exchange rate for revenues and expenses and
the period end rate for assets and liabilities. The gains or losses from such
translation are reported as other comprehensive income, a separate component
of shareholders' equity.

The Company expects that a majority of its revenues will continue to be
generated in U.S. dollars for the foreseeable future and that a significant
portion of the Company's expenses, including personnel costs as well as
capital and operating expenditures, will continue to be denominated in rupees.
Consequently, the Company's results of operations will be adversely affected
to the extent the rupee appreciates against the U.S. dollar. See "Risk
Factors--Risks Related to Investments in Indian Securities."

29
<PAGE>

Results of Operations

The following table sets forth certain operating data as a percentage of
revenues for the periods indicated:

<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal Year Ended March 31, December 31,
--------------------------------- --------------
1994 1995 1996 1997 1998 1997 1998
----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............ 59.0 58.6 58.8 57.1 58.8 58.4 54.6
----- ----- ----- ----- ----- ------ ------
Gross profit................ 41.0 41.4 41.2 42.9 41.2 41.6 45.4
Operating expenses:
Selling, general and
administrative expenses.. 13.8 18.5 16.4 17.7 19.3 18.8 15.9
Amortization of deferred
stock compensation
expense.................. 0.0 0.3 1.4 1.9 3.8 4.4 2.8
----- ----- ----- ----- ----- ------ ------
Total operating ex-
penses................. 13.8 18.8 17.8 19.6 23.1 23.2 18.7
----- ----- ----- ----- ----- ------ ------
Operating income............ 27.2 22.6 23.4 23.3 18.1 18.4 26.7
Other income, net........... 3.4 4.1 5.5 1.9 1.2 1.3 1.4
----- ----- ----- ----- ----- ------ ------
Income before income taxes.. 30.6 26.7 28.9 25.2 19.3 19.7 28.1
Provision for income taxes.. 2.6 4.9 3.4 3.3 1.1 2.0 4.1
Subsidiary preferred stock
dividends.................. -- -- -- -- 0.1 0.1 0.2
----- ----- ----- ----- ----- ------ ------
Net income.................. 28.0% 21.8% 25.5% 21.9% 18.1% 17.6% 23.8%
===== ===== ===== ===== ===== ====== ======
</TABLE>

Nine Months Ended December 31, 1998 Compared to Nine Months Ended December 31,
1997

Revenues. Revenues were $86.1 million for the nine months ended December 31,
1998, representing an increase of 77.9% over revenues of $48.4 million for the
nine months ended December 31, 1997. Revenues continued to increase in all
aspects of the Company's services. Custom software development, maintenance
and software development through OSDCs represented a substantial majority of
the Company's revenues. The increase in revenues was attributable in part to a
substantial increase in revenues from certain existing clients and revenues
from new clients, particularly in the manufacturing and financial services
industries. The revenue growth was also attributable to increases in revenues
from Year 2000 conversion projects, which represented 21.4% of revenues for
the nine months ended December 31, 1998 as compared to 23.0% of revenues for
the nine months ended December 31, 1997. This revenue increase was partially
offset by a reduction in sales of the BANCS 2000 product resulting from a
slow-down of computerization activities by Indian banks. Net sales of BANCS
2000 and other products represented 4.3% of revenues for the nine months ended
December 31, 1998 as compared to 7.0% for the nine months ended December 31,
1997. Revenues from services represented 95.7% of revenues for the nine months
ended December 31, 1998 as compared to 93.0% for the nine months ended
December 31, 1997. Revenues from fixed-price, fixed-time frame contracts and
from time-and-materials contracts represented 36.3% and 63.7%, respectively,
of revenues for the nine months ended December 31, 1998 as compared to 33.2%
and 66.8%, respectively, for the same period in fiscal 1997. Revenues from
North America and Europe represented 82.5% and 9.6%, respectively, of revenues
for the nine months ended December 31, 1998 as compared to 80.9% and 9.0%,
respectively, for the same period in fiscal 1997.

Cost of Revenues. Cost of revenues was $47.0 million for the nine months
ended December 31, 1998, representing an increase of 66.2% over cost of
revenues of $28.3 million for the nine months ended December 31, 1997. Cost of
revenues represented 54.6% and 58.4% of revenues for the nine months ended
December 31, 1998 and 1997, respectively. This marginal decrease as a
percentage of revenues was attributable to a favorable business mix and a
decrease in depreciation and software expenses, which represented 9.3% of
total revenues in the nine months ended December 31, 1998 as compared to 12.0%
of total revenues for the

30
<PAGE>

same period in fiscal 1997. The decrease was partially offset by an increase
in compensation rates. Cost of revenues for services represented 53.9% and
57.9% of revenues for services for the nine months ended December 31, 1998 and
1997, respectively. Cost of revenues for product sales represented 70.8% and
65.9% of revenues for product sales for the nine months ended December
31, 1998 and 1997, respectively.

Gross Profit. As a result of the foregoing, gross profit was $39.1 million
for the nine months ended December 31, 1998, representing an increase of 94.2%
over gross profit of $20.1 million for the same period in 1997. This increase
was attributable to a favorable business mix and a decrease in depreciation
and software expenses as a percentage of revenues due to improved
infrastructure utilization. As a percentage of revenues, gross profit
increased to 45.4% for the nine months ended December 31, 1998 from 41.6% for
the same period in fiscal 1997. Gross profit from sales of BANCS 2000 and
other products was $1.1 million for the nine months ended December 31, 1998, a
decrease of 6.4% from gross profit of $1.2 million for the nine months ended
December 31, 1997. Gross profit from services was $38.0 million for the nine
months ended December 31, 1998, an increase of 100.3% over gross profit of
$18.9 million for the nine months ended December 31, 1997. As a percentage of
product revenues, gross profit from product sales decreased 4.9% for the nine
months ended December 31, 1998 from 34.1% for the nine months ended
December 31, 1997. As a percentage of service revenues, gross profit from
services increased 4.0% for the nine months ended December 31, 1998 from 42.1%
for the nine months ended December 31, 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $13.7 million for the nine months ended
December 31, 1998, an increase of 50.5% over selling, general and
administrative expenses of $9.1 million for the nine months ended December 31,
1997. Selling, general and administrative expenses were 15.9% and 18.8% of
revenues for the nine months ended December 31, 1998 and 1997, respectively.
This decrease as a percentage of revenues was a result of the Company's
ability to leverage its higher revenues in 1998 without a proportionate
increase in management, finance, administrative and occupancy costs. Salaries
for support staff represented 4.4% of revenues and rent and office maintenance
represented 2.5% of revenues for the nine months ended December 31, 1998 as
compared to 5.1% and 3.7%, respectively, for the same period in fiscal 1997.

Amortization of Deferred Stock Compensation Expense. Amortization of
deferred stock compensation expense was $2.4 million for the nine months ended
December 31, 1998, an increase of 14.2% over amortization of deferred stock
compensation expense of $2.1 million for the nine months ended December 31,
1997. Compensation expense increased for new grants of stock purchase rights
in part because of the rising market price of the Equity Shares and in part
because of an increase in the number of stock purchase rights that were
granted. The increase in deferred stock compensation expense also reflects the
continued amortization of compensation expense from stock purchase rights
granted in prior periods.

Operating Income. As a result of the foregoing, operating income was $23.0
million for the nine months ended December 31, 1998, an increase of 157.7%
over operating income of $8.9 million for the nine months ended December 31,
1997. As a percentage of revenues, operating income increased to 26.7% for the
nine months ended December 31, 1998 from 18.4% for the same period in 1997.
Excluding the amortization of deferred stock compensation expense, the
operating margin would have been 29.5% for the nine months ended December 31,
1998 as compared to 22.7% for the same period in fiscal 1997.

Other Income. Other income was $1.2 million for the nine months ended
December 31, 1998 as compared to $606,000 for the nine months ended
December 31, 1997. This increase in other income was due to an increase in
interest income resulting from investment of larger cash balances and income
from the sale of Yantra preferred stock, offset in part by a decrease in
income from the sale of Special Import Licenses in the nine months ended
December 31, 1998, as compared to the nine months ended December 31, 1997.

Provision for Income Taxes. Provision for income taxes was $3.5 million for
the nine months ended December 31, 1998 as compared to $977,000 for the nine
months ended December 31, 1997. The Company's effective tax rate increased to
14.6% for the nine months ended December 31, 1998 as compared to 10.3% for

31
<PAGE>

the same period in 1997. The effective tax rate increased due to an increase in
foreign tax liabilities, offset in part by a decrease resulting from a higher
proportion of the Company's operations qualifying for Indian tax exemptions
applicable to designated Software Technology Parks.

Net Income. As a result of the foregoing, net income was $20.5 million for
the nine months ended December 31, 1998, an increase of 141.0% over net income
of $8.5 million for the nine months ended December 31, 1997. As a percentage of
revenues, net income increased to 23.8% for the nine months ended December 31,
1998 from 17.6% for the same period in 1997.

Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997

Revenues. Revenues were $68.3 million for fiscal 1998, representing an
increase of 72.6% over revenues of $39.6 million for fiscal 1997. This increase
was attributable in part to significant increases in revenues from Year 2000
conversion projects, which represented 23.3% of revenues for fiscal 1998 as
compared to 7.5% of revenues for fiscal 1997. The revenue growth in fiscal 1998
included a substantial increase in revenues from existing clients, particularly
in the retail industry, as well as revenues from new clients, particularly in
the financial services and telecommunications industries. This increase was
partially offset by a reduction in sales of the BANCS 2000 product resulting
from a slow-down of computerization activities by Indian banks. Net sales of
BANCS 2000 and other products represented 5.4% of revenues for fiscal 1998 as
compared to 12.7% for fiscal 1997. Revenues from services represented 94.6% of
revenues for fiscal 1998 as compared to 87.3% for fiscal 1997. Revenues from
fixed-price, fixed-time frame contracts and from time-and-materials contracts
represented 35.8% and 64.2%, respectively, of revenues for fiscal 1998 as
compared to 37.0% and 63.0%, respectively, for fiscal 1997. North America and
Europe represented 82.3% and 9.0%, respectively, of revenues for fiscal 1998 as
compared to 78.5% and 8.2%, respectively, for fiscal 1997.

Cost of Revenues. Cost of revenues was $40.2 million for fiscal 1998,
representing an increase of 77.6% over cost of revenues of $22.6 million for
fiscal 1997. Cost of revenues represented 58.8% and 57.1% of revenues for
fiscal 1998 and 1997, respectively. This marginal increase as a percentage of
revenues is attributable to an increase in depreciation and software expenses,
which represented 12.5% of total revenues for fiscal 1998 as compared to 10.4%
for fiscal 1997. The increase was partially offset by a favorable business mix,
especially in certain fixed-price, fixed-time frame services. Cost of revenues
for services represented 58.9% and 57.1% of revenues for services for fiscal
1998 and 1997, respectively. Cost of revenues for product sales represented
57.2% and 57.3% of revenues for product sales for fiscal 1998 and 1997,
respectively.

Gross Profit. As a result of the foregoing, gross profit was $28.2 million
for fiscal 1998, representing an increase of 66.0% over gross profit of $17.0
million for fiscal 1997. As a percentage of revenues, gross profit decreased to
41.2% for fiscal 1998 from 42.9% for fiscal 1997. Gross profit from sales of
BANCS 2000 and other products was $1.7 million for fiscal 1998, a decrease of
22.7% from gross profit of $2.2 million for fiscal 1997. Gross profit from
services was $26.4 million for fiscal 1998, an increase of 78.4% over gross
profit of $14.8 million for fiscal 1997. As a percentage of product revenues,
gross profit from product sales increased 0.1% for fiscal 1998 from 42.7% for
fiscal 1997. As a percentage of service revenues, gross profit from services
decreased 1.8% for fiscal 1998 from 42.9% for fiscal 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $13.2 million for fiscal 1998, an increase of
88.7% over selling, general and administrative expenses of $7.0 million for
fiscal 1997. Selling, general and administrative expenses were 19.4% and 17.7%
of revenues for fiscal 1998 and 1997, respectively. This increase as a
percentage of revenues was a result of an increase in salaries for
administrative and support staff and an increase in rent and other expenses as
the Company expanded the number of sales offices and offshore software
development facilities. Salaries for support staff represented 5.5% of revenues
and rent and office maintenance represented 3.6% of revenues for fiscal 1998 as
compared to 4.7% and 2.9%, respectively, for fiscal 1997.

Amortization of Deferred Stock Compensation Expense. Amortization of deferred
stock compensation expense was $2.6 million for fiscal 1998, an increase of
234.2% over amortization of deferred stock compensation expense of $768,000 for
fiscal 1997. The expense recorded in fiscal 1998 included a charge of

32
<PAGE>

$1.6 million recognized in the third quarter of the year. Compensation expense
was higher in that quarter because Equity Shares issued to participants in the
ESOP in connection with the Company's 1997 stock dividend were not subject to
vesting, and accordingly, the compensation expense related to such shares was
recognized in one quarter rather than amortized over five years. Amortization
of deferred stock compensation expense was 3.8% of revenues in fiscal 1998 as
compared to 1.9% of revenues in fiscal 1997.

Operating Income. As a result of the foregoing, operating income was $12.4
million for fiscal 1998, an increase of 34.7% over operating income of $9.2
million for fiscal 1997. As a percentage of revenues, operating income
decreased to 18.0% for fiscal 1998 from 23.3% for fiscal 1997. Excluding the
amortization of deferred stock compensation expense, the operating margin would
have been 21.8% for fiscal 1998 as compared to 25.2% for fiscal 1997.

Other Income. Other income was $801,000 for fiscal 1998 as compared to
$769,000 for fiscal 1997 as a result of an increase in interest income.

Provision for Income Taxes. Provision for income taxes was $770,000 for
fiscal 1998 as compared to $1.3 million for fiscal 1997. The Company's
effective tax rate decreased to 5.8% for fiscal 1998 as compared to 13.3% for
fiscal 1997. The effective tax rate declined as a higher proportion of the
Company's operations qualified for Indian tax exemptions applicable to
designated Software Technology Parks.

Net Income. As a result of the foregoing, net income was $12.4 million for
fiscal 1998, an increase of 43.6% over net income of $8.6 million for fiscal
1997. As a percentage of revenues, net income decreased to 18.1% for fiscal
1998 from 21.9% for fiscal 1997.

Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996

Revenues. Revenues were $39.6 million for fiscal 1997, representing an
increase of 48.8% over revenues of $26.6 million for fiscal 1996. This increase
was attributable to: the commencement of Year 2000 conversion projects, which
represented approximately 7.5% of revenues for fiscal 1997; a substantial
increase in revenues, from 21.9% to 27.4% of total revenues, from certain
existing clients using the Company's dedicated OSDCs; and an increase in the
number of new clients. This increase was partially offset by a reduction in
sales to the Company's then largest client, from 21.5% of revenues for fiscal
1996 to 6.7% of revenues for fiscal 1997, as the Company chose to reduce its
services rather than to accept price reductions and increases in Company
resources sought by the client. Net sales of BANCS 2000 and other products
represented 12.7% of total revenues for fiscal 1997, as compared to 10.2% for
fiscal 1996. Revenues from services represented 87.3% of total revenues for
fiscal 1997 as compared to 89.8% for fiscal 1996. Revenues from fixed-price,
fixed-time frame contracts and from time-and materials contracts represented
37.0% and 63.0%, respectively, of revenues for fiscal 1997 as compared to 24.0%
and 76.0%, respectively for fiscal 1996. Revenues from North America and Europe
represented 78.5% and 8.2%, respectively, of revenues for fiscal 1997 as
compared to 76.0% and 10.8%, respectively, for fiscal 1996.

Cost of Revenues. Cost of revenues was $22.6 million for fiscal 1997,
representing an increase of 44.6% over cost of revenues of $15.6 million for
fiscal 1996. Cost of revenues represented 57.1% and 58.8% of revenues for
fiscal 1997 and 1996, respectively. This marginal decrease as a percentage of
revenues was attributable to a decrease in depreciation and software expenses
which represented 10.4% of total revenues for fiscal 1997 and 13.6% of total
revenues for fiscal 1996. The decrease was partially offset by an increase in
certain lower margin businesses. Cost of revenues for services represented
57.1% and 57.6% of revenues for services for fiscal 1997 and 1996,
respectively. Cost of revenues for product sales represented 57.3% and 69.0% of
revenues for product sales for fiscal 1997 and 1996, respectively.

Gross Profit. As a result of the foregoing, gross profit was $17.0 million
for fiscal 1997, representing an increase of 54.7% over gross profit of $11.0
million for fiscal 1996. As a percentage of revenues, gross profit increased to
42.9% for fiscal 1997 from 41.2% for fiscal 1996. Gross profit from sales of
BANCS 2000 and other products was $2.2 million for fiscal 1997, an increase of
161.9% over gross profit of $841,000 for fiscal

33
<PAGE>

1996. Gross profit from services was $14.8 million for fiscal 1997, an increase
of 46.5% over gross profit of $10.1 million for fiscal 1996. As a percentage of
product revenues, gross profit from product sales increased 11.7% for fiscal
1997 from 31.0% for fiscal 1996. As a percentage of service revenues, gross
profit from services increased 0.5% for fiscal 1997 from 42.4% for fiscal 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $7.0 million for fiscal 1997, an increase of 61.1%
over selling, general and administrative expenses of $4.4 million for fiscal
1996. Selling, general and administrative expenses were 17.7% and 16.4% of
revenues for fiscal 1997 and 1996, respectively. This increase as a percentage
of revenues was due to rental increases and other expenses resulting from
growth in the number of sales offices. This increase was partially offset by
increased leverage of support staff. Salaries for support staff were 4.7% of
revenues and rent and office maintenance were 2.9% of revenues for fiscal 1997
as compared to 6.4% and 1.8%, respectively, for fiscal 1996.

Amortization of Deferred Stock Compensation Expense. Amortization of deferred
stock compensation expense was $768,000 for fiscal 1997, an increase of 112.7%
over amortization of deferred stock compensation expense of $361,000 for fiscal
1996. Compensation expense increased for new grants of stock purchase rights in
part because of the rising market price of the Equity Shares and in part
because of an increase in the number of stock purchase rights that were
granted. The increase in deferred stock compensation expense also reflects the
continued amortization of compensation expense from stock purchase rights
granted in prior periods.

Operating Income. As a result of the foregoing, operating income was $9.2
million for fiscal year 1997, an increase of 46.9% over operating income of
$6.3 million for fiscal 1996. As a percentage of revenues, operating income
remained relatively constant at 23.2% for fiscal 1997 from 23.5% for fiscal
1996. Excluding the amortization of deferred stock compensation expense, the
operating margin would have been 25.2% for fiscal 1997 as compared to 24.9% for
fiscal 1996.

Other Income. Other income was $769,000 for fiscal 1997 as compared to $1.5
million for fiscal 1996. This decrease was attributable to a decline in
interest rates on cash investments.

Provision for Income Taxes. Provision for income taxes was $1.3 million for
fiscal 1997 as compared to $894,000 for fiscal 1996. The Company's effective
tax rate increased to 13.3% for fiscal 1997 as compared to 11.6% for fiscal
1996. This increase in the effective tax rate was attributable to an increase
in the proportion of income subject to U.S. taxes as well as an increase in
Indian tax assessments for prior years.

Net Income. As a result of the foregoing, net income was $8.6 million for
fiscal 1997, an increase of 26.6% over net income of $6.8 million for fiscal
1996. As a percentage of revenues, net income decreased to 21.9% for fiscal
1997 from 25.5% for fiscal 1996.

34
<PAGE>

Quarterly Results of Operations

The following table presents certain unaudited quarterly statements of
operations data for each of the ten quarters from July 1, 1996 through
December 31, 1998. The information relating to these quarters is qualified by
reference to the audited Consolidated Financial Statements appearing elsewhere
in this Prospectus and, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of that information. The results of operations for any
quarter are not necessarily indicative of the results to be expected for any
future period.

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------------------ ---------------------------------- -------------------------
Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $9,515 $10,326 $12,302 $12,791 $16,849 $18,773 $19,917 $23,939 $28,874 $33,289
Cost of revenues........ 5,513 5,801 6,417 7,548 9,901 10,832 11,876 13,839 16,500 16,664
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 4,002 4,525 5,885 5,243 6,948 7,941 8,041 10,100 12,374 16,625
Operating expenses:
Selling, general and
administrative
expenses.............. 1,235 2,200 2,272 2,481 3,168 3,458 4,118 4,419 4,547 4,741
Amortization of
deferred stock
compensation expense.. 167 234 234 234 234 1,637 462 462 461 1,481
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 1,402 2,434 2,506 2,715 3,402 5,095 4,580 4,881 5,008 6,222
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 2,600 2,091 3,379 2,528 3,546 2,846 3,461 5,219 7,366 10,403
Other income, net....... 179 390 32 135 348 123 195 241 149 821
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 2,779 2,481 3,411 2,663 3,894 2,969 3,656 5,460 7,515 11,224
Provision (benefit) for
income taxes........... 390 217 442 493 260 224 (207) 650 1,280 1,602
Subsidiary preferred
stock dividends........ -- -- -- -- -- 34 34 34 76 41
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $2,389 $ 2,264 $ 2,969 $ 2,170 $ 3,634 $ 2,711 $ 3,829 $ 4,776 $ 6,159 $ 9,581
====== ======= ======= ======= ======= ======= ======= ======= ======= =======

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

<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------------------ ---------------------------------- -------------------------
Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 57.9 56.2 52.2 59.0 58.8 57.7 59.6 57.8 57.1 50.1
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 42.1 43.8 47.8 41.0 41.2 42.3 40.4 42.2 42.9 49.9
Operating expenses:
Selling, general and
administrative
expenses.............. 13.0 21.3 18.5 19.4 18.8 18.4 20.7 18.5 15.7 14.2
Amortization of
deferred stock
compensation expense.. 1.8 2.3 1.9 1.8 1.4 8.7 2.3 1.9 1.6 4.5
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating ex-
penses................ 14.8 23.6 20.4 21.2 20.2 27.1 23.0 20.4 17.3 18.7
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 27.3 20.2 27.4 19.8 21.0 15.2 17.4 21.8 25.6 31.2
Other income, net....... 1.9 3.8 0.3 1.1 2.1 0.7 1.0 1.0 0.5 2.5
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 29.2 24.0 27.7 20.9 23.1 15.9 18.4 22.8 26.1 33.7
Provision (benefit) for
income taxes........... 4.1 2.1 3.6 3.9 1.5 1.3 (1.0) 2.7 4.4 4.8
Subsidiary preferred
stock dividends........ -- -- -- -- -- 0.2 0.2 0.1 0.3 0.1
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. 25.1% 21.9% 24.1% 17.0% 21.6% 14.4% 19.0% 20.0% 21.4% 28.8%
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

35
<PAGE>

The Company's operating results historically have fluctuated and may in the
future continue to fluctuate depending on a number of factors, including: the
size, timing and profitability of significant projects; the proportion of
services that are performed at client sites rather than at the Company's
offshore facilities; the accuracy of estimates of resources and time required
to complete ongoing projects, particularly projects performed under fixed-
price, fixed-time frame contracts; a change in the mix of services provided to
its clients or in the relative proportion of services and product revenues;
the timing of tax holidays and other Government of India incentives; the
effect of seasonal hiring patterns and the time required to train and
productively utilize new employees; the size and timing of facilities
expansion; unanticipated increases in wage rates; the Company's success in
expanding its sales and marketing programs; and currency exchange rate
fluctuations and other general economic factors. A high percentage of the
Company's operating expenses, particularly personnel and facilities, are fixed
in advance of any particular quarter. As a result, unanticipated variations in
the number and timing of the Company's projects or in employee utilization
rates may cause significant variations in operating results in any particular
quarter. The Company believes that period-to-period comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance.

The increase in gross profit for the three months ended December 31, 1998,
as compared to the three months ended September 30, 1998, is attributable to a
decrease in software expenses, a decrease in other cost of revenues, the
deconsolidation of Yantra's results after October 20, 1998 and a favorable
business mix for the Company's services. Software expenses decreased to $0.45
million, representing 1.4% of revenues, for the three months ended December
31, 1998 as compared to $1.44 million, representing 5.0% of revenues, for the
three months ended September 30, 1998. The software expenses decreased in the
third quarter of fiscal 1999 because the Company completed a substantial
portion of its annual software purchases in the second quarter of fiscal 1999.
Other costs of revenues also decreased in the third quarter of fiscal 1999,
including computer maintenance and consumables and the provision for post-
sales customer support, which together represented 0.8% of revenues for the
three months ended December 31, 1998, as compared to 2.7% of revenues for the
three months ended September 30, 1998. The provision for post-sales customer
support in the second quarter of fiscal 1999 included a one-time charge for a
change in the estimate of warranty expenses for the Company's fixed-price,
fixed-time frame contracts. The Company's gross margin was also increased in
the third quarter of fiscal 1999 by the deconsolidation of Yantra's cost of
revenues after October 20, 1998. Yantra's gross profit in the second quarter
of fiscal 1999 and through October 20, 1998 was approximately 24.0%. Yantra's
cost of revenues were $0.21 million, representing 0.62% of the Company's
revenues, for the three months ended December 31, 1998 as compared to $0.43
million, representing 1.5% of revenues, for the three months ended September
30, 1998. Additionally, the Company experienced a favorable business mix in
the three months ended December 31, 1998, as well as improved employee
utilization following the completion of the Company's annual training course
for new hires.

Fluctuations in other income, net are caused by the timing of the sale of
Special Import Licenses and by changes in interest income which are influenced
by the amount under investment as well as by interest rates. For example,
other income declined from the third to the fourth quarter of fiscal 1997 due
to a decrease of $136,000 of income from the sale of Special Import Licenses
and a decrease of $211,000 in interest income. Fluctuations in income taxes
are caused not only by the timing of Indian tax exemptions and the proportion
of services performed in Software Development Parks, but also by the
proportion of domestic income and non-operating income, which is not subject
to tax exemptions, to export income. For example, income taxes increased from
a benefit of $207,000 for the fourth quarter of fiscal 1998 to a provision of
$3.5 million for the nine months ending December 31, 1998 as a result of an
increase in domestic sales of the BANCS 2000 product, an increase in non-
operating income and a higher provision for foreign taxes in the amount of
$300,000, $675,000 and $2.7 million relating to fiscal 1997, fiscal 1998 and
the nine months ended December 31, 1998, respectively.

Liquidity and Capital Resources

The Company has been financed by cash generated from operations and, to a
lesser extent, the proceeds of equity issuances and borrowings. In 1993, the
Company raised approximately $4.4 million in gross aggregate proceeds from the
sale of the Company's Equity Shares in its initial public offering on the
Indian Stock Exchanges. In 1994, the Company raised an additional $7.7 million
through private placements of its Equity Shares with foreign institutional
investors. At December 31, 1998, the Company had $22.8 million in cash and

36
<PAGE>

cash equivalents, $36.1 million in working capital and no outstanding bank
borrowings. At December 31, 1998, the Company had an aggregate of $1.2 million
in working capital lines of credit from two commercial banks.

Net cash provided by operating activities was $9.4 million, $17.2 million
and $25.0 million in fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. Net cash provided by operations consisted
primarily of net income, offset in part by an increase in accounts receivable.
In recent years, accounts receivable have increased at a rate faster than
sales. Accounts receivable as a percentage of revenues, represented 12.6%,
15.0% and 18.5%, for fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. In recent years, the average days outstanding
of accounts receivable has increased in the 31-60, 61-90 and greater than 90
day aging periods and decreased in the 0-30 day aging period. The Company
believes that this is due to an increasing portion of its revenues being
represented by large accounts with large companies, which tend to have better
cash management practices than smaller accounts. The Company believes these
large companies utilize their cash management expertise to take advantage of
the entire payment period. The Company does not expect significant additional
increases in the average days outstanding of its accounts receivable. The
Company's policy on accounts receivable includes a periodic review of all
outstanding accounts receivable. The Company examines, among other things: the
age, amount and quality of the account receivable; the relationship with, size
of and history of the client; and the quality of service performed for a
client to determine the classification of an account receivable. Upon its
review, the Company will classify the accounts into secured and unsecured or
doubtful accounts. The Company makes provisions for all accounts receivable
classified as unsecured or doubtful and for all accounts receivable that are
outstanding more than 180 days.

Prepaid expenses and other current assets increased by $1.2 million,
$925,000 and $1.6 million during fiscal 1997, fiscal 1998 and the nine months
ended December 31, 1998. The increase during fiscal 1997 was primarily due to
an increase in rental deposits for new software development centers. The
increases during fiscal 1998 and the nine months ended December 31, 1998 were
primarily due to loans to employees, which increased by $481,000 and $708,000,
respectively.

Unearned revenue during the nine months ended December 31, 1998 consists
primarily of advance client billings on fixed-price, fixed-time frame
contracts for which related costs were not incurred in such period.

Net cash used in investing activities was $4.6 million, $8.4 million and
$11.9 million in fiscal 1997, fiscal 1998 and the nine months ended December
31, 1998, respectively. Net cash used in investing activities in fiscal 1997
consisted primarily of $7.2 million for property, plant and equipment offset
by sales of equity investments in other companies and in mutual funds. Net
cash used in investing activities in fiscal 1998 and the nine months ended
December 31, 1998 consisted primarily of $7.9 million and $11.6 million,
respectively, for property, plant and equipment. Since the planned facilities
expansion will significantly increase the Company's fixed costs, the Company's
results of operations will be materially adversely affected if the Company is
unable to grow its business proportionately.

Publicly-traded Indian companies customarily pay dividends. The Company
declared dividends of $1.1 million for fiscal 1997, which were paid partly in
fiscal 1997 and partly in fiscal 1998; declared dividends of $1.5 million for
fiscal 1998, which were paid partly in fiscal 1998 and partly in fiscal 1999;
and to date have declared dividends of $1.0 million for fiscal 1999. See
"Dividend Policy."

As of December 31, 1998, the Company had contractual commitments for capital
expenditures of $6.3 million and had budgeted aggregate capital expenditures
of $32.4 million for the fourth quarter of fiscal 1999 through fiscal 2000, to
acquire, build and equip new facilities in India and other regions including
potentially Southeast Asia, Latin America and Europe. The Company has not yet
made contractual commitments for the majority of its budgeted capital
expenditures and there can be no assurance that the Company will not
significantly alter or reduce its proposed expansion plans. See "Business--
Facilities." The Company believes that the proceeds of the Offering together
with existing cash and cash equivalents and funds generated from operations
will be sufficient to meet the Company's operating requirements through fiscal
2000. See "Use of Proceeds."

Income Tax Matters

The Company benefits from certain significant tax incentives provided to
software firms under the Indian tax laws. These incentives presently include:
(i) an exemption from payment of Indian corporate income taxes

37
<PAGE>

for a period of ten consecutive years of operation of software development
facilities designated as "Software Technology Parks" (the "STP Tax Holiday");
and (ii) a tax deduction for profits derived from exporting computer software
(the "Export Deduction"). Under present law, the Export Deduction remains
available after expiration of the STP Tax Holiday. All but one of the
Company's software development facilities are located in a designated Software
Technology Park. The benefits of these tax incentive programs have
historically resulted in an effective tax rate for the Company well below
statutory rates, and the Company expects this trend to continue absent a
change in policy by the Government of India. There is no assurance that the
Government of India will continue to provide these incentives. The Company
pays corporate income tax in foreign countries on income derived from
operations in those countries. See "Risk Factors--Risks Related to Investments
in Indian Securities--Government of India Incentives and Regulation."

Effects of Inflation

The Company's most significant costs are the salaries and related benefits
for its employees. Competition in India and the United States for IT
professionals with the advanced technological skills necessary to perform the
services offered by the Company have caused wages to increase at a rate
greater than the general rate of inflation. As with other IT service
providers, the Company must adequately anticipate wage increases and other
cost increases, particularly on its long-term contracts. Historically, the
Company's wage costs in India have been significantly lower than prevailing
wage costs in the United States for comparably-skilled employees, although
wage costs in India are presently increasing at a faster rate than in the
United States. There can be no assurance that the Company will be able to
recover cost increases through increases in the prices that it charges for its
services in the United States. See "Risk Factors--Dependence on Skilled
Personnel; Risks of Wage Inflation" and "--Fixed-Price, Fixed-Time Frame
Contracts."

Year 2000 Compliance

Client IT Services and Products. The Company has evaluated each of its IT
services and software products and believes that each is substantially Year
2000 compliant. In making such evaluations, the Company has utilized its
experience in providing Year 2000 compliance services to its clients.

Internal Infrastructure. The Year 2000 problem could affect the systems,
transaction processing, computer applications and devices used by the Company
to operate and monitor all major aspects of its business, including financial
systems (such as general ledger, accounts payable and payroll), customer
services, infrastructure, materials requirement planning, master project
scheduling, networks and telecommunications systems. The Company believes that
it has identified the major systems, software applications and related
equipment used in connection with its internal operations that must be
modified or upgraded in order to minimize the possibility of a material
disruption to its business. The Company has converted its financial
applications software to programs certified by the suppliers as Year 2000
compliant and is currently in the process of modifying and upgrading all other
affected systems. The Company expects to complete this process by early 1999.
All costs associated with carrying out the Company's plan for the Year 2000
problem are being expensed as incurred and have not been significant to date.
The Company believes the total of such costs will not have a material adverse
effect on the Company's business, results of operations and financial
condition.

Third Party Suppliers. The Company relies directly and indirectly on systems
utilized by its suppliers for telecommunications, utilities, electronic
hardware and software applications. Pursuant to its service delivery model,
the Company must maintain active voice and data communications between its
main offices in Bangalore, the offices of its clients and its other software
development facilities. Although the Company maintains redundant software
facilities and satellite communications links, any sustained disruption of the
Company's ability to transmit voice and data through satellite and telephone
communications would have a material adverse effect on

38
<PAGE>

the Company's business, results of operations and financial condition. To
assess supplier Year 2000 readiness, the Company has sent two separate
questionnaires to a majority of its third party suppliers and believes that it
will complete this assessment process by early 1999. While the Company expects
to resolve any significant Year 2000 problems with its suppliers in a timely
manner, there can be no assurance that these suppliers will not encounter
delays or unforeseen problems that affect their service to the Company. The
Company currently believes that any required upgrades, modifications or
replacements of these third party systems will be fulfilled without cost to
the Company and will not have a material adverse effect on the Company's
business, results of operations and financial condition.

Facilities. Systems such as air conditioning and security systems at the
Company's facilities may also be affected by the Year 2000 problem. The
Company is currently assessing the potential effects of and costs of upgrading
and modifying these systems. The Company estimates that the total cost to the
Company of completing any required upgrades, modifications or replacements of
these systems will not have a material adverse effect on the Company's
business, results of operations and financial condition.

The Company is currently developing contingency plans to address the Year
2000 issues that may pose a risk to its operations and expects such plans to
be completed by mid-1999. Such plans may include accelerated replacement of
affected systems or software, temporary use of redundant or back-up systems or
the implementation of manual procedures. The Company believes that the most
reasonably likely worst case scenario should Infosys not achieve Year 2000
Compliance is the intermittent or temporary disruption in telecommunications,
which could cause inefficiencies and delays, particularly, delays in providing
support services to clients. To minimize the impact of any potential
telecommunications disruptions, the Company is also considering temporary
measures such as placing additional IT professionals at client sites. In
assessing the worst case scenario, the Company has taken into account the
nature of its operations as well as the availability of its IT professionals
to attend to any internal problems that may arise. There can be no assurance
that any contingency plans implemented by the Company would be adequate to
meet the Company's needs without materially impacting its operations, that any
such plan would be successful or that the Company's business, results of
operations and financial condition would not be materially adversely affected
by the delays and inefficiencies inherent in conducting operations in an
alternative manner.

The information above contains forward-looking statements which reflect the
current views of the Company with respect to Year 2000 compliance of the
Company's internal systems and third party suppliers, and the related costs
and potential impact on the Company's financial performance. As indicated
above, these assessments may ultimately prove to be inaccurate. See "Risk
Factors--Infrastructure and Potential Disruption in Telecommunications" and
"--Year 2000 Compliance."

Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") recently issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activity." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company is currently
evaluating the impact of SFAS No. 133 on its consolidated financial
statements.

The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development of internal-use software be
capitalized or amortized over the estimated useful life of the software. SOP
98-1 is effective for financial statements issued for fiscal years beginning
after December 15, 1998. The Company estimates that all software acquired for
internal use has a relatively short useful life, usually less than one year.
The Company, therefore, currently charges to income the cost of acquiring such
software entirely at the time of acquisition. The Company does not believe
that adopting the provisions of SOP 98-1 will have a significant impact on its
consolidated financial statements.

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BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

Overview

The Company, one of India's leading IT services companies, utilizes an
extensive offshore infrastructure to provide managed software solutions to
clients worldwide. Headquartered in Bangalore, India, the Company has 11
state-of-the-art offshore software development facilities located throughout
India that enable it to provide high quality, cost-effective services to
clients in a resource-constrained environment. The Company's services, which
may be offered on a fixed-price, fixed-time frame or time-and-materials basis,
include custom software development, maintenance (including Year 2000
conversion) and re-engineering services as well as dedicated OSDCs for certain
clients. In each of its service offerings, the Company assumes full project
management responsibility in order to strengthen client relationships, offer
higher value-added services and enhance its profitability. In addition, the
Company develops and markets certain Company-owned software products. As a
result of its extensive network of offshore software development facilities,
its quality systems, its disciplined processes and its significant investment
in people, the Company has built a platform from which it has been able to
achieve significant growth to date. The Company completed its initial public
offering on the Bangalore Stock Exchange in 1993. From fiscal 1994 to fiscal
1998, the Company experienced compound annual revenue and net income growth
rates of 63.6% and 46.8%, respectively, and grew from approximately 480 IT
professionals to approximately 2,200.

Through its worldwide sales headquarters in Fremont, California and 16 other
sales offices located in the United States, Canada, the United Kingdom,
Germany, Japan and India, the Company markets its services to large IT-
intensive businesses. During fiscal 1998, the Company derived 82.3% of its
revenues from North America, 9.0% from Europe and 2.6% from India. While the
Company derives its revenues primarily from the United States, Infosys
maintains a diversified client base, with its largest client representing
10.5% of fiscal 1998 revenues. As of December 31, 1998, the Company had
approximately 130 clients. This diversified client base is comprised primarily
of Fortune 500 companies and other multinational companies. Clients include
Bell Atlantic Corporation, NCR Corporation, Nordstrom, Inc., Southern
California Edison Company, Goldman, Sachs & Co., Northern Telecom Limited,
Salomon S.A. and Toshiba Corporation. During fiscal 1998 and for the nine
months ended December 31, 1998, these clients accounted for 34.8% and 28.7%,
respectively, of the Company's revenues. As a result of its commitment to
quality and client service, the Company enjoys a high level of repeat
business. For fiscal 1997 and 1998, existing clients from the previous fiscal
year generated 82.3% and 83.1%, respectively, of the Company's revenues.

The Company was incorporated in 1981 by seven founders who shared a vision
to build a world class IT services organization based upon the principles of
leadership, innovation and integrity. Six of these original founders have
remained with the Company and, together with other members of the Company's
management council, have pursued their vision to pioneer the offshore software
development model, adopt progressive employee-oriented practices and set new
standards in India for investor relations. In recognition of its efforts, the
Company was voted "Best Managed Company" in India by Asiamoney in each of the
last two years was selected as the "Company of the Year" by the Economic Times
Awards for Corporate Excellence and was awarded the Silver Shield in each of
the last three years by the Institute of Chartered Accountants of India as the
Indian company with the best presentation of financial statements by a non-
financial company. Management believes that this reputation for leadership and
innovation and the recognition it has received has been and will continue to
be a key competitive advantage, particularly in attracting and retaining the
highest quality IT professionals. As evidence of this, during fiscal 1998, the
Company received approximately 70,870 job applications, tested approximately
21,350 applicants, interviewed approximately 5,800 and extended job offers to
approximately 1,790, of whom approximately 1,300 accepted.

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Industry Overview

In today's increasingly competitive business environment, companies have
become dependent on IT not only to maintain day-to-day operations, but also as
a strategic tool to enable them to re-engineer business processes, restructure
organizations and react quickly to competitive, regulatory and technological
changes. For these reasons, IT capabilities are particularly critical in
certain vertical markets, such as financial services, utilities and
telecommunications, that are undergoing rapid deregulation and globalization.
As corporations have become increasingly reliant on their IT systems, the
technological challenge of managing such systems has also increased. IT
departments must not only implement new technologies such as client/server
systems and advanced databases, but also maintain and update legacy systems to
work with the latest software and hardware, to expand functionality, to
recognize and process dates that begin in the year 2000 and to handle other
developments, such as the conversion to Eurocurrency.

As businesses have become more dependent on IT, corporate budgets for IT
services have grown dramatically. Dataquest has estimated that the worldwide
market for IT consulting, development, integration and outsourcing will
increase to $291 billion by 2001 from $177 billion in 1998, as businesses
concentrate on their core competencies and attempt to minimize fixed costs and
control the size of their internal IT departments. The need to outsource is
particularly acute for companies whose IT staffs lack the requisite skill set
and project management abilities to implement new technologies, yet are
reluctant to work solely with outdated technology. As a result, such companies
seek third-party IT service providers to implement new technology and support
existing legacy systems. Additionally, in many cases, businesses are being
forced to outsource IT projects due to the difficulty and expense of
recruiting and training sufficient IT staff in a resource-constrained
environment. Outsourcing enables businesses to minimize the risks and reduce
the time-to-completion of large IT projects by shifting some or all of their
IT responsibilities to capable service organizations. In addition to this
trend towards outsourcing, the IT services industry has also benefited
recently from the significant demand for Year 2000 conversion services.

Simultaneously with this significant increase in demand for IT services, the
supply of qualified IT professionals has decreased in most developed
countries, particularly the United States, Western Europe and Japan. According
to the United States Department of Education, from 1986 to 1995, the number of
bachelor degrees in computer science awarded annually at U.S. universities
fell by 41.7% from 41,889 to 24,404. One result of this downward trend is a
growing shortage of IT professionals in the United States; the Information
Technology Association of America reports that at U.S. companies with more
than 100 employees the number of unfilled positions for IT professionals was
346,000 in January 1998. Furthermore, the United States Department of Commerce
has estimated that between 1994 and 2005, U.S. companies will require more
than one million new IT professionals to fill newly created positions and
replace workers who are retiring or are otherwise leaving the IT sector.

This shortage of IT professionals, along with recent advances in
telecommunications and the growing acceptance of telecommuting has led to the
globalization of the market for IT services. It is now well accepted that
effective project management techniques combined with satellite links, video
conferencing, the Internet, e-mail and other communications capabilities can
enable efficient coordination of ways to manage IT projects between domestic
and overseas facilities. By outsourcing software development and maintenance
projects to offshore IT service providers, establishing overseas facilities or
joint venturing with foreign partners, companies have been able to access
skilled IT professionals, often in lower cost environments with a large
population of English-speaking technical talent.

India: A Source for Software Services

According to a survey of U.S. software service vendors conducted by the
World Bank, India is the leading offshore destination for companies seeking to
outsource software development or IT projects. NASSCOM estimates that India's
export revenue from software, including software services, was approximately
$1.8 billion in fiscal 1998 and will reach $4.0 billion by fiscal 2000,
contributing to total Indian software industry revenues of approximately $5.9
billion by fiscal 2000.

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There are three key factors contributing to this rapid growth of India's
software market. First, India has a large, highly skilled labor pool that is
available at a relatively low labor cost. With over four million engineers,
India ranks second only to the United States as the country with the largest
population of English-speaking technical personnel. According to NASSCOM, the
number of software professionals employed by the Indian software industry has
grown from approximately 56,000 in fiscal 1990 to approximately 200,000 in
fiscal 1998. In addition, India has more than 1,800 engineering colleges and
technical institutes that train approximately 68,000 graduates annually in IT.
This sizable pool of IT talent in India is available to companies worldwide at
relatively low labor costs. According to Software Productivity Research, the
average annual wage for software professionals in India is approximately 15%
of the average U.S. rate. Although wages in India are rising faster than in
the United States, the labor rate differential is anticipated to remain a
competitive advantage for Indian companies into the foreseeable future.

A second key factor driving the Indian software market is the capability of
Indian IT firms to deliver a product that satisfies the requirements of
clients who expect high quality standards. A NASSCOM analysis of international
quality standards of the top 300 Indian software companies showed that 109 had
already acquired ISO 9000 or SEI certification, with an additional 76
anticipated to acquire such certification by December 1999. These capabilities
have led to a recognition of India's IT talent by companies worldwide. To take
advantage of India's high quality IT services at attractive prices, companies
worldwide have outsourced their software services needs to India unrestrained
by distances or transportation limitations that often handicap Indian
manufacturing firms. In fact, the approximate 10- to 12-hour time difference
between India and its largest market, the United States, allows work to be
carried on by Indian teams on a 24-hour basis, shortening cycle times and
improving productivity and service quality.

A final factor driving the Indian software market is the recognition by
recent Indian governments of the importance of the IT sector to the Indian
economy. In 1991, the Government of India introduced a number of measures to
address the economic and financial difficulties that India had been facing.
The package contained policies to stimulate investment in infrastructure
industries and included favorable incentives designed to foster the growing
Indian software industry. This commitment to the software sector has been and
continues to be pursued by each successive government since 1991. For example,
the current Government of India established the National Task Force on
Information Technology with a mandate to make recommendations that detail
policies designed to increase India's IT exports. In addition, software firms
benefit from a variety of incentives, such as relief from import duties on
hardware, a tax deduction for income derived from software exports, and tax
holidays and infrastructure support for companies operating in Software
Technology Parks. See "Risk Factors--Risks Related to Investments in Indian
Securities" and "Management's Discussion and Analysis of Financial Condition--
Income Tax Matters."

Business Strategy

The Company's objective is to become one of the leading worldwide providers
of IT services by utilizing a global network of resources to offer a broad
array of managed software solutions. In order to achieve this goal, the
Company focuses on the following key elements of its business strategy:

Pursue World Class Operating Model. Management believes that one of the most
critical factors to the Company's success has been its commitment to pursue
high quality standards in all aspects of its business, including the quality
of its services, operations, investor relations and management of human
resources. In its services and operations, the Company achieves quality
through rigorous adherence to highly evolved processes, including a detailed
approach to planning and execution, multi-level testing and careful tracking
and analysis of quality control. The Company is certified under ISO 9001 and
TickIT. In addition, the Company has recently been measured against the
Capability Maturity Model, a software specific total quality management model
that was developed by the Software Engineering Institute of Carnegie Mellon
University and defines five levels of process maturity for a software
organization. Infosys has been certified at Level 4, a level achieved by only
2% of the more than 1,000 software companies tested under the Capability
Maturity Model. Infosys also adheres to high quality standards in its investor
relations. For example, the Company was one of the first public Indian
companies to adopt U.S. GAAP reporting in fiscal 1995 and quarterly audited
Indian financial statements in fiscal 1998.

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Invest Heavily in Human Resources. The Company believes that its continued
success will depend upon its ability to recruit, train, deploy and retain
highly talented IT professionals. Even as the field of software engineering
has been attracting the best and brightest Indian students, management
believes the Company has become, for Indian engineering graduates, one of the
most sought after employers. The Company focuses its recruiting efforts on the
top 20% of the students from the engineering departments of Indian
universities and uses a series of interviews and tests to identify the best
applicants. In an effort to attract the most highly qualified candidates, the
Company has spent significant resources in creating a quality work
environment. For example, its main facility in Bangalore, which spans five
acres, encompasses not only 160,000 square feet of office space but also
150,000 square feet of landscaping, a cafeteria, outdoor sitting area, library
and gymnasium as well as tennis, volleyball and basketball courts. Through
this campus-like environment, the Company fosters a collegial atmosphere and
informal culture, which is further promoted by its "open door" operating
philosophy where communication and ideas flow freely irrespective of title or
tenure. The Company also offers its IT professionals challenging assignments,
competitive salaries and benefits and one of the first stock option plans
adopted by a public Indian company. In addition, the Company invests heavily
in training, including 14-week training sessions for newly recruited IT
professionals as well as a variety of two-week continuing education courses in
technology and management skills conducted by a 33-person faculty. As a result
of this high level of investment in its people, management believes that the
Company has become one of the most attractive employers for Indian software
professionals and that its attrition rate is significantly below the industry
average.

Focus on Managed Software Solutions. Since its inception, the Company has
dedicated itself to providing managed software solutions, many of which are
offered on a fixed-price, fixed-time frame basis. By taking full project
management responsibility on every project, the Company enables its clients to
receive high quality, cost-effective solutions with lower risk. Such services
offer the Company the opportunity to build client confidence with the
potential benefit of enhanced margins. Management believes that by
demonstrating the ability to manage and successfully execute large projects,
the Company is better positioned to become a long-term partner to its clients
for all of their IT needs. For example, after the Company managed two IT pilot
projects for Nordstrom, Inc. ("Nordstrom"), Nordstrom engaged Infosys to
establish a dedicated OSDC to provide it with IT services on an ongoing basis.
In addition, by retaining project management responsibility, the Company
accumulates significant industry expertise and continues to develop and refine
its software development tools and proprietary methodologies.

Capitalize on Well-Established Offshore Development Model. As one of the
pioneers of the offshore software development model, the Company has made
significant investments in its infrastructure and has developed the advanced
processes and expertise necessary to manage and successfully execute projects
in multiple locations with seamless integration. The Company has high levels
of project management skills and rigid controls as evidenced by its Level 4
Capability Maturity Model certification. This commitment to quality allows the
Company to successfully execute approximately 80% of its project work in India
while maintaining high levels of client satisfaction. These capabilities not
only provide significant cost advantages but also shorten the time to deliver
a solution to the client. With 11 development facilities and approximately
3,000 IT professionals worldwide as of December 31, 1998 and with plans to
expand significantly its available facilities and hire additional IT
professionals, the Company believes that it is well-positioned to serve
clients globally in a resource-constrained environment.

Maintain Disciplined Focus on Business and Client Mix. The Company provides
a wide range of IT services and maintains a disciplined focus on its business
mix in an effort to avoid service or client concentration. Beginning in fiscal
1996, the Company aggressively sought to minimize its client concentration and
to accept as clients only those that met strict guidelines for overall revenue
potential and profitability. For fiscal 1997, fiscal 1998 and the nine months
ended December 31, 1998, the Company's largest client accounted for 15.6%,
10.5% and 6.7%, respectively, of revenues and its five largest clients
accounted for 43.1%, 35.1% and 29.2%, respectively, of revenues. Similarly,
the Company has endeavored to maintain a balance among its service offerings
despite certain trends in the marketplace, in particular the Year 2000
problem. This balance is key to ensuring that the technology skill sets of the
Company's IT professionals remain diversified. Such diversification is
critical in not only providing the Company the flexibility to adapt to
changing market conditions but also attracting and retaining highly skilled
professionals who seek the opportunity to continue to learn new technologies.

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Growth Strategy

From fiscal 1994 to fiscal 1998, the Company experienced compound annual
revenue and net income growth rates of 63.6% and 46.8%, respectively, and grew
from approximately 480 IT professionals to approximately 2,200. The following
are the key elements of the Company's growth strategy:

Broaden Service Offerings. In order to meet all of its clients' IT needs,
the Company strives to offer a comprehensive range of services by continuously
evaluating new and emerging technologies. As a full-service provider, the
Company believes that it can increase its revenues from existing clients as
well as attract new clients. Toward this end, the Company has
opportunistically expanded its services beyond its core development,
maintenance and re-engineering services. For example, the Company recently has
begun initiatives to develop practices focused on packaged applications
implementation, e-commerce and Internet/intranet services. Management believes
that these services will increasingly become a significant part of the
Company's portfolio of services.

Increase Business with Existing Clients. In fiscal 1998, the Company
performed services for more than 60 clients in the United States and Europe. A
key objective of the Company's growth strategy is to expand the nature and
scope of its engagements with existing clients by both increasing the volume
of its projects and expanding the breadth of services offered. Establishing
broad, long-term relationships potentially increases the quality and
efficiency of the Company's service to a particular client since each project
performed for a client increases the Company's understanding of the client's
systems, requirements and business practices. For the same reason,
establishing broad, long-term relationships with a client also reduces the
Company's marketing costs, increases the client's reliance on the Company and
creates barriers to entry for competitors. The Company seeks to foster such
relationships by delivering high quality services on time and on budget and,
over the course of a relationship, by increasing the integration of its
services with the client's internal IT operations. To date, this approach has
been highly effective. Despite the Company's rate of growth during the last
three years, over 80% of the revenues in fiscal 1997 and 1998 and over 90% of
the revenues in the nine months ended December 31, 1998 were generated from
companies who were clients in the prior fiscal year.

Develop New Clients. The Company pursues several new client development
strategies. First, the Company offers a broad array of managed software
solutions which provide an initial entry into a new client. For example, the
Company has used its Year 2000 conversion services and its recently introduced
Internet/ intranet-related services to establish relationships with 13 new
clients during fiscal 1998. Second, Infosys believes that it can leverage the
industry-specific expertise it has developed in key vertical markets
(financial services, manufacturing and distribution, retail,
telecommunications and technology) to further develop its portfolio of clients
in these targeted markets. This vertical market orientation continues to help
Infosys design and develop re-usable software tools and processes which have
specific applications to clients in these markets and which can improve the
Company's efficiency and productivity. Finally, the Company intends to expand
its global sales and marketing infrastructure by hiring new sales and
marketing personnel, opening additional regional sales offices and increasing
its marketing expenditures. Infosys currently maintains sales and marketing
offices in 17 locations and intends to add new offices in Europe. Management
believes that increasing the Company's geographic presence will enhance its
ability to establish and support new client relationships.

Increase Revenue per IT Professional. In order to increase its revenue per
IT professional, the Company continually focuses on building expertise in
vertical markets, refining its software development tools and methodologies,
and storing and disseminating institutional knowledge in order to improve
efficiency and productivity. Additionally, to enhance productivity per IT
professional, Infosys continually monitors client accounts for profitability
and seeks to select new clients and maintain relationships with existing
clients that maximize the Company's long-term profit margins. The Company's
policy is to decline or discontinue projects that do not offer the potential
to meet the Company's profit margin targets. Finally, the Company is seeking
to increase the proportion of projects that are undertaken on a fixed-price,
fixed-time frame rather than a time-and-materials basis. Management believes
that effectively structured fixed-price, fixed-time frame projects benefit the
client by reducing the client's risk, while offering the Company the potential
benefit of enhanced margins for projects that are performed efficiently.

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Expand and Diversify Base of IT Professionals. Management believes that a
critical element of the Company's growth strategy is its ability to increase
its base of IT professionals. To address this issue, the Company plans to
build new software development facilities in locations where it can access
local pools of talent as well as increase the number of professionals employed
at its existing locations. In addition, the Company is looking to other fields
of expertise, such as business school graduates and accountants, for
recruiting. Accordingly, the Company has approved plans to expand its
facilities in Bangalore, Bhubaneswar, Chennai, Mangalore, Pune and elsewhere.
The Company is also contemplating the addition of facilities in the United
States, Europe and Asia. The approved expansions, which are currently
scheduled to be completed in the next two to three years, are expected to add
approximately 890,000 square feet of office space to provide for approximately
6,000 employees in India.

Pursue Selective Strategic Acquisitions. The Company believes that pursuing
selective acquisitions of IT services and software applications firms could
potentially expand the Company's technical expertise, facilitate expansion
into new vertical markets and increase the penetration of new clients.
Although no acquisitions are currently being contemplated, the Company
anticipates that it will seek to identify and acquire companies that have
well-developed applications in vertical markets, extensive client bases or
proprietary technical expertise and would otherwise complement the Company's
business.

The Infosys Offshore Development Model

The Indian offshore development model was initiated in the mid-1980's as a
method of dividing IT project activities between a service provider's offshore
software development facility and a client's on-site location. This model
contains many features that are attractive to IT consumers who are primarily
located in the United States, Europe and Japan, including: (i) access to a
large pool of highly skilled, English-speaking IT professionals;
(ii) relatively low labor costs of IT professionals offshore; (iii) the
ability to provide high quality IT services at internationally recognized
standards; (iv) the capability to work on specific projects on a 24-hour basis
by exploiting time zone differences between India and client sites; and (v)
the ability to accelerate the delivery time of larger projects by parallel
processing different phases of a project's development. While some U.S. and
European companies have commenced their own operations in India, most large
corporations have opted to form strategic alliances with local Indian IT
companies to reduce the risks and start-up costs of operations in India.

As one of the pioneers of the offshore development model, Infosys has a long
history of successfully executing projects between its clients' sites in North
America, Europe and Asia and the Company's offshore software development
facilities in India. In a typical software development or re-engineering
assignment, the Company assigns a small team of two to five IT professionals
to visit a client's site and determine the scope and requirements of the
project. Once the initial specifications of the engagement have been
established, the project managers return to India to supervise a much larger
team of 10 to 50 IT professionals dedicated to the development of the required
software or system. A small team remains at the client's site to track changes
in scope and address new requirements as the project progresses. The client's
systems are then linked via satellite to the Company's facilities enabling
simultaneous processing in as many as four offshore software development
facilities. Once the development stage of the assignment is completed and
tested in India, a team returns to the client's site to install the newly
developed software or system and ensure its functionality. At this phase of
the engagement, the Company will often enter into an ongoing agreement to
provide the client with comprehensive maintenance services from one of its
offshore software development facilities. In contrast to development projects,
a typical maintenance assignment requires a larger team of 10 to 20 IT
professionals to travel to the client's site to gain a thorough understanding
of all aspects of the client's system. The majority of the maintenance team
subsequently returns to the offshore software development facility, where it
assumes full responsibility for day-to-day maintenance of the client's system,
while coordinating with a few maintenance professionals who remain stationed
at the client's site. By pursuing this model, the Company completes
approximately 80% of its project work at its offshore software development
facilities in India.

The Company's project management techniques, risk management processes and
quality control measures enable the Company to complete projects seamlessly
across multiple locations with a high level of client satisfaction.

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Certified under ISO 9001, TickIT and at Level 4 of the Capability Maturity
Model, the Company rigorously adheres to highly evolved processes. These
processes govern all aspects of the software product life cycle, from
requirements to testing and maintenance. The Company seeks to prevent defects
through its quality program, which includes obtaining early sign off on
acceptance test scripts, project specifications and design documents,
assigning software quality advisors to help each team set up appropriate
processes for each project and adhering to a multi-level testing strategy.
Defects are documented, measured, tracked and analyzed, and feedback is
provided to the project manager. The Company compiles metrics for not only
defect density and size, but also actual effort as compared to project
estimates, adherence to schedule and productivity. Frequent internal and
external audits are conducted to assure compliance with procedures. All of
these procedures have been continuously refined throughout the Company's
history of providing its clients with offshore software development services.

In addition to the processes and methodologies necessary to successfully
execute the offshore model, the Company has invested significant resources in
its infrastructure to ensure uninterrupted service to its clients. The Company
has invested in redundant infrastructure with "warm" backup sites and
redundant telecommunication capabilities with alternate routings to provide
its clients with high service levels. Additionally, the Company utilizes two
telecommunications carriers in India and has installed in its principal
facilities multiple international satellite links connecting with network hubs
in Fremont, California and in Dedham, Massachusetts. A different ocean cable
connecting Europe and the United States serves each of these hubs. Moreover,
the Company has installed wireless links among its facilities in Bangalore and
intends to install wireless links among its other Indian facilities by the end
of 1999.

Services and Products

The Company's services include software development, maintenance and re-
engineering services as well as dedicated OSDCs for certain clients. In each
of its service offerings the Company assumes full project management
responsibility for each project it undertakes rather than providing
supplemental personnel to work under a client's supervision. In addition to
its IT services, the Company as well as its formerly majority-owned
subsidiary, Yantra, also develop and market certain packaged applications
software.

Software Development. The Company provides turnkey software development,
typically pursuant to fixed-price, fixed-time frame contracts. The projects
vary in size and may involve the development of new applications or new
functions for existing software applications. Each development project
typically involves all aspects of the software development process, including
definition, prototyping, design, pilots, programming, testing, installation
and maintenance. In the early stage of a development project, Infosys
personnel often work at a client's site to help determine project definition
and to estimate the scope and cost of the project. Infosys then performs
design review, software programming, program testing, module testing,
integration and volume testing, primarily at its own facilities in India. For
example, for a telecommunications client facing deregulation and subsequent
declining market share, the Company partnered with a specialty marketing firm
to design and implement a customer rewards program. Infosys was able to work
with both the marketing firm and the client to complete this project within
six months, ensuring the system's technical proficiency and enabling the
client to reverse the trend of declining market share.

Software Maintenance. The Company provides maintenance services for large
legacy software systems. Maintenance services include minor and major
modifications and enhancements (including Year 2000 and Eurocurrency
conversion) and production support. Such systems are either mainframe-based or
client/server and are typically essential to a client's business, though over
time they become progressively more difficult and costly for the client's
internal IT department to maintain. By outsourcing the maintenance
responsibilities to Infosys, clients can control costs and free their IT
departments for other work. The Company's IT professionals take an engineering
approach to software maintenance, focusing on the long-term functionality and
stability of the client's overall system and attempting to avoid problems
stemming from "quick-fix" solutions. The Company performs most of the
maintenance work at its own facilities using satellite-based links to the
client's system. In addition, the Company maintains a small team at the
client's facility to coordinate support functions. Infosys was a pioneer in
managing time-zone differences between India and the United States to provide
near 24-hour

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maintenance services. As an example, the IT department of a large retailer
with inadequate and inflexible systems was overburdened by both building new
systems and maintaining the current legacy infrastructure. The Company was
able to assume maintenance responsibilities for these systems in a short time
frame and reduce maintenance costs to the client by utilizing its offshore
facilities.

Software Re-engineering. The Company's re-engineering services assist
clients in migrating to new technologies while extending the life cycle of
existing systems that are rich in functionality. Projects include re-
engineering software to migrate applications from mainframe to client/server
architectures, to extend existing applications to the Internet, to migrate
from existing operating systems to UNIX or Windows NT or to update from a non-
relational to a relational database technology. For companies with extensive
proprietary software applications, implementing such technologies may require
rewriting and testing millions of lines of software code. As with its other
services, the Company has developed proven methodologies that govern the
planning, execution and testing of the software re-engineering process. For
instance, for a nationwide manufacturer and distributor experiencing operating
inefficiency with a legacy system installed in its two call centers, the
Company re-engineered the system to run in a distributed processing
environment with front-end Internet browser-based capabilities allowing 24-
hour Internet access to the client's distribution systems. As a result, the
client was able to consolidate its call center workforce into one location and
reduce its workforce by over 50%.

Dedicated Offshore Software Development Centers. The Company has pioneered
the concept of dedicated OSDCs in which a software development team that is
dedicated to a single client uses technology, tools, processes and
methodologies unique to that client. Each dedicated OSDC is located at a
Company facility in India and is staffed and managed by the Company. Once the
project priorities are established by the client, the Company, in conjunction
with the client's IT department, manages the execution of the project. By
focusing on a single client over an extended time frame, the dedicated OSDC
team gains a deeper understanding of the client's business and technology and
can begin to function as a virtual extension of the client's software team.
The Company has established dedicated OSDCs providing a range of services for
Ascend Communications, Inc., NCR Corporation and Nortel Networks, a division
of Northern Telecom Limited ("Nortel"). The Company's first OSDC, for Nortel,
was established in July 1993.

Software Products. In addition to the IT services described above, the
Company develops and markets certain proprietary software applications. BANCS
2000 is an on-line, retail and corporate banking system that offers rich
functionality, scalability and flexibility for automation of banking
operations. This product is used by banks in emerging markets that seek to
implement state-of-the-art banking technology and achieve high levels of
client service. BANCS 2000 has been installed at more than 300 bank branches
in India, Sri Lanka, Nepal, Indonesia and Tanzania. Through Yantra, the
Company also develops and markets WMSYantra, an open system software package
for warehouse management.

47
<PAGE>

Markets, Clients and Representative Engagements

The Company markets its services primarily to large IT-intensive
organizations in North America, Europe and Japan. The Company focuses on
certain market segments, including financial services, manufacturing and
distribution, retail, telecommunications and technology. During fiscal 1998
and for the nine months ended December 31, 1998, the following representative
clients accounted for 60.8% and 59.8% of the Company's revenues, respectively:

<TABLE>
<CAPTION>
Financial Services _Manufacturing and Distributio__n
------------------ --------------------------------
<S> <C>
Avco Financial Services, Inc. ConAgra, Inc.
Bank of America N.T. & S.A. Cooper Industries, Inc.
BankBoston, N.A. Kent Electronics Company
Goldman, Sachs & Co. Levi Strauss & Co.
Northwestern Mutual Life Insurance
Co. Quest International
The Western and Southern Life Reebok International Ltd.
Insurance Company
Visa International Service
Association Salomon S.A.
Toshiba Corporation
<CAPTION>
Telecommunications and Technology Retail
--------------------------------- --------------------------------
<S> <C>
Apple Computer, Inc. Ann Taylor, Inc.
Ascend Communications, Inc. B.J.'s Wholesale Club, Inc.
AST Research, Inc. Sainsbury's Supermarkets Limited
Belgacom Mobile N.V./S.A. J.C. Penney Company Corporation
Bell Atlantic Corporation Nordstrom, Inc.
NCR Corporation Staples, Inc.
Northern Telecom Limited The Gap, Inc.
Epson Software Development
Laboratory, Inc. The TJX Companies, Inc.
</TABLE>

The Company provides a wide range of IT services and maintains a disciplined
focus on its business mix in an effort to avoid service or client
concentration. Beginning in fiscal 1996, the Company aggressively sought to
minimize its client concentration and to accept as clients only those that met
strict guidelines for overall revenue potential and profitability. For fiscal
1997, fiscal 1998 and the nine months ended December 31, 1998, the Company's
largest client accounted for 15.6%, 10.5% and 6.7%, respectively, of revenues
and its five largest clients accounted for 43.1%, 35.1% and 29.2%,
respectively, of revenues.

While each engagement differs, the following case studies describe the
Company's relationship with several of its largest clients:

Northern Telecom Limited. In 1993, the Company established its first
dedicated OSDC for Nortel, a division of Northern Telecom Limited, a leading
global supplier of telecommunications products and networks. The Company
provides a variety of IT services for Nortel through a team of Infosys
professionals assigned to work on long-term projects for Nortel in a separate
dedicated secure area within the Company's Bangalore facility. Nortel helped
train the Infosys team in its technology and products, invested in
communication links and provided certain equipment, including a
telecommunications switch, so that the Company's development facilities would
replicate the work environment of Nortel. As the Company's understanding of
Nortel's needs and technologies has developed, the scope of projects performed
by Infosys for Nortel has gradually increased from software maintenance
projects to the development of critical software for Nortel products. As of
December 31, 1998, approximately 245 Company personnel were assigned to the
OSDC dedicated to Nortel.

Apple Computer, Inc. In 1993, Apple Computer, Inc. ("Apple"), a leading
developer and manufacturer of personal computers, decided to restructure
certain areas of its internal IT services operations. After an

48
<PAGE>

extensive selection process, Apple chose the Company as a major outside IT
services provider. In order to demonstrate the benefits of the offshore
development model, the Company initially began with one project. The Company
was subsequently awarded numerous additional projects including re-engineering
services, custom software development and maintenance services. One
illustrative project on which Infosys assisted Apple was modernizing Apple's
legacy system, which handles orders for finished goods and services. The
Company re-engineered the legacy system, implementing modern technology and
making the system more responsive to Apple's market needs. Since 1993, the
Company has been able to meet Apple's IT services needs through its flexible,
scalable workforce that can ramp up quickly to tackle new projects.

Nordstrom, Inc. Nordstrom, a high-end retailer located in most major
metropolitan areas across the United States, expanded rapidly in the 1990s.
This rapid expansion created heavy demands on its internal resources. These
resources were primarily responsible for a business critical system that was
difficult to maintain and expensive to service. The Company approached
Nordstrom in 1994 and offered its services as a long-term solution to meet
Nordstrom's internal IT needs. At the outset of the relationship, 25 Infosys
IT professionals were trained by Nordstrom in PacBase, a specialized case
tool, at the Company's headquarters in India. The Company's IT professionals
performed the requirements definition and prototype work at Nordstrom's site,
then moved offshore to execute the testing and programming phases of the
project. Nordstrom estimates that this approach saved it $750,000 in
consulting fees. The Company has since provided Nordstrom with a high quality
workforce, trained in PacBase and able to be deployed quickly to meet
Nordstrom's needs. The Company has played a major role in reducing Nordstrom's
application development schedule. Nordstrom considers the Company to be an
extension of its in-house IT services department and has even adopted the
Company's software quality practices. The Company is the exclusive offshore
software services provider for Nordstrom.

Sales and Marketing

The Company sells and markets its services and products from 17 sales
offices located in five countries. In the United States, the Company presently
has sales offices located in Atlanta, Boston, Chicago, Dallas, Detroit,
Fremont, Los Angeles, New York and Seattle. Additionally, the Company's
international sales offices are located in Canada, India, Japan, Germany and
the United Kingdom. With its global sales headquarters in Fremont, California
and its corporate marketing group in Bangalore, India, the Company's sales and
marketing efforts are targeted toward IT-intensive organizations in North
America, Europe and Japan. As of December 31, 1998, the Company had 21 sales
and marketing employees outside of India. To continue this focus on countries
with sophisticated IT services needs, the Company intends to expand its global
sales and marketing infrastructure by opening additional regional sales and
marketing offices in Europe. In addition, the Company has partnered with
Teksels S.A., a Swiss firm, to assist its efforts in Switzerland.

From its offices located around the world, the Company's sales professionals
contact prospective clients in developed markets and position the Company as a
leading IT services provider with operations in India. In many cases,
potential clients in their search for offshore IT services providers submit a
request for proposal from the leading Indian software firms, including the
Company. The Company's superior management team, quality of work and IT
professionals and competitive prices are often cited as reasons for the award
of competitive contracts. In addition, the Company's impressive client
references and endorsements as well as its willingness to participate in trade
shows and speaking engagements, have helped the Company to generate greater
awareness for its services. The Company believes that the Offering and its
profile as a public company in the United States will further enhance its
corporate marketing efforts. Moreover, the Company intends to use a portion of
the proceeds from the Offering to bolster its marketing efforts in the United
States and Europe.

The Company has focused its sales and marketing efforts on expanding the
scope and depth of its relationships with existing clients. Although initially
the Company may only provide one service to a client, the Company seeks to
convince the client to expand and diversify the type of services it outsources
to the Company. As a result, the Company strengthens its relationships with
its clients by closely integrating its services with its clients' IT
operations. The success of this targeted strategy is reflected in the
Company's high "repeat" rate of business. Over 80% of the Company's revenues
in each of the last three fiscal years have been generated from pre-existing
clients.

49
<PAGE>

In marketing certain services, the Company has pursued a "branded services"
strategy. For example, the Company markets its Year 2000 conversion services
under the brand name "In2000," so as to highlight the well-developed toolset
and proprietary methodology used to deliver these services. By establishing
branded services, the Company's objective is to enhance the credibility and
facilitate the marketing of such services. These brand names also enable the
Company to market its services to new clients who may already recognize the
brand name.

Human Resources

As of December 31, 1998, the Company had approximately 3,500 employees,
including approximately 3,000 IT professionals, up from approximately 2,440
and approximately 2,050, respectively, as of December 31, 1997. The Company
invests heavily in its programs to recruit, train and retain qualified
employees, and management believes the Company has established a reputation as
one of the most desirable employers for software engineers in India.

The Company focuses its recruiting efforts on the top 20% of students from
engineering departments of Indian schools and relies on a rigorous selection
process involving a series of tests and interviews to identify the best
applicants. Because the Company emphasizes flexibility and innovation,
applicants are selected on the basis of their ability to learn as well as
their academic achievement, conceptual knowledge and their temperament for,
and fit with, the Company's culture. The Company's reputation as a premier
employer enables it to select from a large pool of qualified applicants. For
example, in fiscal 1998, the Company received approximately 70,870 job
applications, tested approximately 21,350, interviewed approximately 5,800 and
extended job offers to approximately 1,790, of whom approximately 1,300
accepted.

The Company seeks to attract and motivate IT professionals by offering: an
entrepreneurial environment that empowers IT professionals; programs that
recognize and reward performance; challenging assignments; a continuous
updating of skills; and a culture that emphasizes openness, integrity and
respect for the employee. IT professionals receive competitive salaries and
benefits and are eligible to participate in the Company's stock option plans.
In addition, the Company spends significant resources on training and
continuing education. To conduct training, the Company employs a 33-person
faculty, including 20 with doctorate or master's degrees. The faculty conducts
14-week training sessions for new recruits and a variety of two-week
continuing education courses in technology and management skills.

At any given time, approximately 15% of the Company's IT professionals are
working on-site at client facilities in the United States and elsewhere while
the balance are working off-site in India. On average, approximately 190, 330
and 510 of the Company's IT professionals worked on-site in the United States
and elsewhere per month in fiscal 1997, fiscal 1998 and the nine months ended
December 31, 1998, respectively. On average, approximately 1,210, 1,780 and
2,510 of the Company's IT professionals and support staff worked off-site in
India per month in fiscal 1997, fiscal 1998 and the nine months ended December
31, 1998, respectively.

The Company's professionals that work on-site at client facilities in the
United States on temporary and extended assignments are typically required to
obtain visas. As of December 31, 1998, substantially all of the Company's
personnel in the United States were working pursuant to H-1B visas (231
persons) or L-1 visas (111 persons). Both H-1B and L-1 visas require that
recipients meet certain education requirements; however, only employees who
have worked for the Company for at least one year are eligible to obtain L-1
visas. The Company is generally able to obtain H-1B and L-1 visas within two
to four months of applying for such visas, which remain valid for three years.
Although there is no limit to new L-1 petitions, there is a limit to the
number of new H-1B petitions that the United States Immigration and
Naturalization Service may approve in any government fiscal year. In years in
which this limit is reached, the Company may be unable to obtain H-1B visas
necessary to bring critical Indian IT professionals to the United States on an
extended basis. The H-1B limit was reached in May 1998 for the U.S.
government's fiscal year ending September 30, 1998. The Company planned for
the H-1B limit being reached prior to the end of the U.S. government's current
fiscal year primarily by forecasting its annual needs for such visas early in
the U.S. government's fiscal year and applying for such visas

50
<PAGE>

as soon as practicable. In addition, the Company utilizes L-1 visas whenever
available and redeploys existing H-1B visa holders in order to minimize the
number of new H-1B visas needed by the Company. While the Company anticipated
that such limit would be reached prior to the end of the U.S. government's
fiscal year and has made efforts to plan accordingly, there can be no
assurance that the Company will continue to be able to obtain a sufficient
number of H-1B visas. See "Risk Factors--Restrictions on U.S. Immigration."

The market for hiring software professionals is highly competitive.
Competing employers include multinational corporations that perform software
development in India through subsidiaries and joint ventures with Indian
companies, a number of well-known Indian IT services and software product
companies and a large number of small and medium regional companies, many with
affiliates or parent companies in the United States and Europe. See "Risk
Factors--Dependence on Skilled Personnel; Risks of Wage Inflation."

Facilities

As part of its strategy to provide high quality services to its clients, the
Company has a detailed facility management plan. First, the Company seeks to
provide its Indian IT professionals with facilities that are comparable to
those used by software companies in the United States and Europe. Second, the
Company seeks to establish facilities near large sources of technical talent.
Third, the Company equips its facilities to minimize vulnerability to
interruptions in local utility and telecommunication services.

The Company's headquarters facility in Bangalore is a 160,000 square foot
building located on approximately five acres in a Software Technology Park in
Electronics City. The Company acquired the land from the State of Karnataka in
1993 and has subsequently acquired parcels for various other offices, pursuant
to certain lease cum sale agreements (the "Conditional Purchase Agreements"),
which are used by the State of Karnataka to make land available to private
companies for specific purposes. Under the Conditional Purchase Agreements,
property is sold subject to a long-term (typically 25-year), rental-free lease
which transfers ownership to the buyer at the end of the period provided that
the buyer uses the land for specified purposes. The Conditional Purchase
Agreements require the Company to use the various parcels for software
development facilities. Typically, the Company pays 99% of the purchase price
at the time the agreement is signed and pays the remaining 1% when the term is
concluded.

The Company has its worldwide sales headquarters in Fremont, California and
branch sales offices in Atlanta, Bangalore, Boston, Chennai, Chicago, Dallas,
Detroit, Frankfurt, London, Los Angeles, Mumbai, New Delhi, New York, Seattle,
Tokyo and Toronto. All sales offices, except the Mumbai office, are in leased
facilities.

The Company plans to expand its facilities to meet its anticipated growth.
Currently the Company is planning new facilities in Bangalore, Bhubaneswar,
Chennai, Mangalore and Pune to provide an additional 890,000 square feet of
office space. As of December 31, 1998, the Company had contractual commitments
for capital expenditures of $6.3 million and had budgeted aggregate capital
expenditures of $32.4 million for the fourth quarter of fiscal 1999 through
fiscal 2000 to acquire, build and equip new facilities in India and other
regions including potentially Southeast Asia, Latin America and Europe. The
Company has not yet made contractual commitments for the majority of its
budgeted aggregate capital expenditures and there can be no assurance that the
Company will not significantly alter or reduce its proposed expansion plans.

51
<PAGE>

The following table sets forth certain information as of December 31, 1998
relating to the Company's principal facilities and proposed developments:

<TABLE>
<CAPTION>
Approximate
Location Square Feet Status Type of Facility
- ------------------------ ----------- ----------- ----------------------------
<S> <C> <C> <C>
Bangalore, India 300,000 Conditional Proposed Software
(Plots 45, 46, 97C, 97D Purchase Development Facility
and 97E, Hosur Road)
Bangalore, India 150,000 Conditional Proposed Software
(Plots 4/1, 4/2, 4/3, Purchase Development Facility
4/4, 26/1, 26/2, Hosur
Road)
Bangalore, India 160,000 Conditional Corporate Headquarters,
(Plots 44 and 97A, Purchase Software Development
Hosur Road) Facility
Bangalore, India 7,000 Owned Software Development
(Dickenson Road) Facility
Bangalore, India 11,300 Leased Software Development
(BTM Layout) Facility
Bangalore, India 18,700 Leased Software Development
(Koramangala) Facility
Bangalore, India * Owned Proposed Office Premises
(J.P. Nagar, Phase II)
Bangalore, India 59,500 Leased Software Development
(J.P. Nagar, Phase III) Facility
Bangalore, India 78,700 Owned Employee Residence Flats
(Adarsh Gardens)
Mangalore, India 14,100 Leased Software Development
Facility
Mangalore, India 5,100 Owned Employee Residence Flats
Mumbai, India 1,200 Owned Sales and Marketing Office
Pune, India 43,700 Leased Software Development
Facility
Pune, India 160,000 Conditional Proposed Software
Purchase Development Facility
Pune, India 3,300 Owned Employee Residence Flats
Bhubaneswar, India 52,900 Leased Software Development
Facility
Bhubaneswar, India 150,000 Leased Proposed Software
Development Facility
Chennai, India 26,600 Leased Software Development
Facility
Chennai, India 23,200 Leased Software Development
Facility
Fremont, California 6,200 Leased Worldwide Sales Headquarters
</TABLE>

- --------
* The Company has not yet determined the aggregate square feet of the proposed
development. The land parcel is approximately 16,500 square feet.

Competition

52
<PAGE>

potentially including countries with lower personnel costs than those
prevailing in India. Part of the Company's competitive advantage has
historically been a cost advantage relative to service providers in the United
States and Europe. Since wage costs in India are presently increasing at a
faster rate than those in the United States, the Company's ability to compete
effectively will become increasingly dependent on its reputation, the quality
of its services and its expertise in specific markets. Many of the Company's
competitors have significantly greater financial, technical and marketing
resources and generate greater revenue than the Company, and there can be no
assurance that the Company will be able to compete successfully with such
competitors and will not lose existing clients to such competitors. The
Company believes that its ability to compete also depends in part on a number
of factors outside its control, including the ability of its competitors to
attract, train, motivate and retain highly skilled IT professionals, the price
at which its competitors offer comparable services and the extent of its
competitors' responsiveness to client needs.

Intellectual Property

Ownership of software and associated deliverables created for clients is
generally retained by or assigned to the client, and the Company does not
retain an interest in such software or deliverables. The Company also develops
software products and software tools which are licensed to clients and remain
the property of the Company. The Company relies upon a combination of non-
disclosure and other contractual arrangements and copyright, trade secret and
trademark laws to protect its proprietary rights in technology. The Company
currently requires its IT professionals to enter into non-disclosure and
assignment of rights agreements to limit use of, access to and distribution of
its proprietary information. The source code for the Company's proprietary
software is generally protected as trade secrets and as unpublished
copyrighted works. The Company has obtained registration of INFOSYS as a
trademark in India but not in the United States. The Company does not have any
patents or registered copyrights in the United States. The Company generally
applies for trademarks and service marks to identify its various service and
product offerings.

The laws of India may not, under some circumstances, permit the protection
of the Company's proprietary rights in the same manner or to the same extent
as the laws of the United States. India is a member of the Berne Convention
and the Universal Copyright Convention, as revised at Paris (1971), both
international treaties. As a member of the Berne Convention, the Government of
India has agreed to extend copyright protection under its domestic laws to
foreign works, including works created or produced in the United States. The
Company believes that laws, rules, regulations and treaties in effect in the
United States and India are adequate to protect it from misappropriation or
unauthorized use of its copyrights. However, there can be no assurance that
such laws will not change in ways that may prevent or restrict the protection
of the Company's proprietary rights. There can be no assurance that the steps
taken by the Company to protect its proprietary rights will be adequate to
deter misappropriation of any of its proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights.

Although the Company believes that its services and products do not infringe
on the intellectual property rights of others, there can be no assurance that
such a claim will not be asserted against the Company in the future. Assertion
of such claims against the Company could result in litigation, and there is no
assurance that the Company would prevail in such litigation or be able to
obtain a license for the use of any infringed intellectual property from a
third party on commercially reasonable terms. There can be no assurance that
the Company will be able to protect such licenses from infringement or misuse,
or prevent infringement claims against the Company in connection with its
licensing efforts. The Company expects that the risk of infringement claims
against the Company will increase if more of the Company's competitors are
able to obtain patents for software products and processes. Any such claims,
regardless of their outcome, could result in substantial cost to the Company
and divert management's attention from the Company's operations. Any
infringement claim or litigation against the Company could, therefore, have a
material adverse effect on the Company's results of operations and financial
condition. See "Risk Factors--Intellectual Property Rights."

Legal Proceedings

The Company is not currently a party to any material legal proceedings.

53
<PAGE>

MANAGEMENT

Directors and Executive Officers

The directors and executive officers of the Company, their respective ages
as of December 31, 1998, and their respective positions with the Company are
as follows:

<TABLE>
<CAPTION>
Name Age Position
------------------------------- --- ------------------------------------------
<C> <C> <S>
N.R. Narayana Murthy........... 52 Chairman of the Board and Chief Executive
Officer
Nandan M. Nilekani............. 43 Managing Director (Director, President and
Chief Operating Officer)
N.S. Raghavan.................. 55 Director and Head--Human Resources and
Education
S. Gopalakrishnan.............. 43 Director and Head--Client Delivery and
Technology
K. Dinesh...................... 44 Director and Head--Quality, Productivity
and MIS
S.D. Shibulal.................. 43 Director, Head--Manufacturing and
Distribution Business Unit and Head--
Internet and Intranet Business Unit
Dr. P. Balasubramanian......... 49 Senior Vice President and Head--Financial
Services and Transportation Business Unit
Srinath Batni.................. 44 Senior Vice President and Head--Retail and
Telecommunications Business Unit
Ashwani K. Khurana............. 48 Senior Vice President and Head--Banking
Business Unit (Sales and Support)
Phaneesh Murthy................ 35 Senior Vice President and Head--Worldwide
Sales
T.V. Mohandas Pai.............. 40 Senior Vice President and Head--Finance
and Administration
Dr. M.S.S. Prabhu.............. 50 Senior Vice President and Head--
Engineering Services Business Unit
Hema Ravichandar............... 38 Senior Vice President and Head--Human
Resources
Raghupati G. Bhandi............ 38 Vice President--Enterprise Resource
Planning
Vasudeva L. Rao................ 37 Vice President--Manufacturing and
Distribution
Rajiv Kuchal................... 33 Associate Vice President and Head--Nortel
OSDC Business Unit
Dr. S. Yegneshwar.............. 38 Associate Vice President and Head--
Education and Research
Susim M. Datta (1)............. 62 Director
Deepak Satwalekar (1).......... 50 Director
Dr. Marti G. Subrahmanyam (1).. 52 Director
Ramesh Vangal (1).............. 44 Director
</TABLE>
- --------
(1) Member of the Audit and Compensation Committees.

N.R. Narayana Murthy has served as Chairman of the Board and Chief Executive
Officer of Infosys since 1981, when he founded the Company with six software
professionals. Mr. Murthy also served as Managing Director of Infosys until
February 1999. While at Infosys, from 1992 to 1994, Mr. Murthy also served as
the President of National Association of Software and Service Companies
("NASSCOM"). Mr. Murthy is on the Governing Council of the National
Information Technology Task Force of India and was voted "IT Man of the Year"
for 1996 by Dataquest India. In 1998, Mr. Murthy was awarded the prestigious
J.R.D. Tata Corporate Leadership Award. Since August 1998, Mr. Murthy has
served as a director of the Industrial Credit and Investment Corporation of
India ("ICICI") and since 1998, he has served as a director of Videsh Sanchar
Nigam Limited ("VSNL"). He is a Fellow of the All India Management Association
("AIMA") and the Computer Society of India ("CSI"). Mr. Murthy received a B.E.
in Electrical Engineering from the University of Mysore and a M.Tech. from the
Indian Institute of Technology ("IIT"), Kanpur.

54
<PAGE>

Nandan M. Nilekani is a co-founder of Infosys and has served as a Director
since 1981, Head--Marketing and Sales of Infosys since 1987, Head--Banking
Business Unit since 1997 and Managing Director (President and Chief Operating
Officer) since February 1999. From 1981 to 1987, Mr. Nilekani was in the
United States managing the marketing and development efforts of Infosys. Mr.
Nilekani is a co-founder of NASSCOM and received a B.Tech. in Electrical
Engineering from IIT, Mumbai.

N.S. Raghavan is a co-founder of Infosys and has served as a Director since
1981 Head--Human Resources and Education of Infosys since 1996. From 1981 to
1996, he served in various senior management positions within Infosys.
Mr. Raghavan received a B.E. in Electrical Engineering from Andhra University.

S. Gopalakrishnan is a co-founder of Infosys and has served as a Director
since 1981 and Head--Client Delivery and Technology of Infosys since 1996.
From 1994 and 1996, Mr. Gopalakrishnan was head of Technical Support Services
for Infosys. From 1987 to 1994, he was Technical Vice President and managed
all projects at the U.S.-based KSA/Infosys, a former joint venture between the
Company and Kurt Salmon Associates. Prior to that, Mr. Gopalakrishnan was
Technical Director of Infosys, responsible for the technical direction of the
Company. Mr. Gopalakrishnan received a M.Sc. in Physics and an M.Tech. in
Computer Science from IIT, Chennai.

K. Dinesh is a co-founder of Infosys and has served as a Director since
1985. He has served as Head--Quality, Productivity and MIS of Infosys since
1996. From 1991 to 1996, Mr. Dinesh served in various project management
capacities and was responsible for worldwide software development efforts for
Infosys. From 1981 to 1990, he managed projects for Infosys in the United
States. Mr. Dinesh received a M.Sc. degree in Mathematics from Bangalore
University.

S.D. Shibulal is a co-founder of Infosys and has served as a Director from
1984 to 1991 and since 1997. He has served as Head--Manufacturing,
Distribution and Year 2000 Business Unit and Head--Internet and Intranet
Business Unit of Infosys since 1997. From 1991 to 1996, Mr. Shibulal was on
sabbatical from Infosys and served as Senior Information Resource Manager at
Sun Microsystems, Inc. From 1981 to 1991, he worked for Infosys in the United
States on projects in the retail and manufacturing industries. Mr. Shibulal
received a M.Sc. in Physics from the University of Kerala and a M.S. in
Computer Science from Boston University.

Dr. P. Balasubramanian has served as Senior Vice President and Head--
Financial Services and Transportation Business Unit of Infosys since 1995.
From 1989 to 1992, Dr. Balasubramanian was Chief Executive Officer and
Technical Director of Hitek Software Engineers Limited ("Hitek"), Jamaica,
West Indies. From 1992 to 1994, he was a Technical Director of Hitek. From
1986 to 1989, Dr. Balasubramanian was Chief Executive Officer of Cholamandalam
Software Limited, Chennai. Dr. Balasubramanian has been invited as guest
faculty to several executive training programs in India as well as at the
University of West Indies. Dr. Balasubramanian received a B.Tech. and M.Tech
from IIT, Chennai and a Ph.D. in Operations Research and Financial Management
from Purdue University.

Srinath Batni has served as Senior Vice President and Head--Retail and
Telecommunications Business Unit of Infosys since 1996. After joining Infosys
in 1992, Mr. Batni was a Project Manager. From 1990 to 1992, he was Manager of
Technical Support for PSI Bull, an Indian software development subsidiary of
Bull, S.A., a French company. Mr. Batni received a B.E. in Mechanical
Engineering from Mysore University and a M.E. in Mechanical Engineering from
the Indian Institute of Science, Bangalore.

Ashwani K. Khurana has served as Senior Vice President and Head--Banking
Business Unit (Sales and Support) of Infosys since 1994. He joined the Company
in 1992 as Managing Director of Infosys Digital Systems Pvt. Ltd., formerly a
subsidiary of the Company. Prior to that, for 14 years, Mr. Khurana was a
Regional Manager for WIDIA India Limited, an Indian subsidiary of KRUPP WIDIA
of Germany, an industrial product manufacturer. Mr. Khurana received a B.Tech.
from IIT, Delhi.

Phaneesh Murthy has served as Senior Vice President and Head--Worldwide
Sales of Infosys since 1996. From 1992 to 1996, Mr. Murthy was a Marketing
Manager for Infosys based in the United States. From 1987 to 1992, he worked
in sales and marketing for Sonata, a software division of Indian Organic
Chemicals Ltd. Mr. Murthy received a B.Tech. in Mechanical Engineering from
IIT, Chennai and a post graduate diploma in business administration from IIM,
Ahmedabad.

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<PAGE>

T.V. Mohandas Pai has served as Senior Vice President and Head--Finance and
Administration of Infosys since 1996. From 1994 to 1996, he served as Vice
President of Finance at Infosys. From 1988 to 1994, Mr. Pai was Executive
Director of Prakash Leasing Limited. He was also a member of the Capital
Markets Committee of the Institute of Chartered Accountants of India. Mr. Pai
received a B.Com. from St. Joseph's College of Commerce, Bangalore and a LL.B.
from the University Law College, Bangalore. Mr. Pai is a Fellow Member of the
Institute of Chartered Accountants of India.

Dr. M.S.S. Prabhu has served as Senior Vice President and Head--Engineering
Services Business Unit of Infosys since 1997. From 1994 to 1997, Dr. Prabhu
served as head of CAD/CAM group at Tata Consultancy Services. From 1972 to
1994, he served in various capacities for the Indian Satellite Research
Organization. Dr. Prabhu received a B.E. in Civil Engineering from Bangalore
University and a Ph.D. in Aeronautical Engineering from Indian Institute of
Science, Bangalore.

Hema Ravichandar has served as Senior Vice President and Head--Human
Resources of Infosys since 1998. From 1996 to 1998, Ms. Ravichandar was an
independent consultant. From 1992 to 1995, she served as Head--Human Resources
at Infosys. From 1983 to 1992, Ms. Ravichandar was employed by Motor
Industries Company Limited as Deputy Manager--Human Resource Development. Ms.
Ravichandar received a B.A. in Economics and a post graduate diploma in
management from IIM, Ahmedabad.

Raghupati G. Bhandi has served as Vice President of Infosys since April
1998. From 1995 to 1998, he started and developed the Company's first software
development facility outside of Bangalore. From 1991 to 1995, Mr. Bhandi
worked in the Quality Department of Infosys with attention to ISO 9000
certification. From 1988 to 1991, he was an Assistant Manager on projects in
the United States and Europe. Mr. Bhandi received a B.E. from Mysore
University and a M.Tech. in Industrial Management and Engineering from IIT,
Kanpur.

Vasudeva L. Rao has served as Vice President of Infosys since April 1998,
operating in the distribution and logistics domains of the Manufacturing and
Distribution Business Unit. From 1994 to 1996, he was an Associate Vice
President working in the Manufacturing and Distribution Unit. From 1991 to
1994, he served as a project manager in the retail industry at Software
Sourcing Company, formerly KSA/Infosys. From 1985 to 1991, Mr. Rao was a
software engineer for Infosys based in the United States. Mr. Rao received a
B.E. in Mechanical Engineering from Bangalore University.

Rajiv Kuchal has served as Associate Vice President of Infosys since 1998
and Head--Nortel OSDC Business Unit of Infosys since April 1998. From 1990 to
1998, Mr. Kuchal served in various capacities for the Company, including
projects relating to an electronic telex interface and management of the
Nortel OSDC before it became a separate business unit. Mr. Kuchal received a
B.Tech. in Electrical and Electronics Engineering from IIT, Delhi.

Dr. S. Yegneshwar has served as Associate Vice President and Head--Education
and Research of Infosys since 1996. From 1993 to 1996, Dr. Yegneshwar was a
group leader of the Software Engineering group in the Education and Research
Department of Infosys. From 1990 to 1993, he was an Assistant Professor of
Computers and Information Systems at IIM, Ahmedabad, where he taught courses
in software engineering and management to postgraduate and doctoral students.
Dr. Yegneshwar received a B.E. in Mechanical Engineering from the Birla
Institute of Technology and Science, Pilani and a Ph.D. in Computer Science
and Engineering from IIT, Mumbai.

Susim M. Datta has served as a Director of Infosys since 1997. He is
Chairman of Castrol India Ltd. and IL&FS Venture Corporation Ltd. He is a
Director of Philips India Ltd., Tata Trustee Company Ltd. and various other
publicly-held corporations in India. From 1990 to 1996, he was Chairman of
Hindustan Lever Ltd. and all Unilever Group Companies in India and Nepal. Mr.
Datta is a Trustee of the government-sponsored India Brand Equity Fund Trust
and a member of the Advisory Board of the Council for Fair Business Practices,
Mumbai. He is also Chairman of the Board of Governors of IIM, Bangalore and
the Goa Institute of Management. Mr. Datta received a M.Sc. from Calcutta
University.

56
<PAGE>

Deepak M. Satwalekar has served as a Director of Infosys since 1997. He has
been Managing Director of Housing Development Finance Corporation Ltd. since
1993, and was Deputy Managing Director since 1990. He has been a member of the
Managing Committee of the Bombay Chamber of Commerce and Industry from 1996 to
1998. Mr. Satwalekar was also a Member of the Economic Affairs Committee of
the Indo-American Chamber of Commerce from 1993 to 1994 and 1996 to 1997. He
is a Director of several companies in India and elsewhere. Mr. Satwalekar
received a B.Tech. in Mechanical Engineering from IIT, Mumbai and a M.B.A.
from the American University.

Dr. Marti G. Subrahmanyam has served as a Director of Infosys since April
1998. He has served as the Charles E. Merrill Professor of Finance and
Economics at the Stern School of Business at New York University since 1991
and has been a visiting professor at IIT, Chennai, INSEAD, IIM, Ahmedabad and
Manchester Business School, among other academic institutions. Dr.
Subrahmanyam has written several books and published numerous articles in the
areas of finance and economics. He is a Director of ICICI Limited, Nomura
Asset Management Inc. and Deutsche Software India Ltd., a subsidiary of
Deutsche Bank AG. Dr. Subrahmanyam received a B.Tech. from IIT, Chennai, a
Diploma in Business Administration, from IIM, Ahmedabad and a Ph.D. in Finance
and Economics from the Massachusetts Institute of Technology.

Ramesh Vangal has served as a Director of Infosys since 1997. He has served
as the President of Seagram Asia Pacific since 1997. From 1994 to 1997, he was
a member of the Worldwide Operating Council of PepsiCo and was President of
PepsiCo Foods International, Asia Pacific. From 1985 to 1994, he served in
various management capacities for PepsiCo. Mr. Vangal received a B.Tech. from
IIT, Mumbai and a M.Sc. in Business from the London Business School. He also
holds a Certificate Diploma, Accounting and Finance from the Institute of
Chartered Accountants, London.

Board Composition

The Company's Articles set the minimum number of directors at three and the
maximum number of directors at 12. The Company presently has 10 directors. The
Indian Companies Act and the Company's Articles require that: (i) at least
two-thirds of the Company's directors shall be subject to re-election by the
Company's shareholders; and (ii) at least one-third of the Company's directors
who are subject to re-election shall be up for re-election at each annual
meeting of the Company's shareholders. The Company's Articles provide that
Mr. N.R. Narayana Murthy shall serve as the Company's Chairman of the Board
and shall not be subject to re-election as long as Mr. Murthy, together with
his relatives, owns at least 5% of the Company's outstanding equity
securities. There are no family relationships between any of the directors or
executive officers of the Company.

Director Compensation

In fiscal 1998, the Company's three non-employee directors were paid an
aggregate of $24,148. Directors who are also employees of the Company do not
receive any additional compensation for their service on the Board of
Directors. Directors are also reimbursed for certain expenses in connection
with their attendance at Board and Committee meetings.

57
<PAGE>

Executive Compensation

The following sets forth certain summary information with respect to the
compensation paid by the Company to the Company's Chief Executive Officer.
Except for one executive officer whose cash compensation exceeded $100,000
during fiscal 1997 and fiscal 1998 due to overseas assignment, none of the
Company's executive officers earned a combined annual salary and bonus in
excess of $100,000 during any of the last three fiscal years. The amounts in
the following table are in dollars based on the Noon Buying Rate of 39.53
Indian Rupees per U.S. Dollar on March 31, 1998.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation Number of
----------------------------- Securities
Name and Principal Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation(1) Options Compensation
- ------------------------ ------ ------- ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
N. R. Narayana Murthy... 1998 $22,739 -- $4,104 -- --
Chairman and Chief Ex- 1997 23,013 -- 3,439 -- --
ecutive Officer 1996 24,293 -- 2,987 -- --
</TABLE>
- --------
(1) Includes amounts paid pursuant to Company-sponsored pension and retirement
funds.

Option Grants in Last Fiscal Year

There were no options granted to the Chief Executive Officer during fiscal
1998.

Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values

The Chief Executive Officer did not exercise or hold any options during
fiscal 1998.

Employment Agreements

Under the Indian Companies Act, the Company's shareholders must approve the
salary, bonus and benefits of all employee directors at an Annual General
Meeting of Shareholders. Each employee director of the Company has signed an
agreement containing the terms and conditions of employment, including a
monthly salary, performance bonus and benefits including vacation, medical
reimbursement and pension fund contributions. These agreements are made for a
five year period, but either the Company or the employee director may
terminate the agreement upon six months notice to the other party.

Benefit Plans

1994 Employees Stock Offer Plan. The ESOP was approved by the shareholders
on June 25, 1994 and adopted by the Board of Directors on September 15, 1994.
The ESOP provides for the grant of rights to purchase Equity Shares to
eligible employees. Each stock purchase right provides the right to acquire
one Equity Share of the Company.

The ESOP is administered by an advisory board which consists of three
Company directors and two independent members. The Company has created an
employee welfare trust (the "Trust") to hold the Equity Shares eligible for
future issuance and subject to vesting under the ESOP. The advisory board
selects eligible full-time employees for the grant of stock purchase rights
from the Trust. The advisory board, in its discretion, selects employees based
upon various factors, including, without limitation: employee performance,
period of service and status in the Company. Founders of the Company are not
eligible to participate in the ESOP.

58
<PAGE>

Stock purchase rights granted under the ESOP are generally non-transferable
by the employee. However, if the employee terminates employment by
resignation, dismissal or severance, his or her stock purchase rights are
canceled and his or her Equity Shares subject to vesting are transferred back
to the Trust. If the employee terminates employment by death or retirement,
his or her stock purchase rights and Equity Shares subject to vesting are
transferred to the employee's legal heirs or shall continue to be held by the
employee, as the case may be. Each purchase right entitles the holder to
purchase one Equity Share at an exercise price of Rs.100 (representing $2.35
per Equity Share at the Noon Buying Rate in effect on March 10, 1999). The
stock purchase rights issued under the ESOP are exercisable for a period of
five years after the date of issuance of the stock purchase right to the
employee from the Trust. Equity Shares received by an employee under the ESOP
are non-transferable for a period of five years from the date the stock
purchase right was issued to the employee. After the expiration of this lock-
in period, the employee shall become the absolute owner of the Equity Shares.
If the Company declares a stock dividend, the dividend shares distributed to
ESOP participants would not be subject to vesting. The ESOP is subject to all
applicable laws, rules, regulations and to such approvals by any governmental
agencies as may be required.

As of March 10, 1999, the Trust held 208,800 Equity Shares which are
reserved for issuance upon exercise of stock purchase rights to be granted by
the Trust in the future.

1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the "1998
Plan") provides for the grant of nonstatutory stock options and incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code")), to employees of the
Company. The establishment of the 1998 Plan was approved by the Board of
Directors in December 1997 and by the shareholders in January 1998. The
Government of India has approved the 1998 Plan, subject to a $50 million limit
on the aggregate market value of the Equity Shares reserved pursuant to the
1998 Plan. Accordingly, the total Equity Shares reserved for issuance may be
reduced by the Board of Directors from time to time to comply with the
Government of India's $50 million limit. A total of 800,000 Equity Shares are
currently reserved for issuance pursuant to the 1998 Plan. Unless terminated
sooner, the 1998 Plan will terminate automatically in January 2008. All
options under the 1998 Plan will be exercisable for ADSs represented by ADRs.

The 1998 Plan may be administered by the Board of Directors or a committee
of the Board (the "Committee"). The Committee has the power to determine the
terms of the options granted, including the exercise price, the number of ADSs
subject to each option, the exercisability thereof, and the form of
consideration payable upon such exercise. In addition, the Committee has the
authority to amend, suspend or terminate the 1998 Plan, provided that no such
action may affect any ADS previously issued and sold or any option previously
granted under the 1998 Plan.

Options granted under the 1998 Plan are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 1998 Plan must generally be
exercised within three months of the end of optionee's status as an employee
of the Company, but in no event later than the expiration of the option's
term. In the event of optionee's termination as a result of death or
disability, the vesting and exercisability of the optionee's option will
accelerate in full and the option must be exercised within 12 months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option's term. The exercise price of incentive stock
options granted under the 1998 Plan must be at least equal to the fair market
value of the ADSs on the date of grant. The exercise price of nonstatutory
stock options granted under the 1998 Plan must be at least equal to 90% of the
fair market value of the ADSs on the date of grant. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of the Company's outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market
value on the grant date and the term of such incentive stock option must not
exceed five years. The term of all other options granted under the 1998 Plan
may not exceed 10 years.

The 1998 Plan provides that in the event of a merger of the Company with or
into another corporation, a sale of substantially all of the Company's assets
or a like transaction involving the Company, each option shall be assumed or
an equivalent option substituted by the successor corporation. If the
outstanding options are not assumed or substituted as described in the
preceding sentence, the vesting and exercisability of each option will
accelerate in full.

59
<PAGE>

Indemnification Agreements

The Company has entered into agreements to indemnify its directors and
officers for certain claims brought under U.S. laws to the fullest extent
permitted by Indian law. These agreements, among other things, indemnify
directors and officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company as to which
indemnification will be required or permitted. The Company is unaware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.

60
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Equity Shares as of March 10,
1999 (as adjusted to reflect the Company's stock dividend declared in December
1998) by: (i) each shareholder known by the Company to be the beneficial owner
of more than 5% of the Company's Equity Shares; (ii) each director; (iii) the
Chief Executive Officer; and (iv) all executive officers and directors as a
group.

<TABLE>
<CAPTION>
Percentage of Equity Shares
Shares Beneficially Owned (2)
Beneficially --------------------------------
Name of Beneficial Owner Owned (1) Prior to Offering After Offering
- -------------------------------- ------------ ----------------- --------------
<S> <C> <C> <C>
N.R. Narayana Murthy (3) (4).... 2,523,600 7.9% 7.7%
N.S. Raghavan (3) (5)........... 1,765,600 5.5 5.4
Nandan M. Nilekani (3) (6)...... 1,716,200 5.4 5.2
S. Gopalakrishnan (3) (7)....... 1,594,800 5.0 4.8
K. Dinesh (3) (8)............... 1,172,200 3.7 3.6
S.D. Shibulal (3) (9)........... 1,074,200 3.4 3.3
Susim M. Datta (10)............. -- -- --
Deepak Satwalekar (11).......... -- -- --
Marti G. Subrahmanyam (12)...... -- -- --
Ramesh Vangal (13).............. -- -- --
All directors and executive of-
ficers as a group (21 per-
sons).......................... 10,144,200 31.7% 30.8%
</TABLE>

- --------
(1) Beneficial ownership is determined in accordance with rules of the
Commission that deem shares to be beneficially owned by any person who
has or shares voting or investment power with respect to such shares. All
information with respect to the beneficial ownership of any principal
shareholder has been furnished by such shareholder and, unless otherwise
indicated below, the Company believes that persons named in the table
have sole voting and sole investment power with respect to all shares
shown as beneficially owned, subject to community property laws where
applicable.
(2) Percentage ownership is calculated based on an aggregate of 32,034,400
Equity Shares issued and outstanding prior to the Offering and 32,934,400
Equity Shares issued and outstanding after the Offering, in each case
adjusted to reflect the Company's stock dividend declared in December
1998.
(3) The address of Messrs. Murthy, Raghavan, Nilekani, Gopalakrishnan, Dinesh
and Shibulal is c/o Infosys Technologies Limited, Electronics City, Hosur
Road, Bangalore, Karnataka, India 561 229.
(4) Shares beneficially owned by Mr. Murthy include 2,188,400 Equity Shares
owned by members of Mr. Murthy's immediate family. Mr. Murthy disclaims
beneficial ownership of such shares.
(5) Shares beneficially owned by Mr. Raghavan include 1,369,600 Equity Shares
owned by members of Mr. Raghavan's immediate family. Mr. Raghavan
disclaims beneficial ownership of such shares.
(6) Shares beneficially owned by Mr. Nilekani include 964,000 Equity Shares
owned by members of Mr. Nilekani's immediate family. Mr. Nilekani
disclaims beneficial ownership of such shares.
(7) Shares beneficially owned by Mr. Gopalakrishnan include 1,018,080 Equity
Shares owned by members of Mr. Gopalakrishnan's immediate family. Mr.
Gopalakrishnan disclaims beneficial ownership of such shares.
(8) Shares beneficially owned by Mr. Dinesh include 737,600 Equity Shares
owned by members of Mr. Dinesh's immediate family. Mr. Dinesh disclaims
beneficial ownership of such shares.
(9) Shares beneficially owned by Mr. Shibulal include 869,240 Equity Shares
owned by members of Mr. Shibulal's immediate family. Mr. Shibulal
disclaims beneficial ownership of such shares.
(10) The address of Mr. Datta is c/o Peerless General Finance and Investment
Co. Ltd., 11-A, Mittal Towers, "A' Wing, First Floor, Nariman Point,
Mumbai, India 400 021.
(11) The address of Mr. Satwalekar is 9 Nutan Alka Co-op Housing Society,
Relief Road, Santa Cruz (W), Mumbai, India 400 054.
(12) The address of Mr. Subrahmanyam is c/o New York University, Leonard N.
Stern School of Business, 44 West Fourth Street #9-15, New York, NY
10003.
(13) The address of Mr. Vangal is 72 Belmont Road, Singapore 269 903.

61
<PAGE>

CERTAIN TRANSACTIONS

Yantra Corporation

In December 1996, the Company transferred all rights, title and interest in
and to the WMSYantra (formerly known as EAGLE) software product to Yantra,
then a majority-owned subsidiary of the Company. Yantra granted Infosys a non-
exclusive right to reproduce, distribute and service the product to the extent
necessary to fulfill the Company's pre-existing contractual obligations for
the product. In consideration for this transaction Infosys received 7,500,000
shares of common stock of Yantra, which had a fair market value at the time of
$0.20 per share. In September 1997, the Company purchased 2,000,000 shares of
Series A Preferred Stock of Yantra at $0.75 per share. Certain of the
Company's directors or officers are directors of Yantra. As of December 31,
1998, Mr. Phaneesh Murthy, an executive officer of the Company, held options
to purchase 100,000 shares of common stock of Yantra at an exercise price of
$0.10 per share, all of which were granted on September 29, 1997. Other than
Mr. Phaneesh Murthy, none of the Company's directors or officers beneficially
owns any shares or options of Yantra.

On October 20, 1998, the Company sold 1,363,637 shares of Series A Preferred
Stock of Yantra for $1.10 per share to an unaffiliated purchaser. As a result,
the Company reduced its interest in Yantra to less than one-half of voting
stock of Yantra.

Employment Agreements

The Company has entered into agreements with its employee directors
containing a monthly salary, performance bonus and benefits including
vacation, medical reimbursement and pension fund contributions. These
agreements are made for a five-year period, but either the Company or the
employee director may terminate the agreement upon six months notice to the
other party. See "Management--Employment Agreements."

Loans to Employees

Pursuant to an employee loan program, the Company grants loans to employees
to acquire certain assets such as property or vehicles. Such loans are made at
interest rates ranging from 0% to 4% and are repayable over fixed periods
ranging from one to 100 months. The loans generally are secured by the assets
acquired by the employees. As of December 31, 1998, there were $4.2 million in
loans outstanding to employees, of which $277,000 were loans receivable from
executive officers of the Company in amounts less than $60,000.

62
<PAGE>

DESCRIPTION OF EQUITY SHARES

Set forth below is the material information concerning the Company's share
capital and a brief summary of the material provisions of the Company's
Articles and the Indian Companies Act, all as currently in effect. The
following description of the Equity Shares of the Company and the material
provisions of the Company's Articles does not purport to be complete and is
qualified in its entirety by the Articles of Association and Memorandum of
Association of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.

General

The Company's authorized share capital is 50,000,000 shares, par value Rs.10
per share. As of March 10, 1999, 32,034,400 Equity Shares (as adjusted to
reflect the Company's stock dividend declared in December 1998) were issued
and outstanding.

The Equity Shares are the only class of share capital of the Company. There
are no convertible debentures or warrants of the Company currently in
existence. For the purposes of this Prospectus, "shareholder" means a
shareholder who is registered as a member in the register of members of the
Company.

Dividends

Under the Indian Companies Act, unless the Board of Directors of the Company
(the "Board") recommends the payment of a dividend, the Company has no power
to declare a dividend. Similarly, under the Articles, although the
shareholders may, at the Annual General Meeting, approve a dividend in an
amount less than that recommended by the Board, they cannot increase the
amount of the dividend. Dividends generally are declared as a percentage of
the par value of the Company's shares. The dividend recommended by the Board,
and subject to the limitations described above, is distributed and paid to
shareholders in proportion to the paid up value of their shares within 42 days
of the approval by the shareholders at the Annual General Meeting. Pursuant to
the Company's Articles, the Board has discretion to declare and pay interim
dividends without shareholder approval. With respect to Equity Shares issued
by the Company during a particular fiscal year (including the Equity Shares
underlying the ADSs issued to the Depositary in connection with the Offering),
cash dividends declared and paid for such fiscal year generally will be
prorated from the date of issuance to the end of such fiscal year. Under the
Indian Companies Act, dividends can only be paid in cash to the registered
shareholder at a record date fixed on or prior to the Annual General Meeting
or to his order or his banker's order. See "Risk Factors--Dividend Policy;
Effect on Equity Shares Underlying ADSs" and "Dividend Policy."

Under the Indian Companies Act, dividends may be paid out of profits of a
company in the year in which the dividend is declared or out of the
undistributed profits of previous fiscal years. Before declaring a dividend
greater than 10%, a company is required under the Indian Companies Act to
transfer to its reserves a minimum percentage of its profits for that year,
ranging from 2.5% to 10% depending upon the dividend percentage to be declared
in such year. The Indian Companies Act further provides that, in the event of
an inadequacy or absence of profits in any year, a dividend may be declared
for such year out of the Company's accumulated profits, subject to the
following conditions: (i) the rate of dividend to be declared shall not exceed
10% of its paid up capital or the average of the rate at which dividends were
declared by the Company in the prior five years, whichever is less; (ii) the
total amount to be drawn from the accumulated profits earned in the previous
years and transferred to the reserves shall not exceed an amount equivalent to
10% of its paid up capital and free reserves, and the amount so drawn is to be
used first to set off the losses incurred in the fiscal year before any
dividends in respect of preference or Equity Shares are declared; and (iii)
the balance of reserves after withdrawals shall not fall below 15% of its paid
up capital. A dividend tax of 10% of the total dividend declared, distributed
or paid for a relevant period is payable by the Company.

63
<PAGE>

Bonus Shares

In addition to permitting dividends to be paid out of current or retained
earnings as described above, the Indian Companies Act permits the Company to
distribute an amount transferred from the general reserve or surplus in the
Company's profit and loss account to its shareholders in the form of bonus
shares (similar to a stock dividend). The Indian Companies Act also permits
the issuance of bonus shares from a share premium account. Bonus shares are
distributed to shareholders in the proportion recommended by the Board.
Shareholders of record on a fixed record date are entitled to receive such
bonus shares.

Preemptive Rights and Issue of Additional Shares

The Indian Companies Act gives shareholders the right to subscribe for new
shares in proportion to their respective existing shareholdings unless
otherwise determined by a special resolution passed by a General Meeting of
the shareholders. Under the Indian Companies Act, in the event of an issuance
of securities, subject to the limitations set forth above, the Company must
first offer the new shares to the shareholders on a fixed record date. The
offer must include: (i) the right, exercisable by the shareholders of record,
to renounce the shares offered in favor of any other person; and (ii) the
number of shares offered and the period of the offer, which may not be less
than 15 days from the date of offer. If the offer is not accepted it is deemed
to have been declined. The Board is authorized under the Indian Companies Act
to distribute any new shares not purchased by the preemptive rights holders in
the manner that it deems most beneficial to the Company. See "Risk Factors--
Restrictions on Exercise of Preemptive Rights by ADS Holders."

Annual General Meetings of Shareholders

The Company must convene an Annual General Meeting of its shareholders
within six months after the end of each fiscal year and may convene an
Extraordinary General Meeting of shareholders when necessary or at the request
of a shareholder or shareholders holding at least 10% of the Company's paid up
capital carrying voting rights. The Annual General Meeting of the shareholders
is generally convened by the Company Secretary pursuant to a resolution of the
Board. Written notice setting out the agenda of the meeting must be given at
least 21 days (excluding the days of mailing and receipt) prior to the date of
the General Meeting to the shareholders of record. Shareholders who are
registered as shareholders on the date of the General Meeting are entitled to
attend or vote at such meeting.

The Annual General Meeting of shareholders must be held at the Registered
Office of the Company or at such other place within the city in which the
Registered Office is located; meetings other than the Annual General Meeting
may be held at any other place if so determined by the Board. The Company's
registered office is located at Electronics City, Hosur Road, Bangalore, 561
229, Karnataka, India.

The Articles provide that a quorum for a General Meeting is the presence of
at least five shareholders in person.

Voting Rights

At any General Meeting, voting is by show of hands unless a poll is demanded
by a shareholder or shareholders present in person or by proxy holding at
least 10% of the total shares entitled to vote on the resolution or by those
holding shares with an aggregate paid up capital of at least Rs.50,000. Upon a
show of hands, every shareholder entitled to vote and present in person has
one vote and, on a poll, every shareholder entitled to vote and present in
person or by proxy has voting rights in proportion to the paid up capital held
by such shareholders. The Chairman of the Board has a deciding vote in the
case of any tie. For a description of voting of ADSs, see "Description of
American Depositary Shares--Voting of Deposited Securities."

Any shareholder of the Company may appoint a proxy. The instrument
appointing a proxy must be delivered to the Company at least 48 hours prior to
the meeting. A proxy may not vote except on a poll. A corporate shareholder
may appoint an authorized representative who can vote on behalf of the
shareholder, both upon a show of hands and upon a poll.

64
<PAGE>

Ordinary resolutions may be passed by simple majority of those present and
voting at any General Meeting for which the required period of notice has been
given. However, certain resolutions such as amendments of the Articles and the
Memorandum of Association, commencement of a new line of business, the waiver
of preemptive rights for the issuance of any new shares and a reduction of
share capital, require that votes cast in favor of the resolution (whether by
show of hands or poll) are not less than three times the number of votes, if
any, cast against the resolution.

The Company maintains a register of shareholders of the Company. For the
purpose of determining the shares entitled to annual dividends, the register
is closed for a specified period prior to the Annual General Meeting.

To determine which shareholders are entitled to certain shareholder rights,
the Company, pursuant to a Board resolution, may close the register of
shareholders. The Indian Companies Act and each of the Company's listing
agreements with the Indian Stock Exchanges require the Company to give at
least 42 days' prior notice to the Indian Stock Exchanges and at least seven
days' prior notice to the public. The Company may not close the register of
shareholders for more than 30 consecutive days, and in no event more than 45
days in a year. Trading of Equity Shares may, however, continue while the
register of shareholders is closed.

Following the introduction of the Depositories Act, 1996, and the repeal of
Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled
companies to refuse to register transfers of shares in certain circumstances,
the shares of the Company are freely transferable, subject only to the
provisions of Section 111A of the Indian Companies Act. The Articles currently
contain provisions which give the directors discretion to refuse to register a
transfer of shares in certain circumstances. In accordance with the provisions
of Section 111A(2) of the Indian Companies Act, the directors may exercise
this discretion if they have sufficient cause to do so. Pursuant to Section
111A(3), if the transfer of shares contravenes any of the provisions of the
Securities and Exchange Board of India Act, 1992 or the regulations issued
thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 or
any other similar laws, the Company Law Board (the "CLB") may, on application
made by the Company, a depositary incorporated in India, an investor, the SEBI
or certain other parties, direct the rectification of the register of records.
The CLB may, in its discretion, issue an interim order suspending the voting
rights attached to the relevant shares before making or completing its
investigation into the alleged contravention. Notwithstanding such
investigation, the rights of a shareholder to transfer the shares will not be
restricted.

Under the Indian Companies Act, a transfer of shares is effected by an
instrument of transfer in the form prescribed by the Indian Companies Act and
the Rules thereunder together with delivery of the share certificates. The
transfer agent of the Company is Karvy Consultants Limited, Bangalore,
Karnataka, India.

The Company has entered into listing agreements with each of the Indian
Stock Exchanges. Clause 40A of each of the listing agreements provides that if
an acquisition of a listed company's shares results in the acquiror and its
associates holding 5% or more of the company's outstanding Equity Shares or
voting rights, the acquiror must report its holding to the company and the
relevant stock exchange(s). If an acquisition results in the acquiror and its
associates holding Equity Shares that have 15% or more of the voting rights,
then the acquiror must, before acquiring such Equity Shares, make an offer (in
accordance with Clause 40B of the listing agreements) on a uniform basis to
all remaining shareholders of the company to acquire Equity Shares that have
at least an additional 20% of the voting rights of the total Equity Shares of
the company at a prescribed price. The acquisition of shares of a company
listed on an Indian stock exchange beyond certain threshold amounts is subject
to regulations governing takeovers of Indian companies. Although clauses 40A
and 40B and such regulations will not apply to the Equity Shares so long as
they are represented by ADSs, holders of ADSs may be required to comply with
such notification and disclosure obligations pursuant to the provisions of the
Deposit Agreement to be entered into by such holders, the Company and a
depositary. See "Description of American Depositary Shares."

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Disclosure of Ownership Interest

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

Audit and Annual Report

At least 21 days before the Annual General Meeting of shareholders, the
Company must distribute a detailed version of the Company's audited balance
sheet and profit and loss account and the reports of the Board and the
auditors thereon. Under the Indian Companies Act, the Company must file the
balance sheet and annual profit and loss account presented to the shareholders
within 30 days of the conclusion of the Annual General Meeting with the
Registrar of Companies. The Company must also file an annual return containing
a list of the Company's shareholders and other Company information, within 60
days of the conclusion of the meeting.

Company Acquisition of Equity Shares

Under the Indian Companies Act, the Company may not acquire its own Equity
Shares because of the resulting reduction in the Company's capital. Such a
reduction in capital is permitted only in certain circumstances and requires
compliance with specific buy-back regulations, a special resolution passed by
the shareholders and approval by the High Court of the state in which the
registered office of the Company is situated. The Government of India has
recently published guidelines that would permit a company to form a separate
trust specifically for the purpose of buying odd lots of shares and disposing
of such shares through a stock exchange.

Liquidation Rights

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

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

The following is a summary of the material provisions of the Deposit
Agreement (the "Deposit Agreement") to be entered into by the Company, Bankers
Trust Company, as depositary (the "Depositary"), and the registered holders
("Holders") of, and owners of a beneficial interest (the "Beneficial Owners")
in, ADSs evidenced by ADRs issued pursuant to the terms thereof.

Terms used herein and not otherwise defined will have the meanings set forth
in the Deposit Agreement. Copies of the Deposit Agreement and the Articles of
the Company will be available for inspection at the Corporate Trust Office of
the Depositary, currently located at Four Albany Street, New York, New York
10006, and at the principal office of the custodian appointed by the
Depositary (the "Custodian"), currently ICICI Limited ("ICICI"), 163 Backbay
Reclamation Road No. 3, Mumbai, India 400 020.

American Depositary Receipts

ADRs evidencing ADSs are issuable by the Depositary pursuant to the Deposit
Agreement. Each ADS will represent one-half of one Equity Share (the Equity
Shares at any time deposited under the Deposit Agreement and any and all other
securities, cash and property received by the Depositary or the Custodian in
respect thereof and at such time held under the Deposit Agreement, "Deposited
Securities"). Only persons in whose names ADRs are registered on the books of
the Depositary will be treated by the Depositary and the Company as the owners
of ADSs evidenced by such ADRs.

Withdrawal of Equity Shares

Under current Indian laws and regulations, the Depositary cannot accept
deposits of outstanding Equity Shares (except for Equity Shares issued as
bonus shares or pursuant to rights offerings) and issue ADRs evidencing ADSs
representing such Equity Shares. A Holder of ADSs who surrenders ADSs and
withdraws Equity Shares is not permitted subsequently to deposit such Equity
Shares and obtain ADSs. The Depositary has agreed, subject to the terms of the
Deposit Agreement, to accept deposits of outstanding Equity Shares in the
event current Indian laws and regulations are amended to permit such deposits.
See "Risk Factors--Risks Related to Investments in Indian Securities--
Restrictions on Foreign Investment" and "Deposit and Pre-Release."

Upon surrender at the Corporate Trust Office of the Depositary of an ADS
evidenced by an ADR for the purpose of withdrawal of the Deposited Securities
represented by the ADSs evidenced by such ADR, and upon payment of the fees of
the Depositary for the surrender of such ADS and the governmental charges and
taxes provided for in the Deposit Agreement, and subject to the terms and
conditions of the Deposit Agreement, the Holder of such ADS will be entitled
to delivery, to him or upon his order, of the amount of Deposited Securities
at the time represented by the ADS or ADSs evidenced by such ADR. The
forwarding of share certificates, other securities, property, cash and other
documents of title for such delivery will be at the risk and expense of the
Holder.

A Holder of ADSs who surrenders ADSs and withdraws Equity Shares will have
to take such Equity Shares in electronic dematerialized form. The Holder will
be required to establish an account with an Indian affiliate of the Depositary
to hold or sell Equity Shares in electronic dematerialized form and may incur
customary fees and expenses in connection therewith. Upon the acquisition of
Equity Shares from the Depositary in exchange for ADSs, the Holder will be
liable for Indian stamp duty at the rate of 0.5% of the market value of the
ADSs or Equity Shares exchanged. Equity Shares which are withdrawn from the
Depositary also may not be sold on the Indian Stock Exchanges until the Equity
Shares underlying the ADSs have been listed on those exchanges, a process
which will be completed within two weeks after the Offering. In addition, RBI
approval will be required for the sale of withdrawn Equity Shares by a non-
resident of India to a resident of India. See "Government of India Approvals"
and "Taxation--Indian Taxation."

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Dividends, Other Distributions and Rights

Subject to any restrictions imposed by Indian law, regulations or applicable
permits, the Depositary or its agent for this purpose is required, as promptly
as practicable, to convert or cause to be converted into dollars, to the
extent that in its judgment it can do so on a reasonable basis and can
transfer the resulting dollars to the United States, all cash dividends and
other cash distributions denominated in a currency other than dollars,
including rupees ("Foreign Currency"), that it receives in respect of the
Deposited Securities, and, as promptly as practicable, to distribute the
resulting dollar amount (net of reasonable and customary expenses incurred by
the Depositary in converting such Foreign Currency) to the Holders entitled
thereto, in proportion to the number of ADSs representing such Deposited
Securities evidenced by ADRs held by them, respectively. Such distribution may
be made upon an averaged or other practicable basis without regard to any
distinctions among Holders on account of exchange restrictions or the date of
delivery of any ADS or ADSs or otherwise. The amount distributed to the
Holders of ADSs will be reduced by any amount on account of taxes to be
withheld by the Company or the Depositary. See "Liability of Holders and
Beneficial Owners for Taxes."

If the Depositary determines that in its reasonable judgment any Foreign
Currency received by the Depositary or the Custodian cannot be converted on a
reasonable basis into dollars transferable to the United States, or if any
approval or license of any government or agency thereof which is required for
such conversion is denied or in the reasonable opinion of the Depositary is
not obtainable, or if any such approval or license is not obtained within a
reasonable period as determined by the Depositary, the Depositary may
distribute the Foreign Currency received by the Depositary or the Custodian
to, or in its discretion may hold such Foreign Currency uninvested and without
liability for interest thereon for the respective accounts of, the Holders
entitled to receive the same. If any such conversion of Foreign Currency, in
whole or in part, cannot be effected for distribution to some of the Holders
entitled thereto, the Depositary may in its discretion make such conversion
and distribution in dollars to the extent permissible to the Holders entitled
thereto, and may distribute the balance of the Foreign Currency received by
the Depositary to, or hold such balance uninvested and without liability for
interest thereon for, the respective accounts of, the Holders entitled
thereto.

If the Company declares a dividend in, or free distribution of, Equity
Shares, the Depositary may, and shall if the Company so requests, as promptly
as practicable, distribute to the Holders of outstanding ADSs entitled
thereto, in proportion to the number of ADSs evidenced by the ADRs held by
them, respectively, additional ADRs evidencing an aggregate number of ADSs
that represent the amount of Equity Shares received as such dividend or free
distribution, subject to the terms and conditions of the Deposit Agreement
with respect to the deposit of Equity Shares and the issuance of ADSs
evidenced by ADRs, including the withholding of any tax or other governmental
charge and the payment of fees and expenses of the Depositary. The Depositary
may withhold any such distribution of ADRs if it has not received from the
Company satisfactory documentation that such distribution does not require
registration under the Securities Act or is exempt from registration under the
provisions of such Act. The RBI has granted general approval for holders of
ADSs to receive stock dividends and participate in rights offerings. In lieu
of delivering ADRs for fractional ADSs in the event of any such dividend or
free distribution, the Depositary will sell the amount of Equity Shares
represented by the aggregate of such fractions and distribute the net proceeds
in accordance with the Deposit Agreement. If additional ADRs are not so
distributed, each ADS will thenceforth also represent the additional Equity
Shares distributed upon the Deposited Securities represented thereby.

If the Company offers or causes to be offered to the holders of any
Deposited Securities any rights to subscribe for additional Equity Shares or
any rights of any other nature, the Depositary, after consultation with the
Company, and subject to the Company's Articles and applicable laws, will have
discretion as to the procedure to be followed in making such rights available
to any Holders of ADSs or in disposing of such rights for the benefit of any
Holders and making the net proceeds available in dollars to such Holders or,
if by the terms of such rights offering or for any other reason, the
Depositary may not either make such rights available to any Holders or dispose
of such rights and make the net proceeds available to such Holders, then the
Depositary shall allow the rights to lapse; provided, however, if at the time
of the offering of any rights the Depositary determines in its discretion that
it is lawful and feasible to make such rights available to certain Holders but
not to other

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Holders, the Depositary may distribute to any Holder to whom it determines the
distribution to be lawful and feasible, in proportion to the number of ADSs
held by such Holder, warrants or other instruments therefor in such form as it
deems appropriate. If the Depositary determines in its discretion that it is
not lawful and feasible to make such rights available to certain Holders, it
may sell the rights, warrants or other instruments in proportion to the number
of ADSs held by the Holders to whom it has determined it may not lawfully or
feasibly make such rights available, and allocate the net proceeds of such
sales for the account of such Holders otherwise entitled to such rights,
warrants or other instruments, upon an averaged or other practical basis
without regard to any distinctions among such Holders because of currency
exchange restrictions or the date of delivery of any ADS(s) evidenced by
ADR(s), or otherwise. The Depositary will not be responsible for any failure
to determine that it may be lawful or feasible to make such rights available
to Holders in general or any Holder in particular.

In circumstances in which rights would not otherwise be distributed, if a
Holder of ADSs requests the distribution of warrants or other instruments in
order to exercise the rights allocable to the ADSs of such Holder, the
Depositary will, to the extent permitted by law, make such rights available to
such Holder upon written notice from the Company to the Depositary that the
Company has elected in its sole discretion to permit such rights to be
exercised. Upon instruction to the Depositary from such Holder to exercise
such rights, upon payment by such Holder to the Depositary for the account of
such Holder of an amount equal to the purchase price of the Equity Shares to
be received in exercise of the rights, and upon payment of the fees and
expenses of the Depositary, the Depositary will, on behalf of such Holder,
exercise (or cause the Custodian to exercise) the rights and purchase the
Equity Shares, and the Company shall cause the Equity Shares so purchased to
be delivered to the Depositary on behalf of such Holder. As agent for such
Holder, the Depositary will, to the extent permitted by law and not
inconsistent with the terms of the Deposit Agreement, cause the Equity Shares
so purchased to be deposited, and will execute and deliver ADSs evidenced by
ADRs to such Holder, pursuant to the Deposit Agreement.

The Depositary will not offer rights to Holders having an address in the
United States unless both the rights and the securities to which such rights
relate are either exempt from registration under the Securities Act with
respect to a distribution to all Holders or are registered under the
provisions of such Act; provided, that nothing in the Deposit Agreement will
create any obligation: (i) on the part of the Company to file a registration
statement with respect to such rights or underlying securities or to endeavor
to have such a registration statement declared effective; or (ii) on the part
of the Depositary to accept for deposit any Equity Shares which are Restricted
Securities (as defined in the Deposit Agreement). If a Holder of ADSs requests
the distribution of warrants or other instruments, notwithstanding that there
has been no such registration under such Act, the Depositary will not effect
such distribution unless it has received an opinion from recognized counsel in
the United States for the Company upon which the Depositary may rely that such
distribution to such Holder is exempt from such registration. The Depositary
will not be responsible for any failure to determine that it may be lawful or
feasible to make such rights available to Holders in general or any Holder in
particular.

Whenever the Depositary receives any distribution other than cash, Equity
Shares or rights in respect of the Deposited Securities, the Depositary will
cause the securities or property received by it to be distributed, as promptly
as practicable, to the Holders entitled thereto, after deduction or upon
payment of any fees and expenses of the Depositary or any taxes or other
governmental charges, in proportion to their holdings, respectively, in any
manner that the Depositary may reasonably deem equitable and practicable for
accomplishing such distribution; provided, however, that if in the opinion of
the Depositary such distribution cannot be made proportionately among the
Holders entitled thereto, or if for any other reason (including, but not
limited to, any requirement that the Company or the Depositary withhold an
amount on account of taxes or other governmental charges or that such
securities must be registered under the Securities Act in order to be
distributed to Holders or Beneficial Owners) the Depositary deems such
distribution not to be feasible, the Depositary may adopt such method as it
may deem equitable and practicable for the purpose of effecting such
distribution, including, but not limited to, the public or private sale of the
securities or property thus received, or any part thereof, and the net
proceeds of any such sale (net of the fees and expenses of the Depositary)
will be distributed by the Depositary to the Holders entitled thereto as in
the case of a distribution received in cash.

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If the Depositary determines that any distribution of property (including
Equity Shares and rights to subscribe therefor) is subject to any taxes or
other governmental charges which the Depositary is obligated to withhold, the
Depositary may, by public or private sale, dispose of all or a portion of such
property in such amount and in such manner as the Depositary deems necessary
and practicable to pay such taxes or charges and the Depositary will
distribute the net proceeds of any such sale after deduction of such taxes or
charges to the Holders entitled thereto in proportion to the number of ADSs
held by them, respectively.

Upon any change in nominal or par value, split-up, consolidation or any
other reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the
Company or to which it is a party, any securities which shall be received by
the Depositary or Custodian in exchange for, in conversion of, or in respect
of Deposited Securities will be treated as new Deposited Securities under the
Deposit Agreement, and the ADSs will, to the extent permitted by law,
represent, in addition to the existing Deposited Securities, the right to
receive the new Deposited Securities so received in exchange or conversion,
unless additional ADSs evidenced by ADRs are delivered pursuant to the
following sentence. In any such case the Depositary may, and will if the
Company requests, in each case to the extent permitted by law, execute and
deliver additional ADSs evidenced by ADRs as in the case of a distribution in
Equity Shares, or call for the surrender of outstanding ADSs evidenced by ADRs
to be exchanged for new ADSs evidenced by ADRs specifically describing such
new Deposited Securities.

Record Dates

Whenever any cash dividend or other cash distribution shall become payable
or any distribution other than cash shall be made, or whenever rights shall be
issued with respect to the Deposited Securities, or whenever for any reason
the Depositary causes a change in the number of Equity Shares that are
represented by each ADS, or whenever the Depositary shall receive notice of
any meeting of holders of Equity Shares or other Deposited Securities, or
whenever the Depositary shall find it necessary or convenient, the Depositary
will fix a record date applicable to the ADSs, after obtaining, if
practicable, the consent of the Company if such record date is different from
the record date applicable to the Equity Shares or other Deposited Securities:
(i) for the determination of the Holders who will be (a) entitled to receive
such dividend, distribution or rights, or the net proceeds of the sale
thereof, or (b) entitled to give instructions for the exercise of voting
rights at any such meeting; or (ii) on or after which each ADS will represent
the changed number of Equity Shares or other Deposited Securities, all subject
to the provisions of the Deposit Agreement.

Voting of Deposited Securities

Under Indian law, voting of the Equity Shares is by show of hands unless a
poll is demanded by a member or members present in person or by proxy holding
at least one-tenth of the total shares entitled to vote on the resolution or
by those holding an aggregate paid up capital of at least Rs.50,000. A proxy
may not vote except on a poll. See "Description of Equity Shares--Voting
Rights."

As soon as practicable after receipt of notice pursuant to the Deposit
Agreement of any meeting of holders of Equity Shares or other Deposited
Securities, the Depositary shall fix a record date for determining the Holders
entitled to give instructions for the exercise of voting rights, if any, as
provided in the Deposit Agreement and shall mail to the Holders of a record
notice which shall contain: (i) such information as is contained in such
notice of meeting; (ii) a statement that the Holders of record at the close of
business on a specified record date will be entitled, subject to any
applicable provisions of Indian law and of the Memorandum and Articles of the
Company governing the Deposited Securities represented by their respective
ADSs evidenced by their respective ADRs; (iii) a brief statement as to the
manner in which such instructions may be given including (a) an express
indication that the Depositary should demand a poll or instruct the Chairman
of the Meeting (the "Chairman") or a person designated by the Chairman to
demand a poll in the event that a poll is not otherwise demanded pursuant to
Indian law and (b) an express indication that instructions may be given to the
Depositary to give a discretionary proxy to a person designated by the
Company; and (iv) a statement that if the Depositary does not receive
instructions from a Holder, such Holder may under certain circumstances be
deemed to have instructed

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the Depositary to give a discretionary proxy to a person designated by the
Company to vote such Deposited Securities. Upon the written request of a
Holder on such record date, received on or before the date established by the
Depositary for such purpose, the Depositary shall endeavor, insofar as is
practicable and permitted under the applicable provisions of Indian law and of
the Memorandum and Articles of the Company governing the Deposited Securities,
to vote or cause to be voted the amount of Deposited Securities represented by
such ADSs evidenced by such ADRs in accordance with the instructions set forth
in such request. In the event that the Depositary receives express
instructions from Holders to demand a poll with respect to any matter to be
voted on by Holders, the Depositary may notify the Chairman or a person
designated by the Chairman of such instructions and request the Chairman or
such designee to demand a poll with respect to such matters and the Company
agrees that the Chairman or such designee will make their reasonable best
efforts to so demand a poll at the meeting at which such matters are to be
voted on and to vote such Equity Shares in accordance with such Holders'
instructions; provided, however, that prior to any demand of a poll or request
to demand a poll by the Depositary upon the terms set forth herein, the
Company is required, at its own expense, to use its best efforts to obtain and
deliver to the Depositary an opinion of Indian counsel, reasonably
satisfactory to the Depositary, stating that such action is in conformity with
all applicable laws and regulations and that such demand for a poll by the
Depositary or a person designated by the Depositary will not expose the
Depositary to any liability to any person. The Depositary shall not have any
obligation to demand a poll or request the demand of a poll if the Company
shall not have delivered to the Depositary the local counsel opinion set forth
in this paragraph.

The Depositary agrees not to, and shall ensure that the Custodian and each
of their nominees does not vote, attempt to exercise the right to vote, or in
any way make use of, for purposes of establishing a quorum or otherwise, the
Equity Shares or other Deposited Securities represented by the ADSs evidenced
by an ADR other than in accordance with such instructions from the Holder or
as provided below. The Depositary may not itself exercise any voting
discretion over any Equity Shares. If the Depositary does not receive
instructions from any Holder with respect to any of the Deposited Securities
represented by the ADSs evidenced by such Holder's ADRs on or before the date
established by the Depositary for such purpose, such Holder shall be deemed,
and the Depositary shall deem such Holder, to have instructed the Depositary
to give a discretionary proxy to a person designated by the Company to vote
such Deposited Securities; provided that: (i) no such discretionary proxy
shall be given with respect to any matter as to which the Company informs the
Depositary (and the Company agrees to provide such information as promptly as
practicable in writing) that (a) the Company does not wish such proxy given,
(b) substantial opposition exists or (c) the rights of the holders of Equity
Shares will be adversely affected; and (ii) the Depositary shall not have any
obligation to give such discretionary proxy to a person designated by the
Company if the Company shall not have delivered to the Depositary the local
counsel opinion and representation letter set forth in the next paragraph.

Prior to each request for the delivery of a discretionary proxy upon the
terms set forth herein, the Company shall, at its own expense, deliver to the
Depositary: (i) an opinion of Indian counsel, reasonably satisfactory to the
Depositary, stating that such action is in conformity with all applicable laws
and regulations; and (ii) a representation letter from the Company (executed
by a senior officer of the Company) which (a) designates the person to whom
any discretionary proxy should be given, (b) confirms that the Company wishes
such discretionary proxy to be given and (c) certifies that the Company has
not and shall not request the discretionary proxy to be given as to any matter
as to which substantial opposition exists or which may adversely affect the
rights of holders of Equity Shares.

Deposit and Pre-Release

The Depositary has agreed, subject to the terms and conditions of the
Deposit Agreement, that upon delivery to the Custodian of Equity Shares and
appropriate instruments of transfer in a form satisfactory to the Custodian
and all certifications as may be required by the Deposit Agreement, the
Depositary will, upon payment of the fees, charges and taxes provided in the
Deposit Agreement, execute and deliver at its Corporate Trust Office to, or
upon the written order of, the person or persons named in the notice of the
Custodian delivered to the Depositary or requested by the person depositing
such Equity Shares with the Depositary, an ADS or ADSs, registered in the name
or names of such person or persons representing the Equity Shares so
deposited.

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Each person depositing Equity Shares will be deemed to represent and warrant
that: (i) such Equity Shares are validly issued, fully paid and non-assessable
and free of any pre-emptive rights of holders of outstanding Equity Shares;
and (ii) such person is duly authorized to deposit such Equity Shares. After
the initial deposit of Equity Shares pursuant to the Deposit Agreement, each
such person shall also be deemed to represent that the deposit of such Equity
Shares or the sale of the ADSs issued in respect thereof by such person is not
restricted under the Securities Act or applicable Indian law.

The Depositary and the Custodian will refuse to accept Equity Shares for
deposit whenever the Depositary is notified that the Company has restricted
transfer of Equity Shares if such transfer would result in the ownership of
the Equity Shares being in violation of any applicable laws or the Articles of
the Company.

Subject to the terms and conditions of the Deposit Agreement and any
limitations established by the Depositary, and unless the Company requests the
Depositary to cease doing so, the Depositary may deliver ADSs prior to the
receipt of Equity Shares (a "Pre-Release") and deliver Equity Shares upon the
receipt and cancellation of ADSs which have been Pre-Released, whether or not
such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such ADS has been Pre-Released. The Depositary may
receive ADSs in lieu of Equity Shares in satisfaction of a Pre-Release. Each
Pre-Release must be: (i) preceded or accompanied by a written representation
from the person to whom the ADSs or Equity Shares are to be delivered that
such person, or its customer, (a) owns the Equity Shares or ADSs to be
remitted, as the case may be, (b) assigns all beneficial rights, title and
interest in such Equity Shares to the Depositary for the benefit of the
Holders, and (c) agrees to hold such Equity Shares for the account of the
Depositary until delivery of such Equity Shares upon the request of the
Depositary; (ii) at all times fully collateralized with cash or such other
collateral as the Depositary deems appropriate; (iii) terminable by the
Depositary on not more than five business days' notice; and (iv) subject to
such further indemnities and credit regulations as the Depositary deems
appropriate.

Reports and Other Communications

The Company will furnish to the Depositary English-language versions of
communications generally distributed to holders of Equity Shares, including
its annual reports to shareholders together with its annual audited
consolidated financial statements prepared in conformity with U.S. GAAP. In
addition, the Company currently intends to furnish to the Depositary its
quarterly interim reports in English which will include unaudited interim
consolidated financial information prepared in conformity with U.S. GAAP. The
Depositary will make available for inspection by Holders and Beneficial Owners
at its Corporate Trust Office any receipts evidencing the payment of any taxes
imposed on Holders in respect of distributions or gains and notices, reports
and communications, including any proxy soliciting material, received from the
Company that are both (i) received by the Depositary as the holder of the
Deposited Securities and (ii) made generally available to the holders of such
Deposited Securities by the Company. The Depositary will also, if so requested
by the Company, send to Holders copies of such reports when furnished by the
Company pursuant to the Deposit Agreement.

On or before the first date on which the Company gives notice, by
publication or otherwise, of any meeting of holders of Equity Shares or other
Deposited Securities, or of any adjourned meeting of, or solicitation of
proxies or consents from, such holders, or of the taking of any action in
respect of any cash or other distributions or of the offering of any rights,
the Company agrees to transmit to the Depositary and the Custodian a copy of
the notice thereof in the form given or to be given to holders of Equity
Shares or other Deposited Securities. The Company will arrange for the
translation into English and the prompt transmittal to the Depositary and the
Custodian of such notices and other reports and communications which are made
generally available by the Company to the holders of its Equity Shares. The
Depositary will arrange for the mailing of copies of such notices, reports and
communications to all Holders if requested in writing by the Company.

Amendment and Termination of the Deposit Agreement

The form of ADRs which evidence ADSs and any provisions of the Deposit
Agreement may at any time and from time to time be amended by agreement
between the Company and the Depositary in any respect which

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they may deem necessary or desirable without the prior consent of the Holders
or Beneficial Owners of ADSs; provided, however, that any amendment that
imposes or increases any fees or charges (other than taxes and other
governmental charges, registration fees, cable, telex or facsimile
transmission costs, delivery costs or other such expenses), or which otherwise
prejudices any substantial existing right of Holders, will not take effect as
to outstanding ADSs until the expiration of 30 days after notice of any
amendment has been given to the Holders of outstanding ADSs. Every Holder and
Beneficial Owner of an ADS, at the time any amendment so becomes effective,
will be deemed, by continuing to hold such ADS, to consent and agree to such
amendment and to be bound by the Deposit Agreement as amended thereby. In no
event will any amendment impair the right of the Holder of any ADS to
surrender such ADS evidenced by an ADR and receive therefor the Deposited
Securities represented thereby, except to comply with mandatory provisions of
applicable law.

Whenever so directed by the Company, subject to the provisions of the
Deposit Agreement, the Depositary will terminate the Deposit Agreement by
mailing notice of such termination to the Holders of the ADSs then outstanding
at least 30 days prior to the date fixed in such notice for such termination.
The Depositary may likewise terminate the Deposit Agreement by mailing notice
of such termination to the Company and the Holders of all ADSs then
outstanding if, any time after 30 days have expired after the Depositary will
have delivered to the Company a written notice of its election to resign, a
successor depositary will not have been appointed and accepted its
appointment, in accordance with the terms of the Deposit Agreement. If any
ADSs remain outstanding after the date of termination of the Deposit
Agreement, the Depositary thereafter will discontinue the registration of
transfers of ADSs, will suspend the distribution of dividends to the Holders
thereof and will not give any further notices or perform any further acts
under the Deposit Agreement, except the collection of dividends and other
distributions pertaining to the Deposited Securities, the sale of rights and
other property and the delivery of underlying Equity Shares, together with any
dividends or other distributions received with respect thereto and the net
proceeds of the sale of any rights or other property, in exchange for
surrendered ADSs (after deducting, in each case, the fees of the Depositary
for the surrender of an ADS and other expenses set forth in the Deposit
Agreement and any applicable taxes or governmental charges). At any time after
the expiration of one year from the date of termination, the Depositary may
sell the Deposited Securities then held thereunder and hold uninvested the net
proceeds of such sale, together with any other cash, unsegregated and without
liability for interest, for the pro rata benefit of the Holders that have not
theretofore surrendered their ADSs, such Holders thereupon becoming general
creditors of the depositary with respect to such net proceeds. After making
such sale, the Depositary will be discharged from all obligations under the
Deposit Agreement, except to account for net proceeds and other cash (after
deducting, in each case, the fee of the Depositary and other expenses set
forth in the Deposit Agreement for the surrender of an ADS and any applicable
taxes or other governmental charges).

Charges of Depositary

The Depositary will charge any party depositing or withdrawing Equity Shares
or any party surrendering ADSs or to whom ADSs are issued (including, without
limitation, issuance pursuant to a stock dividend or stock split declared by
the Company or an exchange of stock regarding the ADRs or Deposited Securities
or a distribution of ADRs pursuant to the Deposit Agreement) where applicable:
(i) taxes and other governmental charges; (ii) such registration as may from
time to time be in effect for the registration of transfers of Equity Shares
generally on the share register of the Company or the appointed agent of the
Company for transfer and registration of Equity Shares and applicable to
transfers of Equity Shares to the name of the Depositary or its nominee or the
Custodian or its nominee on the making of deposits or withdrawals; (iii) such
cable, telex and facsimile transmission expenses as are expressly provided in
the Deposit Agreement to be at the expense of persons depositing Equity Shares
or Holders; (iv) such expenses as are incurred by the Depositary in the
conversion of Foreign Currency pursuant to the Deposit Agreement; (v) a fee
not in excess of $5.00 per 100 ADSs (or portion thereof) for the issuance and
surrender, respectively, of ADRs pursuant to the Deposit Agreement; (vi) a fee
not in excess of $0.02 per ADS (or portion thereof) held for any cash
distribution made pursuant to the Deposit Agreement; and (vii) a fee for the
distribution of securities pursuant to the Deposit Agreement, such fee being
in an amount equal to the fee for the execution and delivery of ADSs referred
to above which would have been charged as a result of the deposit of such
securities (for purposes of this clause (vii) treating all such securities as
if they were Equity Shares), but which securities are instead distributed by
the Depositary to Holders.

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The Depositary, pursuant to the Deposit Agreement, may own and deal in any
class of securities of the Company and its affiliates and in ADSs or ADRs.

Liability of Holders and Beneficial Owners for Taxes

If any tax or other governmental charge shall become payable by the
Custodian or the Depositary with respect to any ADS or any Deposited
Securities represented by the ADSs evidenced by such ADR, such tax or other
governmental charge will be payable by the Holder or Beneficial Owner of such
ADS to the Depositary. The Depositary may refuse to effect any transfer of
such ADS or any withdrawal of Deposited Securities underlying such ADS until
such payment is made, and may withhold any dividends or other distributions,
or may sell for the account of the Holder or Beneficial Owner thereof any part
or all of the Deposited Securities underlying such ADS and may apply such
dividends, distributions or the proceeds of any such sale to pay any such tax
or other governmental charge and the Holder and Beneficial Owner(s) of such
ADS will remain liable for any deficiency.

Withholding Taxes

Before making any distribution or other payments in respect of any Deposited
Securities, the Company will make such deductions (if any) which, by any
applicable laws or regulations, the Company is required to make in respect of
any income, capital gains or other taxes (including interest and penalties)
and the Company may also deduct the amount of any tax or governmental charges
payable by the Company or for which the Company might be made liable in
respect of such distribution or gains or other payment or any document signed
in connection therewith or any capital gains or other taxes payable by the
Holders. The Company or its agent will remit to the appropriate governmental
authority or agency any amounts withheld and owing to such authority or
agency. The Depositary will forward to the Company or its agent such
information from its records as the Company may reasonably request to enable
the Company or its agent to file necessary reports with governmental
authorities or agencies or to file reports necessary to obtain benefits or
reliefs under the applicable tax treaties for the Holders. In the event the
Company, the Depositary or the Custodian endeavors to obtain treaty relief for
the Holders or Beneficial Owners pursuant to a tax treaty, such Holder or
Beneficial Owner shall indemnify the Company, the Depositary or the Custodian
and any of their respective Directors or employees, against any claims by any
governmental agency with respect to taxes (including interest and penalties)
arising from any refund of taxes or reduced rate of withholding obtained for
such Holder or Beneficial Owner.

General

Neither the Depositary nor the Company nor any of their respective
directors, employees, agents or affiliates will be liable to any Holder or
Beneficial Owner of ADSs, if by reason of any provision of any present or
future law or regulation of the United States, India or any other country, or
of any other governmental or regulatory authority or stock exchange, or by
reason of any provision, present or future, of the Articles of the Company, or
any offering or distribution thereof, or by reason of any act of God or war or
other circumstances beyond its control, the Depositary or the Company shall be
prevented, delayed or forbidden from, or be subject to any civil or criminal
penalty on account of, doing or performing any act or thing which by the terms
of the Deposit Agreement or the Deposited Securities it is provided will be
done or performed; nor will the Depositary or the Company or any of their
respective directors, employees, agents, or affiliates incur any liability to
any Holder or Beneficial Owner of any ADS by reason of any nonperformance or
delay, caused as aforesaid, in the performance of any act or thing which by
the terms of the Deposit Agreement it is provided will or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for under the Deposit Agreement. Where, by the terms of a
distribution pursuant to the Deposit Agreement, or an offering or distribution
pursuant to the Deposit Agreement, or for any other reason, such distribution
or offering may not be made available to Holders, and the Depositary may not
dispose of such distribution or offering on behalf of such Holders and make
the net proceeds available to such Holders, then the Depositary will not make
such distribution or offering, will give notice to the Company to this effect,
and will allow the rights, if applicable, to lapse.

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Except for liabilities under applicable U.S. federal securities laws, the
Company and the Depositary assume no obligation nor will they be subject to
any liability under the Deposit Agreement to Holders or Beneficial Owners of
ADSs, except that they agree to perform their respective obligations
specifically set forth under the Deposit Agreement without negligence or bad
faith.

The ADSs evidenced by ADRs are transferable on the books of the Depositary,
provided that the Depositary may close the transfer books at any time or from
time to time when deemed expedient by it in connection with the performance of
its duties or at the written request of the Company. As a condition precedent
to the execution and delivery, registration of transfer, split-up, combination
or surrender of any ADS evidenced by an ADR or withdrawal of any Deposited
Securities, the Depositary, the Custodian or the Registrar may require payment
from the person presenting the ADS evidenced by an ADR or the depositor of the
Equity Shares of a sum sufficient to reimburse it for any tax or other
governmental charge and any stock transfer or registration fee with respect
thereto (including any such tax or charge and fee with respect to Equity
Shares being deposited or withdrawn) and payment of any applicable fees
payable by the Holders and Beneficial Owners of ADSs. The Depositary may
refuse to deliver ADSs, to register the transfer of any ADS or to make any
distribution on, or related to, Equity Shares until it has received such proof
of citizenship or residence, exchange control approval or other information as
it may deem necessary or proper. The delivery, transfer, registration of
transfer of outstanding ADSs and surrender of ADSs generally may be suspended
or refused during any period when the transfer books of the Depositary, the
Company or the foreign registrar are closed or if any such action is deemed
necessary or advisable by the Depositary or the Company, at any time or from
time to time.

Notwithstanding anything to the contrary in the Deposit Agreement, the
surrender of outstanding ADSs and withdrawal of Deposited Securities may not
be suspended except for: (i) temporary delays caused by closing the transfer
books of the Depositary or the Company or the deposit of Equity Shares in
connection with voting at a shareholders' meeting, or the payment of
dividends; (ii) the payment of fees, taxes and similar charges; and
(iii) compliance with any U.S. or foreign laws or governmental regulations
relating to the ADSs or to the withdrawal of the Deposited Securities.

The Depositary will keep books, at its Corporate Trust Office, for the
registration and transfer of ADSs, which at all reasonable times will be open
for inspection by the Holders, provided that such inspection will not be for
the purpose of communicating with Holders in the interest of a business or
object other than the business of the Company or a matter related to the
Deposit Agreement or the ADSs.

The Depositary may appoint one or more co-transfer agents for the purpose of
effecting transfers, combinations and split-ups of ADSs at designated transfer
offices on behalf of the Depositary. In carrying out its functions, a co-
transfer agent may require evidence of authority and compliance with
applicable laws and other requirements by Holders or persons entitled to ADSs
and will be entitled to protection and indemnity to the same extent as the
Depositary.

Governing Law

The Deposit Agreement will be governed by the laws of the State of New York.

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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

Foreign investment in Indian securities is generally regulated by the
Foreign Exchange Regulation Act, 1973 ("FERA"). Under Section 29(1)(b) of
FERA, no person or company resident outside India that is not incorporated in
India (other than a banking company) can purchase the shares of any company
carrying on any trading, commercial or industrial activity in India without
the permission of the RBI. Also, under Section 19(1)(d) of FERA, the transfer
and issuance of any security of any Indian company to a person resident
outside India requires the permission of the RBI. Under Section 19(5) of FERA,
no transfer of shares in a company registered in India by a non-resident to a
resident of India is valid unless the transfer is confirmed by the RBI upon
application filed by the transferor or the transferee. Under guidelines issued
by the RBI, the RBI will approve such transfers if such transfer is transacted
on an Indian stock exchange through a registered stock broker. Furthermore,
the issuance of rights and other distributions of securities to a non-resident
also requires the prior consent of the RBI. The RBI has granted an exemption
from application of certain of these provisions in connection with the
Offering. See "Government of India Approvals."

General

Shares of Indian companies represented by ADSs may be approved for issuance
to foreign investors by the Government of India under the Issue of Foreign
Currency Convertible Bonds and Equity Shares (through Depositary Receipt
Mechanism) Scheme, 1993 (the "1993 Regulation"), as modified from time to
time, promulgated by the Government of India. The 1993 Regulation is distinct
from other policies or facilities, as described below, relating to investments
in Indian companies by foreign investors. The issuance of ADSs pursuant to the
1993 Regulation also affords to holders of the ADSs the benefits of Section
115AC of the Indian Income Tax Act, 1961 for purposes of the application of
Indian tax law. See "Taxation--Indian Taxation."

Foreign Direct Investment

In July 1991, the Government of India raised the limit on foreign equity
holdings in Indian companies from 40% to 51% in certain high priority
industries. The RBI gives automatic approval for such foreign equity holdings.
The Foreign Investment Promotion Board (the "FIPB"), currently under the
Ministry of Industry, was thereafter formed to negotiate with large foreign
companies wishing to make long-term investments in India. Foreign equity
participation in excess of 51% in such high priority industries or in any
other industries up to Rs. six billion is currently allowed only with the
approval of the FIPB. Proposals in excess of Rs. six billion require the
approval of the Cabinet Committee on Foreign Investment. Proposals involving
the public sector and other sensitive areas require the approval of Cabinet
Committee on Economic Affairs. These facilities are designed for direct
foreign investments by non-residents of India who are not NRIs, OCBs or FIIs
(as each term is defined below) ("Foreign Direct Investors"). The Department
of Industrial Policy and Promotion, a part of the Ministry of Industry, issued
detailed guidelines in January 1997 for consideration of foreign direct
investment proposals by the FIPB (the "Guidelines"). Under the Guidelines,
sector specific guidelines for foreign direct investment and the levels of
permitted equity participation have been established. In January 1998, the RBI
issued a notification that foreign ownership of up to 50%, 51% or 74%,
depending on the category of industry, would be allowed without prior
permission of the RBI. The issues to be considered by the FIPB and the FIPB's
areas of priority in granting approvals are also set out in the Guidelines.
The basic objective of the Guidelines is to improve the transparency and
objectivity of the FIPB's consideration of proposals. However, because the
Guidelines are administrative guidelines and have not been codified as either
law or regulations, they are not legally binding with respect to any
recommendation made by the FIPB or with respect to any decision taken by the
Government of India in cases involving foreign direct investment.

In May 1994, the Government of India announced that purchases by foreign
investors of ADSs as evidenced by ADRs and foreign currency convertible bonds
of Indian companies will be treated as direct foreign investment in the equity
issued by Indian companies for such offerings. Therefore, offerings that
involve the issuance of equity that results in Foreign Direct Investors
holding more than the stipulated percentage of direct foreign investments
(which depends on the category of industry) would require approval from the
FIPB. In addition, in

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connection with offerings of any such securities to foreign investors,
approval of the FIPB is required for Indian companies whether or not the
stipulated percentage limit would be reached, if the proceeds therefrom are to
be used for investment in non-high priority industries. With respect to the
activities of the Company, FIPB approval is required for any direct foreign
investment in the Company which exceeds 51% of the total issued share capital
of the Company.

In July 1997, the Government of India issued guidelines to the effect that
foreign investment in preferred shares will be considered as part of the share
capital of a company and will be processed through the automatic RBI route or
will require the approval of the FIPB as the case may be. Investments in
preferred shares are included as foreign direct investment for the purposes of
sectoral caps on foreign equity, if such preferred shares carry a conversion
option. If the preferred shares are structured without a conversion option,
they would fall outside the foreign direct investment limit but would be
treated as debt and would be subject to special Government of India guidelines
and approvals.

Investment by Non-Resident Indians and Overseas Corporate Bodies

A variety of special facilities for making investments in India in shares of
Indian companies is available to individuals of Indian nationality or origin
residing outside India ("NRIs") and to overseas corporate bodies ("OCBs"), at
least 60% owned by such persons. These facilities permit NRIs and OCBs to make
portfolio investments in shares and other securities of Indian companies on a
basis not generally available to other foreign investors. These facilities are
different and distinct from investments by Foreign Direct Investors described
above.

Investment by Foreign Institutional Investors

In September 1992, the Government of India issued guidelines which enable
foreign institutional investors ("FIIs"), including institutions such as
pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional portfolio managers, to invest in all
the securities traded on the primary and secondary markets in India. Under the
guidelines, FIIs are required to obtain an initial registration from the SEBI
and a general permission from the RBI to engage in transactions regulated
under FERA. FIIs must also comply with the provisions of the SEBI Foreign
Institutional Investors Regulations, 1995. When it receives the initial
registration, the FII also obtains general permission from the RBI to engage
in transactions regulated under FERA. Together, the initial registration and
the RBIs general permission enable the registered FII to buy (subject to the
ownership restrictions discussed below) and sell freely securities issued by
Indian companies, to realize capital gains on investments made through the
initial amount invested in India, to subscribe or renounce rights offerings
for shares, to appoint a domestic custodian for custody of investments held
and to repatriate the capital, capital gains, dividends, income received by
way of interest and any compensation received towards sale or renunciation of
rights offerings of shares.

Ownership Restrictions

SEBI and RBI regulations restrict investments in Indian companies by FIIs,
NRIs and OCBs (collectively, "Foreign Direct Investors"). Under current SEBI
regulations applicable to the Company, Foreign Direct Investors in aggregate
may hold no more than 30% of the Company's Equity Shares, excluding the Equity
Shares underlying the ADSs, and NRIs and OCBs in aggregate may hold no more
than 10% of the Company's Equity Shares, excluding the Equity Shares
underlying the ADSs. Furthermore, SEBI regulations provide that no single FII
may hold more than 10% of the Company's total Equity Shares and no single NRI
or OCB may hold more than 5% of the Company's total Equity Shares.

FIIs may only purchase securities of public Indian companies (other than the
ADSs) through a procedure known as a "preferential allotment of shares," which
is subject to certain restrictions. These restrictions will not apply to
Equity Shares issued as stock dividends or in connection with rights offerings
applicable to the Equity Shares underlying the ADSs.

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There is uncertainty under Indian law about the tax regime applicable to
FIIs which hold and trade ADSs. FIIs are urged to consult with their Indian
legal and tax advisers about the relationship between the FII guidelines and
the ADSs and any Equity Shares withdrawn upon surrender of ADSs.

More detailed provisions relating to FII investment have been introduced by
the SEBI with the introduction of the SEBI Foreign Institutional Investors
Regulations, 1995. These provisions relate to the registration of FIIs, their
general obligations and responsibilities and certain investment conditions and
restrictions. One such restriction is that the total investment in equity and
equity-related instruments should not be less than 70% of the aggregate of all
investments of an FII in India. The SEBI has also permitted private placements
of shares by listed companies with FIIs, subject to the prior approval of the
RBI under FERA. Such private placement must be made at the average of the
weekly highs and lows of the closing price over the preceding six months or
the preceding two weeks, whichever is higher.

Under the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 approved by the SEBI in January 1997
and promulgated by the Government of India in February 1997 (the "Takeover
Code"), which replaced the 1994 Takeover Code (as defined herein), upon the
acquisition of more than 5% of the outstanding shares of a public Indian
company, a purchaser is required to notify the company and all the stock
exchanges on which the shares of the Company are listed. Upon the acquisition
of 15% or more of such shares or a change in control of the company, the
purchaser is required to make an open offer to the other shareholders offering
to purchase at least 20% of all the outstanding shares of the Company at a
minimum offer price as determined pursuant to the rules of the Takeover Code.
Upon conversion of ADSs into Equity Shares, an ADS holder will be subject to
the Takeover Code.

Open market purchases of securities of Indian companies in India by Foreign
Direct Investors or investments by NRIs, OCBs and FIIs above the ownership
levels set forth above require Government of India approval on a case-by-case
basis.

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GOVERNMENT OF INDIA APPROVALS

India's Ministry of Finance (the "MOF") and the RBI have approved the
Offering. In addition, the Company has obtained the required approvals from
the MOF to enter into the Depositary Agreement and the Underwriting Agreement
referred to in "Underwriting." Pursuant to such approvals and consistent with
the Company's request, the maximum aggregate proceeds of the Offering are
limited to $75 million (including the Underwriters' over-allotment option).
Various tax concessions are expected to be available with respect to the
Offering in accordance with the provisions of Section 115AC of the Indian
Income Tax Act. Copies of the approvals from the MOF and the RBI will be made
available for public inspection at the registered office of the Company or
provided upon written request to the Chief Financial Officer of the Company.
See "Taxation--Indian Taxation."

The RBI has granted general approvals which permit: (i) foreign investors to
acquire ADSs and Equity Shares; (ii) the issue of the ADSs and the transfer
and registration of the Equity Shares in the name of the Depositary or its
nominee; (iii) remittance of dividends on the Equity Shares represented by
ADSs at market rates, as and when due subject to the payment of any applicable
Indian taxes; (iv) issue of any rights or bonus Equity Shares represented by
the ADSs; (v) repatriation in free foreign exchange of the proceeds of a sale
of the Equity Shares (received upon surrender of ADSs) and any rights or
bonuses that may accrue in respect of the Equity Shares, subject to applicable
Indian taxes; (vi) export of Equity Shares from India for transfer thereof
outside of India upon withdrawal from the depositary facility; and (vii) the
free transfer of ADSs outside India between non-residents of India. Specific
approval of the RBI will have to be obtained, however, for the sale of the
underlying Equity Shares by a non-resident of India to a resident of India as
well as for any renunciation of rights to a resident of India. Pursuant to
FERA, a resident of India is: (i) a citizen of India who has not left India
with an intention of staying outside India; and (ii) a non-citizen of India
who stays in India for a purpose indicating an intention to stay in India. A
"non-resident" of India is a person who is not a resident of India. Currently,
such sales or renunciations will be permitted by the RBI if made through a
registered Indian broker or through a recognized stock exchange in India at
prevailing market rates, and the sale proceeds may be repatriated after
payment of applicable taxes and stamp duties. See "Taxation--Indian Taxation--
Taxation of Distributions."

Any person resident outside India desiring to sell Equity Shares received
upon surrender of ADSs or otherwise transfer such Equity Shares within India,
whether or not through any of the Indian Stock Exchanges, should seek the
advice of Indian counsel as to the requirements applicable at that time.
Transfers of shares of an Indian company between non-residents generally
require the approval of the RBI (such approvals having been obtained by the
Company as described above). Transfers of securities in Indian companies from
a person resident outside India to a person resident in India require
confirmation from the RBI under Section 19(5) of FERA. Accordingly, under
current Indian law, the sale and transfer of Equity Shares withdrawn from the
Depositary to any person resident in India would require additional approvals
to be obtained from the RBI. Under current regulations and practice, a person
resident outside of India intending to sell Indian securities within India or
to a resident of India would generally apply for RBI approval by submitting a
Form TS1, which requires information as to the transferor, transferee, the
shareholding structure of the Indian company whose shares are to be sold, the
highest and lowest quotation shares on the stock exchange where the shares
have been listed during each of the preceding three calendar years and the
latest available quotation, the proposed sale price per share and other
information. Applications for transfer of Equity Shares by non-resident
investors to residents should be submitted to the RBI on Form TS1 together
with the documents mentioned therein. The RBI will generally permit such sales
or renunciation if made through a registered Indian broker or through a
recognized stock exchange in India at prevailing market rates. The proceeds
from such transfers may be transferred outside India after payment of
applicable taxes and stamp duties. The RBI will also consider applications for
transfer of shares by private arrangement (i.e., other than through a stock
exchange) to a person resident in India. In such cases, the RBI will need to
satisfy itself that the shares are proposed to be sold at a price arrived at
by taking the average of quotations on the date of application or the price
paid by the applicant whichever is lower. The RBI is not required to respond
to a Form TS1 application within any specific time period and may grant or
deny the application in its discretion.

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The Company will file prior to the effectiveness of this Registration
Statement an application with the Department of Company Affairs to the effect
that it is not required to file this Prospectus under the Indian Companies
Act. The MOF may request that a copy of this Prospectus be filed with the
SEBI, the Registrar of Companies in Bangalore and the relevant Indian Stock
Exchanges for record purposes.

The Company's Equity Shares issued and outstanding prior to the Offering are
listed on the Indian Stock Exchanges. Upon effectiveness of the Offering, the
Company will make the appropriate filings with the Indian Stock Exchanges to
approve the Equity Shares underlying the ADSs offered hereby for trading on
the Indian Stock Exchanges. Equity Shares which are withdrawn from the
Depositary may not be sold on the Indian Stock Exchanges until the listing
process is completed, which will occur within two weeks of the Offering.

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TAXATION

Indian Taxation

General. The following is the opinion of Crawford Bayley & Co. on the
principal Indian tax consequences for holders of ADSs and Equity Shares
received upon withdrawal of such Equity Shares who are not resident in India
whether of Indian origin or not ("Non-resident Holders") and is based on the
provisions of the Income Tax Act, 1961 (the "Indian Tax Act"), including the
special tax regime contained in Section 115AC (the "Section 115AC Regime") and
the 1993 Regulation. The Indian Tax Act is amended every year by the Finance
Act of the relevant year. Some or all of the tax consequences of the Section
115 AC Regime may be amended or changed by future amendments of the Indian Tax
Act.

This opinion is not intended to constitute a complete analysis of the
individual tax consequences to Non-resident Holders under Indian law for the
acquisition, ownership and sale of ADSs and Equity Shares by Non-resident
Holders. Personal tax consequences of an investment may vary for investors in
various circumstances and potential investors should therefore consult their
own tax advisers on the tax consequences of such acquisition, ownership and
sale, including specifically the tax consequences under the law of the
jurisdiction of their residence and any tax treaty between India and their
country of residence.

Residence. For purposes of the Indian Tax Act, an individual is considered
to be a resident of India during any financial year if he: (i) is in India in
that year for a period or periods amounting to 182 days or more; or (ii) is in
India in that year for 60 days or more and, in case of a citizen of India or a
person of Indian origin, who, being outside India, comes on a visit to India,
is in India for more than 182 days effective April 1, 1995 and in each case
within the four preceding years has been in India for a period or periods
amounting to 365 days or more. A company is resident in India if it is
registered in India or the control and the management of its affairs is
situated wholly in India.

Taxation of Distributions. Pursuant to the Finance Act, 1997, withholding
tax on dividends paid to shareholders no longer applies. Distributions to Non-
resident Holders of additional ADSs or Equity Shares or rights to subscribe
for Equity Shares ("Rights") made with respect to ADSs or Equity Shares are
not subject to Indian tax.

Taxation of Capital Gains. Any gain realized on the sale of ADSs or Equity
Shares by a Non-resident Holder to another Non-resident Holder outside India
is not subject to Indian capital gains tax. However, as Rights are not
expressly covered by the Indian Income Tax Act, 1961, it is unclear, and
Crawford Bayley & Co. is therefore unable to opine, as to whether capital gain
derived from the sale of Rights by a Non-resident Holder (not entitled to an
exemption under a tax treaty) to another Non-resident Holder outside India
will be subject to Indian capital gains tax. If such Rights are deemed by the
Indian tax authorities to be situated within India, the gains realized on the
sale of such Rights will be subject to customary Indian taxation as discussed
below.

Since the Offering has been approved by the Government of India under the
Section 115AC Regime, Non-resident Holders of the ADSs will have the benefit
of tax concessions available under the Section 115AC Regime. The Section 115AC
Regime provides that if the Equity Shares are sold on an Indian Stock Exchange
against payment in Indian rupees, they will no longer be eligible for such
concessional tax treatment. However, the Section 115AC Regime is unclear, and
Crawford Bayley & Co. is therefore unable to opine, as to whether such tax
treatment is available to a non-resident who acquires Equity Shares outside
India from a Non-resident Holder of Equity Shares after receipt of the Equity
Shares upon surrender of the ADSs. If concessional tax treatment is not
available, gains realized on the sale of such Equity Shares will be subject to
customary Indian taxation as discussed below.

Subject to any relief provided pursuant to an applicable tax treaty, any
gain realized on the sale of Equity Shares to an Indian resident or inside
India generally will be subject to Indian capital gains tax which is to be
deducted at the source by the buyer. For the purpose of computing capital
gains tax, the cost of acquisition of Equity Shares received in exchange for
ADSs will be determined on the basis of the prevailing price of the shares

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<PAGE>

on any of the Indian Stock Exchanges on the date that the Depositary gives
notice to the custodian of the delivery of the Equity Shares in exchange for
the corresponding ADSs. A Non-resident Holder's holding period (for purposes
of determining the applicable Indian capital gains tax rate) in respect of
Equity Shares received in exchange for ADSs commences on the date of the
notice of the redemption by the Depositary to the Custodian. The Indian-U.S.
Treaty does not provide an exemption from the imposition of Indian capital
gains tax.

Taxable gain realized in respect of Equity Shares held (calculated in the
manner set forth in the prior paragraph) for more than 12 months (long-term
gain) is subject to tax at the rate of 10%. Taxable gain realized in respect
of Equity Shares held for 12 months or less (short-term gain) is subject to
tax at variable rates with a maximum rate of 48%. The actual rate of tax on
short-term gain depends on a number of factors, including the legal status of
the Non-resident Holder and the type of income chargeable in India.

Stamp Duty and Transfer Tax. Upon issuance of the Equity Shares, the Company
is required to pay a stamp duty of 0.1% per share of the issue price of the
underlying Equity Shares. A transfer of ADSs is not subject to Indian stamp
duty. However, upon the acquisition of Equity Shares from the Depositary in
exchange for ADSs, the holder will be liable for Indian stamp duty at the rate
of 0.5% of the market value of the ADSs or Equity Shares exchanged. A sale of
Equity Shares by a registered holder will also be subject to Indian stamp duty
at the rate of 0.5% of the market value of the Equity Shares on the trade
date, although customarily such tax is borne by the transferee.

Gift and Wealth Tax. The holding of the ADSs in the hands of Non-resident
Holders and the holding of the underlying Equity Shares by the Depositary as a
fiduciary and the transfer of ADSs between Non-resident holders and the
Depositary will be exempt from Indian gift tax and Indian wealth tax. Although
Indian gift tax was abolished effective October 1, 1998, a gift tax may apply
to transfers by way of gift of Equity Shares or ADSs in the future. Investors
are advised to consult their own tax advisers in this context.

Estate Duty. Under current Indian law, there is no estate duty applicable to
a Non-resident Holder of ADSs or Equity Shares.

United States Federal Taxation

The following is a summary of the material U.S. federal income and estate
tax matters that may be relevant with respect to the acquisition, ownership
and disposition of Equity Shares or ADSs. This summary addresses only the U.S.
federal income and estate tax considerations of holders that are citizens or
residents of the United States, partnerships or corporations created in or
under the laws of the United States or any political subdivision thereof or
therein, estates, the income of which is subject to U.S. federal income
taxation regardless of its source and trusts ("U.S. Holders") or are not U.S.
Holders ("Non-U.S. Holders") and that will hold Equity Shares or ADSs as
capital assets. This summary does not address tax considerations applicable to
holders that may be subject to special tax rules, such as banks, insurance
companies, dealers in securities or currencies, tax-exempt entities, persons
that will hold Equity Shares or ADSs as a position in a "straddle" or as part
of a "hedging" or "conversion" transaction for tax purposes, persons that have
a "functional currency" other than the U.S. dollar or holders of 10% or more
(by voting power or value) of the stock of the Company. This summary is based
on the tax laws of the United States as in effect on the date of this
Prospectus and on United States Treasury Regulations in effect (or, in certain
cases, proposed) as of the date of this Prospectus, as well as judicial and
administrative interpretations thereof available on or before such date and is
based in part on representations of the Depositary and the assumption that
each obligation in the Depositary Agreement and any related agreement will be
performed in accordance with its terms. All of the foregoing are subject to
change, which change could apply retroactively and could affect the tax
consequences described below.

EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT
TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
OWNING OR DISPOSING OF EQUITY SHARES OR ADSs.

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<PAGE>

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

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

A U.S. Holder will not be eligible for a foreign tax credit against its U.S.
federal income tax liability for Indian taxes paid by the Company and deemed
under Indian law to have been paid by the shareholders of the Company, unless
it is a U.S. company holding at least 10% of the Indian company paying the
dividends.

U.S. Holders should be aware that dividends paid by the Company generally
will constitute "passive income" for purposes of the foreign tax credit. The
Internal Revenue Code applies various limitations on the amount of foreign tax
credit that may be available to a U.S. taxpayer. U.S. Holders should consult
their own tax advisors with respect to the potential consequences of those
limitations.

A Non-U.S. Holder of Equity Shares or ADSs generally will not be subject to
U.S. federal income tax or withholding tax on dividends received on Equity
Shares or ADSs unless such income is effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States

Sale or Exchange of Equity Shares or ADSs. A U.S. Holder generally will
recognize gain or loss on the sale or exchange of Equity Shares or ADSs equal
to the difference between the amount realized on such sale or exchange and the
U.S. Holder's tax basis in the Equity Shares or ADSs, as the case may be. Such
gain or loss will be capital gain or loss, and will be long-term capital gain
or loss if the Equity Shares or ADSs, as the case may be, were held for more
than one year. Gain, if any, recognized by a U.S. Holder generally will be
treated as U.S. source passive income for U.S. foreign tax credit purposes.

A Non-U.S. Holder of Equity Shares or ADSs generally will not be subject to
U.S. federal income or withholding tax on any gain realized on the sale or
exchange of such Equity Shares or ADSs unless: (i) such gain is effectively
connected with the conduct by such Non-U.S. Holder of a trade or business in
the U.S.; or (ii) in the case of any gain realized by an individual Non-U.S.
Holder, such holder is present in the United States for 183 days or more in
the taxable year of such sale and certain other conditions are met.

If dividends are paid in Indian rupees, the amount of the dividend
distribution includible in the income of a U.S. Holder will be in the U.S.
dollar value of the payments made in Indian rupees, determined at a spot
exchange rate between Indian rupees and U.S. dollars applicable to the date
such dividend is includible in the income of the U.S. Holder, regardless of
whether the payment is in fact converted into U.S. dollars. Generally, gain or
loss (if any) resulting from currency exchange fluctuations during the period
from the date the dividend is paid to the date such payment is converted into
U.S. dollars will be treated as ordinary income or loss.

Estate Taxes. An individual shareholder who is a citizen or resident of the
United States for U.S. federal estate tax purposes will have the value of the
Equity Shares or ADSs owned by such holder included in his or her gross estate
for U.S. federal estate tax purposes. An individual holder who actually pays
Indian estate tax with respect to the Equity Shares will, however, be entitled
to credit the amount of such tax against his or her U.S. federal estate tax
liability, subject to certain conditions and limitations.

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<PAGE>

Backup Withholding Tax and Information Reporting Requirements. Under current
U.S. Treasury Regulations, dividends paid on Equity Shares, if any, generally
will not be subject to information reporting and generally will not be subject
to U.S. backup withholding tax. Information reporting will apply to payments
of dividends on, and to proceeds from the sale or redemption of, Equity Shares
or ADSs by a paying agent (including a broker) within the United States to a
U.S. Holder (other than an "exempt recipient," including a corporation, a
payee that is a Non-U.S. Holder that provides an appropriate certification and
certain other persons). In addition, a paying agent within the United States
will be required to withhold 31% of any payments of the proceeds from the sale
or redemption of Equity Shares or ADSs within the United States to a holder
(other than an "exempt recipient") if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with such backup
withholding requirements.

Passive Foreign Investment Company. A non-U.S. corporation will be
classified as a passive foreign investment company (a "PFIC") for U.S. Federal
income tax purposes if it satisfies either of the following two tests: (i) 75%
or more of its gross income for the taxable year is passive income; or (ii) on
average for the taxable year (by value or, if the Company so elects, by
adjusted basis) 50% or more of its assets produce or are held for the
production of passive income.

The Company does not believe that it satisfies either of the tests for PFIC
status. If the Company were to be a PFIC for any taxable year, U.S. Holders
would be required to either: (i) pay an interest charge together with tax
calculated at maximum ordinary income rates on certain "excess distributions"
(defined to include gain on a sale or other disposition of Equity Shares); or
(ii) if a Qualified Electing Fund election is made, to include in their
taxable income their pro rata share of certain undistributed amounts of the
Company's income.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
TAX CONSEQUENCES RELATING TO OWNERSHIP OF REGISTERED SHARES OR ADSs.
PROSPECTIVE PURCHASERS OF ADSs OFFERED HEREBY SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

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<PAGE>

EQUITY SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of Equity Shares into the public market
following the Offering (whether on the Indian Stock Exchanges or into the
United States market by conversion of outstanding Equity Shares into ADSs, if
permitted in the future by the Government of India) could adversely affect the
market price of the ADSs. Upon completion of the Offering, 32,934,400 Equity
Shares will be issued and outstanding, including 900,000 Equity Shares
represented by 1,800,000 ADSs issued in connection with the Offering. Of the
32,034,400 Equity Shares issued and outstanding prior to the issuance of the
ADSs, holders of approximately 10,144,200 Equity Shares (including all shares
held by directors and their families and executive officers) have agreed not
to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of, or agree to dispose of, any such Equity Shares for a period of 180
days following the date of this Prospectus. NationsBanc Montgomery Securities
LLC may release such shares from the lock-up in its sole discretion at any
time and without prior public announcement. Substantially all of the Equity
Shares that are not subject to such lock-ups, will be freely tradeable in
India immediately after the Offering. Upon expiration of the lock-up period
(or earlier with such consent), substantially all of the Equity Shares will be
available for sale on the Indian Stock Exchanges. Sales of substantial amounts
of Equity Shares, or the availability of such shares for sale, could adversely
affect the market price of the ADSs. See "Risk Factors--Risks Related to
Investments in Indian Securities" and "--Absence of Prior U.S. Public Market;
Potential Limited Liquidity" for information on the limitations on conversion
of Equity Shares into ADSs.

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<PAGE>

UNDERWRITING

The Underwriters named below, represented by NationsBanc Montgomery
Securities LLC, BancBoston Robertson Stephens, BT Alex. Brown and Thomas
Weisel Partners LLC (the "Representatives"), have severally agreed, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
from the Company the number of ADSs indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters are committed to purchase all
of the ADSs if they purchase any.

<TABLE>
<CAPTION>
Number
Underwriter of ADSs
----------- ---------
<S> <C>
NationsBanc Montgomery Securities LLC.............................. 505,440
BancBoston Robertson Stephens...................................... 365,040
BT Alex. Brown Incorporated........................................ 365,040
Thomas Weisel Partners LLC......................................... 168,480
Credit Suisse First Boston Corporation............................. 57,000
Donaldson, Lufkin & Jenrette Securities Corporation................ 57,000
Raymond James & Associates, Inc.................................... 57,000
Cazenove Inc....................................................... 57,000
Robert Fleming Inc................................................. 57,000
Cruttenden Roth Incorporated....................................... 37,000
John G. Kinnard & Company, Incorporated............................ 37,000
H.C. Wainwright & Co., Inc......................................... 37,000
---------
Total............................................................ 1,800,000
=========
</TABLE>

The Representatives have advised the Company that the Underwriters initially
propose to offer the ADSs to the public on the terms set forth on the cover
page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $0.84 per ADS, and the Underwriters may allow, and
such dealers reallow, a concession of not more than $0.10 per ADS to certain
other dealers. If the Underwriters' over-allotment option is exercised, the
Underwriters will reimburse the Company for certain expenses incurred in
connection with the Offering. After the Offering, the offering price and other
selling terms may be changed by the Representatives. The ADSs are offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 270,000 additional ADSs to cover over-allotments, if any, at the
same price per ADS as the initial ADSs to be purchased by the Underwriters. To
the extent that the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional ADSs, in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such ADSs only to cover over-
allotments made in connection with the Offering.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in request thereof.

All of the Company's directors (other than directors who do not own Equity
Shares or rights to purchase Equity Shares) and executive officers, and
certain family members of the Company's directors, have agreed that, subject
to certain exceptions, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of NationsBanc
Montgomery Securities LLC, directly or indirectly, offer, sell, contract or
grant any option to sell, pledge, transfer, establish an open put position or
otherwise dispose of, or agree to

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dispose of, any Equity Shares or ADSs, any options or warrants to purchase
Equity Shares or ADSs, or any securities convertible into, exercisable or
exchangeable for Equity Shares or ADSs. In addition, the Company has agreed
that for a period of 180 days after the date of this Prospectus, it will not,
without the prior written consent of NationsBanc Montgomery Securities LLC,
directly or indirectly, offer, issue, sell, contract or grant any option to
sell, pledge, transfer, establish an open put position or otherwise dispose of,
or agree to dispose of, any Equity Shares or ADSs, any options or warrants to
purchase any Equity Shares or ADSs or any securities convertible into,
exercisable or exchangeable for Equity Shares or ADSs, other than the grant of
options and issuance of shares under the ESOP and the 1998 Plan. See "Equity
Shares Eligible for Future Sale."

The Representatives have advised the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of ADSs offered hereby.

The Company's Equity Shares are traded on the Indian Stock Exchanges.
However, prior to the Offering, there has been no public market for the ADSs
offered hereby or for the underlying Equity Shares in the United States.
Consequently, the public offering price for the ADSs will be determined through
negotiations among the Company and the Representatives. The primary factor to
be considered in such negotiations will be the price of the Company's Equity
Shares on the Indian Stock Exchanges. Among the other factors to be considered
in such negotiations will be the history of, and the prospects for, the Company
and the industry in which it competes, an assessment of the Company's
management, its past and present earnings and the trend of such earnings, the
prospects for future earnings of the Company, applicable regulatory limitations
on foreign investment in the Equity Shares, the present state of the Company's
business, the general condition of the securities markets at the time of the
Offering and the market prices of publicly traded stock of comparable companies
in recent periods.

The Underwriters are permitted to engage in certain transactions that
stabilize the price of the ADSs. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the ADSs. If the
Underwriters create a short position in the ADSs in connection with the
Offering, i.e., if they sell more ADSs than are set forth on the cover page of
this Prospectus, the Underwriters may reduce that short position by purchasing
ADSs in the open market. The Underwriters may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above. In addition, the Representatives may impose "penalty bids" under
contractual arrangements with the Underwriters whereby they may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of the
other Underwriters, the selling concession with respect to the ADSs that are
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market.

In general, purchases of ADSs for the purpose of stabilization or to reduce a
short position could cause the price of the ADSs to be higher than it might be
in the absence of such purchases. Neither the Company nor the Underwriters make
any representation or predictions as to the direction or magnitude of any
effect that the transactions described above may have on the price of the ADSs.
In addition, neither the Company nor the Underwriters make any representation
that the Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.

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LEGAL MATTERS

The validity of the ADSs offered hereby will be passed upon for the Company
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. The validity of the Equity Shares represented by the ADSs offered
hereby will be passed upon by Crawford Bayley & Co., Mumbai, India, Indian
counsel for the Company. Certain matters in connection with the Offering will
be passed upon on behalf of the Underwriters by Latham & Watkins, Los Angeles,
California, and Nishith Desai Associates, Mumbai, India, counsel for the
Underwriters. Wilson Sonsini Goodrich & Rosati may rely upon Crawford Bayley &
Co. with respect to certain matters governed by Indian law.

INDIA FINANCIAL ADVISOR

In connection with certain matters in the Offering, Enam Financial
Consultants Pvt. Ltd. has acted as the India financial advisor to the Company.

EXPERTS

The U.S. GAAP consolidated financial statements of Infosys Technologies
Limited as of March 31, 1997 and 1998, and for each of the years in the three-
year period ended March 31, 1998, have been included herein in reliance upon
the report of KPMG Peat Marwick, India, independent accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in auditing
and accounting.

CHANGE OF ACCOUNTANTS

Effective April 1997, Bharat S. Raut and Company was engaged as the
principal independent accountants for the Company for Indian GAAP reporting,
replacing Mr. A.M. Bhatkal, who resigned at that time. The change was approved
by the Audit Committee of the Company's Board of Directors and at the Annual
General Meeting held on June 7, 1997.

In connection with the audits of the three fiscal years in the period ended
March 31, 1997, and for the interim period from April 1, 1997 through June 7,
1997 there were no disagreements with Mr. Bhatkal on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which disagreements, if not resolved to Mr. Bhatkal's satisfaction
would have caused him to make reference to the matter in his report. The audit
reports of Mr. Bhatkal for the financial statements of the Company as of and
for the fiscal years ended March 31, 1996 and 1997 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty or audit scope.

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<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
F-1 (including all amendments thereto, the "Registration Statement"), of which
this Prospectus constitutes a part, under the Securities Act, with respect to
the ADSs and the underlying Equity Shares offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the
matter involved, and each such statement is qualified in its entirety by such
reference.

Upon declaration by the Commission of the effectiveness of the Registration
Statement, the Company will be subject to the periodic reporting and other
informational requirements of the Exchange Act, and in accordance therewith
will be required to file reports and other information with the Commission.
The Registration Statement (with exhibits), as well as such reports and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549; and at the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York,
New York 10048; and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, such as
the Company, that make electronic filings with the Commission.

As a foreign private issuer, the Company will be exempt from the rules under
the Exchange Act prescribing the furnishing and content of proxy statements,
and its executive officers, directors and principal shareholders are exempt
from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. Under the Exchange Act, the Company will not
be required to publish consolidated financial statements as frequently or as
promptly as United States companies. However, the Company intends to furnish
the Depositary with annual reports, which will include annual audited
consolidated financial statements prepared in accordance with U.S. GAAP, and
quarterly reports, which will include unaudited quarterly consolidated
financial information prepared in accordance with U.S. GAAP. The Depositary
has agreed with the Company that, upon the Company's request, it will promptly
mail such reports to all registered holders of ADSs. The Company will also
furnish to the Depositary all notices of shareholders' meetings and other
reports and communications that are made generally available to its
shareholders. The Depositary will arrange for the mailing of such documents to
record holders of ADSs. In addition, the Company has agreed in the
Underwriting Agreement relating to the Offering to submit to the Commission
quarterly reports, which will include unaudited quarterly condensed
consolidated financial information, on Form 6-K for the first three quarters
of each fiscal year and to file its annual report on Form 20-F within the time
period prescribed under Section 13 of the Exchange Act for the filing by
domestic issuers of quarterly reports on Form 10-Q and annual reports on
Form 10-K, respectively.

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<PAGE>

INFOSYS TECHNOLOGIES LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of KPMG Peat Marwick, Independent Auditors....................... F-2
Balance Sheets.......................................................... F-3
Statements of Income.................................................... F-4
Statements of Shareholders' Equity...................................... F-5
Statements of Cash Flows................................................ F-6
Notes to Financial Statements........................................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Infosys Technologies Limited:

We have audited the accompanying consolidated balance sheets of Infosys
Technologies Limited and its subsidiary as of March 31, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended March 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Infosys
Technologies Limited and its subsidiary as of March 31, 1997 and 1998 and the
results of their operations and their cash flows for each of the years in the
three year period ended March 31, 1998, in conformity with accounting
principles generally accepted in the United States.

KPMG Peat Marwick

Bangalore, India
April 10, 1998

F-2
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
As of
As of March 31, December
------------------------ 31,
1997 1998 1998
----------- ----------- --------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 8,320,331 $15,419,265 $22,797,989
Trade accounts receivable, net of al-
lowances.............................. 4,994,607 10,263,084 21,270,407
Inventories............................ 11,458 -- --
Prepaid expenses and other current as-
sets.................................. 2,826,506 3,751,289 5,302,824
Prepaid income taxes................... 983,859 536,969 --
----------- ----------- -----------
Total current assets.................. 17,136,761 29,970,607 49,371,220
Property, plant and equipment--net...... 14,930,862 16,695,503 22,795,198
Deferred tax assets..................... 382,395 1,089,948 1,642,311
Investments............................. 362 362 177,938
Other assets............................ 473,079 1,025,605 2,595,128
----------- ----------- -----------
Total assets............................ $32,923,459 $48,782,025 $76,581,795
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable....................... $ 125,579 $ 149,086 $ 81,400
Customer deposits...................... 196,710 190,173 109,809
Other accrued liabilities.............. 1,960,941 4,979,306 6,186,528
Provision for income taxes............. -- -- 1,582,516
Unearned revenue....................... -- -- 5,356,200
----------- ----------- -----------
Total current liabilities............. 2,283,230 5,318,565 13,316,453
Non-current liabilities................. -- -- --
----------- ----------- -----------
Total liabilities....................... 2,283,230 5,318,565 13,316,453
----------- ----------- -----------
Preferred stock of subsidiary........... -- 2,317,500 --
Shareholders' equity:
Common stock, $0.32 par value;
50,000,000 Equity Shares
authorized as of 1997 and 1998; Issued
and outstanding
Equity Shares--29,038,400 and
32,034,400 as of 1997
and 1998, respectively ............... 2,310,270 4,545,811 4,545,811
Additional paid-in capital............. 15,712,247 24,415,920 44,802,455
Accumulated other comprehensive in-
come.................................. (3,531,811) (7,042,229) (9,384,666)
Deferred compensation--Employees Stock
Offer Plan............................ (3,507,715) (7,831,445) (25,813,924)
Retained earnings...................... 19,681,740 27,994,268 49,942,298
Loan to Trust.......................... (24,502) (936,365) (826,632)
----------- ----------- -----------
Total shareholders' equity.............. 30,640,229 41,145,960 63,265,342
----------- ----------- -----------
Total liabilities and shareholders' eq-
uity................................... $32,923,459 $48,782,025 $76,581,795
=========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31, December 31,
----------------------------------- -----------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $26,607,009 $39,585,919 $68,329,961 $48,412,398 $86,101,258
Cost of revenues........ 15,637,577 22,615,070 40,156,509 28,280,589 47,001,970
----------- ----------- ----------- ----------- -----------
Gross profit............ 10,969,432 16,970,849 28,173,452 20,131,809 39,099,288
----------- ----------- ----------- ----------- -----------
Operating expenses:
Selling, general and
administrative
expenses.............. 4,350,710 7,010,211 13,225,492 9,107,747 13,706,594
Amortization of
deferred stock
compensation expense.. 360,853 767,926 2,566,613 2,105,036 2,404,056
----------- ----------- ----------- ----------- -----------
Total operating
expenses............... 4,711,563 7,778,137 15,792,105 11,212,783 16,110,650
----------- ----------- ----------- ----------- -----------
Operating income........ 6,257,869 9,192,712 12,381,347 8,919,026 22,988,638
Other income, net....... 1,460,329 769,560 800,799 606,324 1,211,520
----------- ----------- ----------- ----------- -----------
Income before income
taxes.................. 7,718,198 9,962,272 13,182,146 9,525,350 24,200,158
Provisions for income
taxes.................. 894,561 1,320,270 770,458 977,865 3,532,000
Subsidiary preferred
stock dividends........ -- -- 67,500 33,750 151,331
----------- ----------- ----------- ----------- -----------
Net income.............. $ 6,823,637 $ 8,642,002 $12,344,188 $ 8,513,735 $20,516,827
=========== =========== =========== =========== ===========
Earnings per Equity
Share:
Basic.................. $0.24 $0.30 $0.41 $0.29 $0.67
=========== =========== =========== =========== ===========
Diluted................ $0.23 $0.29 $0.41 $0.28 $0.67
=========== =========== =========== =========== ===========
Weighted Equity Shares
used in computing
earnings per
Equity Share:
Basic.................. 29,034,400 29,036,394 29,787,144 29,416,886 30,540,000
Diluted................ 29,283,514 29,704,060 30,403,904 30,260,320 30,624,604
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Equity Shares
---------------------
Accumulated Deferred
Additional Other Compensation--
Paid-In Comprehensive Comprehensive Employee Stock Loan to Retained
Shares Par Value Capital Income Income Offer Plan Trust Earnings
---------- ---------- ----------- ------------- ------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
March 31, 1995.. 29,034,400 $2,309,991 $12,403,865 $ (131,438) $ (1,330,622) -- $ 6,416,483
Cash dividends
declared........ -- -- -- -- -- -- (1,068,955)
Compensation
related to stock
option grants... -- -- 1,283,275 -- (1,283,275) -- --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 360,853 -- --
Comprehensive
income
Net income...... -- -- -- $ 6,823,637 -- -- -- 6,823,637
Other comprehen-
sive income
Translation ad-
justment....... -- -- -- (1,438,382) -- -- -- --
Unrealized loss
on investments,
net............ -- -- -- (420,876) -- -- -- --
-----------
Other comprehen-
sive income.... -- -- -- (1,859,258) (1,859,258) -- -- --
-----------
Comprehensive
income.......... -- -- -- $ 4,964,379 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1996.. 29,034,400 2,309,991 13,687,140 (1,990,696) (2,253,044) -- 12,171,165
Cash dividends
declared........ -- -- -- -- -- -- (1,131,427)
Common stock
issued upon
exercise of
warrants........ 4,000 279 2,510 -- -- (24,502) --
Compensation
related to stock
option grants... -- -- 2,022,597 -- (2,022,597) -- --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 767,926 -- --
Comprehensive
income
Net income...... -- -- -- $ 8,642,002 -- -- -- 8,642,002
Other comprehen-
sive income
Translation ad-
justment....... -- -- -- (1,902,597) -- -- -- --
Unrealized gain
on invest-
ments--net..... -- -- -- 361,482 -- -- -- --
-----------
Other comprehen-
sive income.... -- -- -- (1,541,115) (1,541,115) -- -- --
-----------
Comprehensive
income.......... -- -- -- $ 7,100,887 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1997.. 29,038,400 2,310,270 15,712,247 (3,531,811) (3,507,715) (24,502) 19,681,740
Stock split...... -- 2,028,521 -- -- -- -- (2,028,521)
Cash dividends
declared........ -- -- -- -- -- -- (2,003,139)
Common stock
issued upon
exercise of
warrants........ 2,996,000 207,020 1,813,330 -- -- (911,863) --
Compensation
related to stock
option grants... -- -- 6,890,343 -- (6,890,343) -- --
Amortization of
compensation
related to stock
option grants... -- -- -- -- 2,566,613 -- --
Comprehensive
income
Net income...... -- -- -- $12,344,188 -- -- -- 12,344,188
Other comprehen-
sive income--
translation ad-
justment....... -- -- -- (3,510,418) (3,510,418) -- -- --
-----------
Comprehensive
income.......... -- -- -- $ 8,833,770 -- -- -- --
---------- ---------- ----------- =========== ----------- ------------ --------- -----------
Balance as of
March 31, 1998.. 32,034,400 4,545,811 24,415,920 (7,042,229) (7,831,445) (936,365) 27,994,268
Cash dividends
declared
(unaudited)..... -- -- -- -- -- -- (1,037,628)
Compensation
related to stock
option grants
(unaudited)..... -- -- 20,386,535 -- (20,386,535) -- --
Amortization of
compensation
related to stock
option grants
(unaudited)..... -- -- -- -- 2,404,056 -- --
Comprehensive
income
(unaudited)
Net income (un-
audited)....... -- -- -- $20,516,827 -- -- -- 20,516,827
Other comprehen-
sive income--
Translation ad-
justment ...... -- -- -- (2,342,437) (2,342,437) -- -- --
-----------
Comprehensive
income
(unaudited)..... -- -- -- $18,174,390 -- -- -- --
===========
Adjustment on
deconsolidation
of subsidiary
(unaudited)..... -- -- -- -- -- -- 2,468,831
Repayment on loan
to Trust
(unaudited)..... -- -- -- -- -- 109,733 --
---------- ---------- ----------- ----------- ------------ --------- -----------
Balance as of
December 31,
1998
(unaudited)..... 32,034,400 $4,545,811 $44,802,455 $(9,384,666) $(25,813,924) $(826,632) $49,942,298
========== ========== =========== =========== ============ ========= ===========
<CAPTION>
Total
Shareholders'
Equity
-------------
<S> <C>
Balance as of
March 31, 1995.. $19,668,279
Cash dividends
declared........ (1,068,955)
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 360,853
Comprehensive
income
Net income...... 6,823,637
Other comprehen-
sive income
Translation ad-
justment....... (1,438,382)
Unrealized loss
on investments,
net............ (420,876)
Other comprehen-
sive income.... --
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1996.. 23,924,556
Cash dividends
declared........ (1,131,427)
Common stock
issued upon
exercise of
warrants........ (21,713)
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 767,926
Comprehensive
income
Net income...... 8,642,002
Other comprehen-
sive income
Translation ad-
justment....... (1,902,597)
Unrealized gain
on invest-
ments--net..... 361,482
Other comprehen-
sive income.... --
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1997.. 30,640,229
Stock split...... --
Cash dividends
declared........ (2,003,139)
Common stock
issued upon
exercise of
warrants........ 1,108,487
Compensation
related to stock
option grants... --
Amortization of
compensation
related to stock
option grants... 2,566,613
Comprehensive
income
Net income...... 12,344,188
Other comprehen-
sive income--
translation ad-
justment....... (3,510,418)
Comprehensive
income.......... --
-------------
Balance as of
March 31, 1998.. 41,145,960
Cash dividends
declared
(unaudited)..... (1,037,628)
Compensation
related to stock
option grants
(unaudited)..... --
Amortization of
compensation
related to stock
option grants
(unaudited)..... 2,404,056
Comprehensive
income
(unaudited)
Net income (un-
audited)....... 20,516,827
Other comprehen-
sive income--
Translation ad-
justment ...... (2,342,437)
Comprehensive
income
(unaudited)..... --
Adjustment on
deconsolidation
of subsidiary
(unaudited)..... 2,468,831
Repayment on loan
to Trust
(unaudited)..... 109,733
-------------
Balance as of
December 31,
1998
(unaudited)..... $63,265,342
=============
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31, December 31,
------------------------------------- ------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income............. $ 6,823,637 $ 8,642,002 $12,344,188 $ 8,513,735 $20,516,827
Adjustments to recon-
cile net income to net
cash provided by oper-
ating activities:
Gain on sale of proper-
ty, plant and equip-
ment.................. -- -- (2,929) -- --
Depreciation........... 2,679,577 3,034,984 6,121,650 3,944,096 5,101,293
Deferred tax benefit... (391,532) (249,220) (707,553) (109,744) (552,363)
Gain on sale of invest-
ment in deconsolidated
subsidiary............ -- -- -- -- (620,958)
(Gain)/Loss on sale of
short-term invest-
ments................. -- 374,380 -- -- --
Amortization of de-
ferred stock compensa-
tion expense.......... 360,853 767,926 2,566,613 2,105,036 2,404,056
Loss relating to
deconsolidated subsid-
iary.................. -- -- -- -- 1,934,556
Subsidiary preferred
stock dividend........ -- -- 67,500 33,750 151,331
Changes in assets and
liabilities:
Accounts receivables.. (1,139,150) (1,534,731) (5,268,477) (4,959,368) (11,327,154)
Inventories........... 3,104 40,022 11,458 9,024 --
Prepaid expenses and
other current as-
sets................. (718,442) (1,200,316) (924,783) (309,856) (1,602,704)
Prepaid income taxes.. (234,383) (591,147) 446,890 214,341 536,969
Accounts payable...... (3,488) 62,203 23,507 77,549 (18,364)
Customer deposits..... 233,367 (65,304) (6,537) (119,120) (80,364)
Unearned revenue...... -- -- -- -- 5,356,200
Other accrued liabili-
ties................. 528,544 134,397 2,482,653 962,448 3,165,538
----------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities.. 8,142,087 9,415,196 17,154,180 10,361,891 24,964,863
----------- ----------- ----------- ----------- -----------
Cash flows from invest-
ing activities:
Expenditure on proper-
ty, plant and equip-
ment.................. (4,003,108) (7,201,749) (7,891,441) (5,273,833) (11,598,726)
Proceeds from sale of
property, plant and
equipment............. 57,599 33,453 8,079 667 5,704
Loans to employees..... (196,789) (418,790) (552,526) (667,100) (1,579,837)
Proceeds from sale of
investment in
deconsolidated
subsidiary............ -- -- -- -- 1,500,000
Proceeds from sale of
investments in affili-
ates.................. -- 78,819 -- -- --
Purchases of short-term
investments........... (1,274,018) -- -- -- --
Proceeds from sale of
short-term invest-
ments................. -- 2,859,420 -- -- --
Purchase of investments
in affiliates......... -- -- -- -- (177,576)
----------- ----------- ----------- ----------- -----------
Net cash used in in-
vesting activities.... (5,416,316) (4,648,847) (8,435,888) (5,940,266) (11,850,435)
----------- ----------- ----------- ----------- -----------
Cash flows from financ-
ing activities:
Repayment of long-term
borrowings............ (759,613) (1,253,125) -- -- --
Net proceeds from issu-
ance of Equity
Shares................ -- 2,789 2,020,350 2,020,350 --
Net proceeds from issu-
ance of preferred
stock by
subsidiary............ -- -- 2,250,000 2,250,000 --
Payment of cash divi-
dends................. (804,688) (1,062,475) (1,467,427) (534,269) (1,037,628)
Loan to trust.......... -- -- (911,863) (944,335) 109,733
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities............ (1,564,301) (2,312,811) 1,891,060 2,791,746 (927,895)
----------- ----------- ----------- ----------- -----------
Effect of exchange rate
changes on cash........ (1,438,382) (1,902,597) (3,510,418) (3,462,515) (2,342,437)
Effect of
deconsolidation on
cash................... -- -- -- -- (2,465,372)
Net increase/(decrease)
in cash and cash equiv-
alents during
the year............... (276,912) 550,941 7,098,934 3,750,856 7,378,724
Cash and cash equiva-
lents at the beginning
of the year........... 8,046,302 7,769,390 8,320,331 8,320,331 15,419,265
----------- ----------- ----------- ----------- -----------
Cash and cash equiva-
lents at the end of the
year................... $ 7,769,390 $ 8,320,331 $15,419,265 $12,071,187 $22,797,989
=========== =========== =========== =========== ===========
Supplementary informa-
tion:
Cash paid for inter-
est................... $ 217,650 $ 172,268 -- -- --
Cash paid for taxes.... $ 1,306,358 $ 1,856,548 $ 323,568 $ 840,073 $ 1,412,515
</TABLE>

See accompanying notes to consolidated financial statements

F-6
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies

The Company

Infosys Technologies Limited is one of India's leading information
technology ("IT") services companies. Infosys utilizes an extensive offshore
infrastructure to provide managed software solutions to clients worldwide.
Headquartered in Bangalore, India, the Company has 11 state-of-the-art
offshore software development facilities located throughout India that enable
it to provide high quality, cost-effective services to clients in a resource-
constrained environment. The Company's services, which may be offered on a
fixed-price, fixed-time frame or time-and-materials basis, include custom
software development, maintenance (including Year 2000 conversion) and re-
engineering services as well as dedicated offshore software development
centers for certain clients. In addition, the Company develops and markets
certain software products.

Basis of preparation of financial statements

The accompanying consolidated financial statements have been prepared in
accordance with United States Generally Accepted Accounting Principles ("U.S.
GAAP"). All amounts are stated in U.S. dollars.

Principles of consolidation

The financial statements of the Company were consolidated with the accounts
of its wholly-owned subsidiary, Yantra Corporation ("Yantra"), until October
20, 1998 at which date the Company's voting control of Yantra declined to
approximately 47%. Yantra was incorporated in the United States in fiscal 1996
for the development of software products in the retail and distribution areas.

The Company has followed the equity method of accounting for Yantra since
October 20, 1998 (see note 10). Although the Company continues to own all of
the outstanding common stock of Yantra, it has no financial obligations or
commitments to Yantra and does not intend to provide Yantra with financial
support. Accordingly, the Company has credited to retained earnings the excess
of its previously recognized losses over the basis of its investment in Yantra
through and as of October 20, 1998. No recognition will be given to future
losses of Yantra.

All inter-company transactions between Infosys and Yantra have been
eliminated.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Examples of such estimates include
estimates of expected contract costs to be incurred to complete software
development, allowance for doubtful accounts, future obligations under
employee benefit plans and useful lives of property, plant and equipment.
Actual results could differ from those estimates.

Revenue recognition

The Company derives its revenues primarily from software services and also
from the licensing of software products. Revenue with respect to time-and-
material contracts is recognized as related costs are incurred. Revenue with
respect to fixed-price, fixed-time frame contracts is recognized upon the
achievement of specified milestones identified in the related contracts, which
approximates the percentage of completion method. Selling, general and
administrative expenses are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are recorded in the period in which
such losses become probable based on the current contract estimates. The
Company provides its customers with a three month warranty for corrections of
errors and telephone support for all its fixed-price, fixed-time frame
contracts. Costs associated with such services are accrued at the time the
related revenue is recorded.

F-7
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies (Continued)

Revenue from licensing of software products is recognized upon shipment of
products and fulfillment of acceptance terms, if any, provided that no
significant vendor obligations remain and the collection of the related
receivable is probable. When the Company receives advance payments for
software products, such payments are reported as customer deposits until all
conditions for revenue recognition are met. Maintenance revenue arising due to
the sale of software products is deferred and recognized ratably over the term
of the agreement, generally 12 months. Revenue from client training, support,
and other services arising due to the sale of software products is recognized
as the service is performed.

Cash, cash equivalents and short-term investments

The Company considers all highly liquid investments with a remaining
maturity at the date of purchase/ investment of three months or less to be
cash equivalents. Cash and cash equivalents consist of cash, cash on deposit
with banks, marketable securities and deposits with corporations. Management
determines the appropriate classification of investment securities at the time
of purchase and re-evaluates such designation as of each balance sheet date.
As of March 31, 1997 and 1998 and December 31, 1998 all investment securities
were designated as "available-for-sale." Available-for-sale securities are
carried at fair value based on quoted market prices, with unrealized gains and
losses, net of deferred income taxes, reported as a separate component of
stockholders' equity. Realized gains and losses and declines in value judged
to be other than temporary on available-for-sale securities are included in
the consolidated statements of income. The cost of securities sold is based on
the specific identification method. Interest and dividend on securities
classified as available-for-sale are included in interest income.

Property, plant and equipment

Property, plant and equipment are stated at cost. The Company computes
depreciation for all property, plant and equipment using the straight-line
method. The estimated useful lives of assets are as follows:

<TABLE>
<S> <C>
Buildings
--Software Development Centers................................. 28 years
--Others....................................................... 58 years
Furniture and fixtures........................................... 5 years
Computer equipment............................................... 2-5 years
Plant and equipment.............................................. 5 years
Vehicles......................................................... 5 years
</TABLE>

The cost of software purchased for use in software development and services
is charged to the cost of revenues at the time of acquisition. The amount of
third party software expensed in fiscal 1996, 1997, and 1998 and in the nine
months ended December 31, 1997 and 1998 was $875,407, $1,102,733, and
$2,381,626, $1,889,715 and $2,899,070, respectively.

Deposits paid towards the acquisition of property, plant and equipment
outstanding at each balance sheet date and the cost of property, plant and
equipment not put to use before such date are disclosed under Capital work-in-
progress.

Impairment of long-lived assets and long-lived assets to be disposed of

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

F-8
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies (Continued)

exceed the fair value of the assets. Assets to be disposed are reported at the
lower of the carrying amount and fair value less cost to sell.

Research and development

Research and development costs are expensed as incurred. Software product
development costs are expensed as incurred until technological feasibility is
achieved. Software product development costs incurred subsequent to the
achievement of technological feasibility have not been significant and have
been expensed as incurred.

Foreign currency translation

The functional currency of the Company is the Indian rupee. The functional
and reporting currency of the Company's subsidiary, Yantra, is the U.S.
dollar.

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

Foreign currency transactions

The Company enters into foreign exchange forward contracts to limit the
effect of exchange rate changes on its foreign currency receivables. Gains and
losses on these contracts are recognized as income or expense in the
consolidated statements of income as incurred, over the life of the contract.

Earnings per share

On January 1, 1998, the Company adopted SFAS No. 128, "Earnings Per Share."
In accordance with SFAS No. 128, basic earnings per share is computed using
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period,
using the treasury stock method for options and warrants, except where the
results would be anti-dilutive.

Income taxes

Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits of which future realization is
uncertain.

F-9
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies (Continued)

Fair value of financial instruments

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

Concentration of risk

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents and trade receivables.
The Company's cash resources are invested with corporations, financial
institutions and banks with high investment grade credit ratings. Limitations
have been established by the Company as to the maximum amount of cash that may
be invested with any such single entity. To reduce its credit risk, the
Company performs ongoing credit evaluations of customers.

Retirement benefits to employees

Gratuity. In accordance with Indian law, the Company provides for gratuity,
a defined benefit retirement plan (the "Gratuity Plan") covering all
employees. The plan provides a lump sum payment to vested employees at
retirement or termination of employment in an amount based on the respective
employee's salary and the years of employment with the Company. Until March
31, 1997, the Company contributed each year to a gratuity fund maintained by
the Life Insurance Corporation of India based upon actuarial valuations. No
additional contributions were required to be made by the Company in excess of
the unpaid contributions to the plan.

Effective April 1, 1997, the Company established the Infosys Technologies
Limited Employees' Group Gratuity Fund Trust. Liabilities with regard to the
gratuity plan are determined by actuarial valuation, based upon which the
Company makes contributions to the gratuity fund trust. Trustees administer
the contributions made to the gratuity fund trust. The funds contributed to
the trust are invested in specific securities as mandated by law and generally
consist of federal and state government bonds and the debt instruments of
government-owned corporations.

Superannuation. Apart from being covered under the gratuity plan described
above, the senior officers of the Company are also participants in a defined
contribution benefit plan maintained by the Company. The plan is termed the
superannuation plan to which the Company makes monthly contributions based on
a specified percentage of each covered employee's salary. The Company has no
further obligations under the plan beyond its monthly contributions.

Provident Fund. In addition to the above benefits, all employees receive
benefits from a provident fund, which is a defined contribution plan. Both the
employee and employer each make monthly contributions to the plan equal to 12%
of the covered employee's salary. Until July 1996, Infosys contributed to the
employees' provident fund maintained by the Government of India. Effective
August 1996, the Company established a provident fund trust to which a part of
the contributions are made each month. The remainder of the contributions are
made to the Government's provident fund. The Company has no further
obligations under the plan beyond its monthly contributions.

F-10
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

1. Summary of Significant Accounting Policies (Continued)

Stock-based compensation

The Company uses the intrinsic value-based method of APB Opinion No. 25 to
account for its employee stock-based compensation plan. The Company has
therefore adopted the pro forma disclosure provisions of SFAS No. 123.

Unaudited interim financial statements

The accompanying unaudited interim financial statements as of December 31,
1998, and for the nine months ended December 31, 1997 and 1998, have been
prepared on substantially the same basis as the audited financial statements
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information set forth
herein.

2. Cash and Cash Equivalents

The cost and fair values for cash and cash equivalents as of March 31, 1997
and 1998 and December 31, 1998, are as follows:

<TABLE>
<CAPTION>
Cost and
Fair Value
-----------
<S> <C>
1997
Cash and cash equivalents:
Cash and bank deposits....................................... $4,484,684
Deposits in corporations..................................... 3,835,647
-----------
$8,320,331
===========
1998
Cash and cash equivalents:
Cash and bank deposits....................................... $13,576,206
Deposits in corporations..................................... 1,843,059
-----------
$15,419,265
===========
December 31, 1998 (unaudited)
Cash and cash equivalents:
Cash and bank deposits....................................... $22,797,989
Deposits in corporations..................................... --
-----------
$22,797,989
===========
</TABLE>

3. Accounts Receivable

The accounts receivable as of March 31, 1997 amounted to $4,994,607, net of
allowance for doubtful accounts of $169,976. The accounts receivable as of
March 31, 1998 amounted to $10,263,084, net of allowance for doubtful accounts
of $393,799. The accounts receivable as of December 31, 1998 amounted to
$21,270,407 net of allowance for doubtful accounts of $317,325. The age
profile is as given below.

F-11
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

3. Accounts receivable (Continued)

<TABLE>
<CAPTION>
Period in days 1997 1998 December 31, 1998
-------------- ----- ----- -----------------
(Unaudited)
<S> <C> <C> <C>
0-30....................................... 69.5% 61.5% 50.1%
31-60...................................... 22.0 29.4 34.9
61- 90..................................... 0.1 6.3 11.0
More than 90............................... 8.4 2.8 4.0
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

Accounts receivable, as a percentage of revenue for fiscal 1997 and 1998,
and the nine months ended December 31, 1998 amount to 12.6%, 15.0%, and 18.5%
respectively.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

<TABLE>
<CAPTION>
December 31,
1997 1998 1998
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Rent deposits......................... $1,219,201 $1,364,372 $1,383,499
Deposits with government
organizations........................ 103,348 53,675 82,421
Loans to employees.................... 415,063 895,971 1,603,769
Prepaid expenses...................... 513,758 434,999 2,078,932
Other deposits........................ 575,136 1,002,272 154,203
---------- ---------- ----------
$2,826,506 $3,751,289 $5,302,824
========== ========== ==========
</TABLE>

Other deposits represent advance payments to vendors for the supply of goods
and rendering of services. Deposits with government organizations relate
principally to leased telephone lines and electricity supplies.

5. Property, Plant and Equipment--Net

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
December 31,
1997 1998 1998
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Land............................... $ 660,827 $ 1,215,973 $ 2,564,102
Buildings.......................... 5,162,950 4,903,049 6,075,633
Furniture and fixtures............. 2,220,551 3,331,759 4,287,533
Computer equipment................. 8,755,719 12,499,330 15,852,251
Plant and equipment................ 3,133,487 4,955,100 6,702,198
Vehicles........................... 35,354 44,493 41,546
Capital work-in-progress........... 1,964,361 1,854,440 3,577,410
----------- ----------- -----------
21,933,249 28,804,144 39,100,673
Accumulated depreciation........... (7,002,387) (12,108,641) (16,305,475)
----------- ----------- -----------
$14,930,862 $16,695,503 $22,795,198
=========== =========== -----------
</TABLE>

Depreciation expense amounted to $2,679,577, $3,034,984, $6,121,650,
$3,944,046 and $5,101,293 for fiscal years 1996, 1997 and 1998 and for the
nine months ended December 31, 1997 and 1998, respectively.

F-12
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

6. Other Assets

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

7. Related Parties

The Company grants loans to employees for acquiring assets such as property
and cars. Such loans are repayable over fixed periods ranging from one to 100
months. The rates at which the loans have been made to employees vary between
0% to 4%. None of the loans have been made to employees in connection with
equity issuances. The loans generally are secured by the assets acquired by
the employees. As of March 31, 1997 and 1998, and December 31, 1998, amounts
receivable from officers were $68,019 and $227,242, and $276,849, and are
included in prepaid expenses and other current assets and other assets in the
accompanying consolidated balance sheets.

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

<TABLE>
<CAPTION>
December 31,
1997 1998 1998
-------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
1998...................................... $415,063 $ -- $ --
1999...................................... 114,797 895,971 1,603,769
2000...................................... 101,541 294,215 779,478
2001...................................... 84,459 241,304 628,652
2002...................................... 63,060 147,898 421,730
2003...................................... -- 104,415 310,974
Thereafter................................ 109,222 237,773 454,294
-------- ---------- ----------
Total................................... $888,142 $1,921,576 $4,198,897
======== ========== ==========
</TABLE>

The estimated fair value amounts of the related party receivables at the
balance sheet date, amounted to $761,495, $1,653,373, and $3,940,938 as of
March 31, 1997 and 1998 and December 31, 1998. These amounts have been
determined using available market information and appropriate valuation
methodologies. Considerable judgement is required to develop the estimates of
fair value, thus, the estimates provided herein are not necessarily indicative
of the amounts that the Company could realize in the market.

8. Other Accrued Liabilities

<TABLE>
<CAPTION>
December 31,
1997 1998 1998
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Accrued compensation to employees..... $ 790,196 $1,853,974 $2,418,987
Accrued dividends..................... 829,137 1,364,849 597,252
Provision for post sales customer
support.............................. -- 311,799 827,216
Others................................ 341,608 1,448,684 2,343,073
---------- ---------- ----------
$1,960,941 $4,979,306 $6,186,528
========== ========== ==========
</TABLE>

Accrued dividends represent dividends recommended and proposed by the Board
of Directors, subject to the approval of the shareholders.

F-13
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

9. Employee Post-Retirement Benefits

Gratuity benefits. The following table sets forth the plan's funded status
and amounts recognized in the Company's consolidated balance sheet as of March
31, 1998:

<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Change in benefit obligation
Projected Benefit Obligations (PBO) as of April 1, 1997..... $1,356,650
Service cost................................................ 330,318
Interest cost............................................... 189,931
Benefits paid............................................... (72,395)
-----------
PBO as of March 31, 1998.................................... $1,804,504
Change in plan assets
Fair value of plan assets as of April 1, 1997............... $301,232
Actual return on plan assets................................ 41,892
Employer contributions...................................... 409,770
Benefits paid............................................... (72,395)
-----------
Plan assets as of March 31, 1998............................ $680,499
Funded status............................................... $(1,124,005)
Excess of actual over estimated return on plan assets....... (129,192)
Unrecognized actuarial gain................................. (7,219)
Unrecognized transition obligation.......................... 985,058
-----------
Net amount recognized....................................... $ (275,358)
Amounts recognized in the statement of financial position
consist of:
Accrued benefit cost....................................... $275,358
</TABLE>

Net gratuity cost for 1998 included the following components:

<TABLE>
<CAPTION>
1998
--------
<S> <C>
Service cost..................................................... $330,318
Interest cost.................................................... 189,931
Expected return on assets........................................ (49,111)
Amortization..................................................... 70,361
--------
Net gratuity cost................................................ $541,499
========
</TABLE>

Assumptions used in accounting for the Gratuity Plan as of March 31, 1998
were a discount rate of 14.0%, a long-term sustainable rate for the increase
in compensation levels of 7.5% and an expected long-term rate of return on
assets of 12.0%. As the assumed rates used above have a significant effect on
the amounts reported, the Company has assessed these rates as compared with
prevalent industry standards and its projected long-term plans of growth.

F-14
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

9. Employee Post-Retirement Benefits (Continued)

Contributions to the gratuity plan managed by the Life Insurance Corporation
of India in fiscal 1996 and 1997 were $114,903 and $161,606.

Super-annuation benefits.

The Company contributed $39,408, $64,695, $99,206, $76,286 and $108,784 to
the superannuation plan in fiscal 1996, 1997 and 1998 and in the nine months
ended December 31, 1997 and 1998.

Provident fund benefits.

In addition the Company contributed $144,785, $237,833, $537,663, $397,558
and $585,358 to the provident fund plan in fiscal 1996, 1997 and 1998 and in
the nine months ended December 31, 1997 and 1998.

10. Preferred Stock of Subsidiary

In September 1997, the Company's subsidiary company, Yantra, sold 5,000,000
shares of Series A Convertible Preferred Stock, par value $0.01 per share
("Series A Convertible Preferred") at $0.75 per share for $3,750,000 in cash.
The related offering costs of $49,853 were offset against the proceeds of the
issue. Of these, 2,000,000 shares were issued to the Company and 3,000,000
shares were issued to third party investors. The preferred stock issued to the
Company is eliminated upon consolidation. Preferred stock issued to third
party investors is reported on the balance sheet as preferred stock of
subsidiary.

In August 1998, Yantra sold 4,800,000 shares of Series B Convertible
Preferred Stock, par value $0.01 per share ("Series B Convertible Preferred")
at $1.25 per share for $6,000,000 in cash to a third party investor. The
related offering costs of $44,416 were offset against the proceeds of the
issue. In connection with this sale, Yantra issued warrants to purchase
810,811 shares of Series C Convertible Preferred Stock, par value $0.01 per
share ("Series C Convertible Preferred"), at $0.01 per share for $8,108 in
cash. Such warrants are immediately exercisable and expire in seven years. The
exercise price of the warrants is based upon the then current market price of
the Series C Convertible Preferred at the time of exercise.

The holders of Series A Convertible Preferred are entitled to the following
rights, privileges and restrictions:

Holders of Series A Convertible Preferred vote with holders of common stock
on an as-converted basis, except as otherwise required by Delaware law. The
Series A Convertible Preferred is convertible into common stock at a 1:1 ratio
(subject to certain adjustments): (i) automatically in the event of an initial
public offering with gross proceeds of $10,000,000 or more; or (ii) at any
time at the holder's option. The Series A Convertible Preferred is entitled to
a 6% cumulative dividend ($0.045 per share) and to receive additional
dividends at the same rate as dividends, if any, declared and paid on the
common stock, calculated on an as-converted basis. Upon a liquidation or sale
of the Company, holders of the Series A Convertible Preferred are entitled to
a liquidation preference of $0.75 per share plus accrued and unpaid dividends;
and any remaining assets will be distributed to holders of the common stock.
The Series A Convertible Preferred is redeemable at the election of holders of
75% of the outstanding shares of Series A Convertible Preferred at any time
after September 29, 2004 at a redemption price of $0.75 per share plus accrued
but unpaid dividends.

The holders of Series B and C Convertible Preferred are entitled to similar
rights, privileges and restrictions as that of Series A Convertible Preferred.

F-15
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

In October 1998, Infosys sold 1,363,637 shares of Series A Convertible
Preferred in Yantra having a cost basis of $879,042 to a third party investor
for $1,500,000 thereby recognizing a gain of $620,958 and reducing its voting
interest in Yantra to approximately 47%. The Company has subsequently
accounted for Yantra by the equity method. Deconsolidation of Yantra has
resulted in a credit to the Company's retained earnings in the amount of
$2,468,831 representing the excess of Yantra's previously consolidated losses,
amounting to $4,445,903, over the Company's residual investment basis in
Yantra amounting to $1,977,072. The net assets and liabilities of Yantra as of
March 31, 1998 and October 20, 1998 (unaudited) respectively, are presented
below.

<TABLE>
<CAPTION>
As of
-------------------------------
March 31, 1998 October 20, 1998
-------------- ----------------
(Unaudited)
<S> <C> <C>
Preferred stock (net of Infosys'
holdings).............................. $2,317,500 $ 9,485,228
Current liabilities..................... 325,947 1,288,913
---------- -----------
Total liabilities................... 2,643,447 10,774,141
---------- -----------
Current assets.......................... 2,836,372 7,422,303
Property, plant and equipment........... 243,196 491,044
Other assets............................ 10,314 391,963
---------- -----------
Total Assets........................ $3,089,882 $ 8,305,310
---------- -----------
Net (Assets)/Liabilities................ $ (446,435) $ 2,468,831
========== ===========
</TABLE>

11. Shareholders' Equity

The Company has only one class of capital stock referred to herein as Equity
Shares. In fiscal 1998 and 1999, the Board of Directors authorized a two-for-
one stock split of the Company's Equity Shares effected in the form of a stock
dividend. All references in the consolidated financial statements to number of
shares, per share amounts and market prices of the Company's Equity Shares
have been retroactively restated to reflect the increased number of shares
outstanding resulting from the stock split.

12. Common Stock

Voting. Each holder of Equity Shares is entitled to one vote per share.

Dividends. Should the Company declare and pay dividends, such dividends will
be paid in Indian rupees.

Indian law mandates that any dividend declared out of distributable profits
only after the transfer of up to 10% of net income computed in accordance with
current regulations to a general reserve. Also, the remittance of dividends
outside India is governed by Indian law on foreign exchange. Such dividend
payments are also subject to applicable withholding taxes. The Company
declared a cash dividend of $1,068,955, $1,131,427, $2,003,139, $534,269 and
$1,037,628 for the fiscal years 1996, 1997 and 1998 and for the nine months
ended December 31, 1997 and 1998.

Liquidation. In the event of the liquidation of the Company, the holders of
common stock shall be entitled to receive all of the remaining assets of the
Company, after distribution of all preferential amounts, if any. Such amounts
will be in proportion to the number of shares of common stock held by the
shareholders.

Stock options. There are no voting, dividend or liquidation rights to the
holders of warrants issued under the Company's stock option plan.

F-16
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

13. Other Income, Net

Other income, net, consists of the following:

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------------------
1996 1997 1998 1997 1998
---------- ---------- -------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest income and oth-
er....................... $1,337,643 $1,035,749 $526,508 $326,664 $ 590,562
Gain on sale of investment
in subsidiary............ -- -- -- -- 620,958
Income from sale of spe-
cial import licenses..... 122,686 280,459 274,291 279,660 --
Interest expense.......... -- (172,268) -- -- --
Realized loss on sale of
investments.............. -- (374,380) -- -- --
---------- ---------- -------- -------- ----------
$1,460,329 $ 769,560 $800,799 $606,324 $1,211,520
========== ========== ======== ======== ==========
</TABLE>

14. Accumulated Other Comprehensive Income

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
of reporting and display of comprehensive income and its components of net
income and "other comprehensive income" in a full set of general purpose
financial statements. "Other comprehensive income" refers to revenues,
expenses, gains and losses that are not included in net income but rather are
recorded directly in shareholders' equity. SFAS No. 130 is effective for
annual and interim periods beginning after December 15, 1997 and for periods
ended before that date when presented for comparative purposes. SFAS No. 130
was adopted by the Company in its quarter ended June 30, 1998 and for prior
comparative periods. Net income adjusted for total comprehensive income was
$4,964,379, $7,100,887, $8,833,770, $5,051,220 and $18,174,390 for the years
ended March 31, 1996, 1997, and 1998, and for the nine months ended December
31, 1997 and 1998, respectively. As of March 31, 1998, the accumulated other
comprehensive income consists entirely of foreign currency translation
adjustments.

15. Operating Leases

The Company has various operating leases for office buildings that are
renewable on a periodic basis at its option. Rental expense for operating
leases for fiscal years 1996, 1997 and 1998 and for the nine months ended
December 31, 1997 and 1998 is $186,165, $679,705, $1,432,447, $1,037,838 and
$1,287,611. The operating leases are cancelable at the Company's option.

16. Research and Development

Selling, general and administrative expenses in the accompanying
consolidated statements of income include research and development expenses of
$955,529, $2,092,368, $1,777,703, $1,333,277 and $2,227,225 for fiscal years
1996, 1997 and 1998 and for the nine months ended December 31, 1997 and 1998.

17. Employees Stock Offer Plan

In September 1994, the Company established the Employees Stock Offer Plan
("ESOP") which provides for the issuance of 3,000,000 warrants (as adjusted
for the stock split effective June 1997 and December 1998) to eligible
employees. The warrants were issued to an employee welfare trust (the "Trust")
at Rs.1 each. The warrants were purchased by the Trust using the proceeds of a
loan obtained from the Company. The Trust holds the warrants and transfers
them to eligible employees over a period of years. The warrants are
transferred to

F-17
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

17. Employees Stock Offer Plan (Continued)

employees at Rs.1 each and each warrant entitles the holder to purchase one of
the Company's Equity Shares at a price of Indian Rs.100 per share. The
warrants and the Equity Shares received upon the exercise of warrants are
subject to a five-year aggregate vesting period from the date of issue of
warrants to employees. The warrants expire upon the earlier of five years from
the date of issue or September 1999. The fair market value of each warrant is
the market price of the underlying Equity Shares on the date of the grant.

In 1997, in anticipation of a share dividend to be declared by the Company,
the Trust exercised all warrants held by it and converted them into Equity
Shares with the proceeds obtained from a loan obtained from the Company. In
connection with the warrant exercise and the share dividend, on an adjusted
basis, 1,505,600 Equity Shares were issued to employees of the Company who
exercised stock purchase rights and 1,494,400 Equity Shares were issued to the
Trust for future issuance to employees pursuant to the ESOP. Following such
exercise, there were no longer any rights to purchase Equity Shares from the
Company in connection with the ESOP; there remained only Equity Shares held by
the Trust for future issuances to employees, subject to vesting provisions.
The Equity Shares acquired upon the exercise of the warrants vests 100% upon
the completion of five years of service. The warrant holders were entitled to
exercise early, but the shares received are subject to the five year vesting
period. As of March 31, 1998 the Company's outstanding Equity Shares included
1,494,400 shares held by the Trust of which 518,600 allocated to employees
subject to vesting provisions have been included in the calculation of diluted
earnings per share and 975,800 reserved for future grants have not been
considered outstanding in the earnings per share calculations. The warrants
allotted and the underlying Equity Shares are not subject to any repurchase
obligations by the Company.

The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for its employee stock-based compensation plan.
During the years ended March 31, 1996, 1997 and 1998, the Company recorded
deferred compensation of $1,283,275, $2,022,597 and $6,890,343, respectively,
for the difference at the grant date between the exercise price and the fair
value as determined by quoted market prices of the common stock underlying the
warrants. For the nine months ended December 31, 1998, the Company recorded
deferred compensation of $20,386,535 for the difference at the grant date,
October 13, 1998, between the weighted average exercise price of $1.18, as
adjusted for-the two-for-one stock split effected in fiscal 1999, and the fair
value so determined by quoted market prices of the common stock underlying the
warrants of $26.08, as adjusted for the two-for-one stock split effected in
fiscal 1999. The deferred compensation is being amortized on a straight-line
basis over the vesting period of the warrants/Equity Shares. In fiscal 1998,
the Company declared a share dividend of one Equity Share for each Equity
Share outstanding to all its shareholders including participants in the ESOP.
Under the terms of the ESOP, the additional Equity Shares issued to ESOP
participants as a result of the share dividend were not subject to vesting.
Consequently, the amortization of deferred stock compensation of $1,519,739
relating to these shares was accelerated at the time of the share dividend.
The Company also expects to recognize additional deferred stock compensation
expense in the fourth quarter of fiscal 1999 as a result of the stock dividend
proposed by the Board of Directors in December 1998 and approved by the
shareholders in January 1999, with a record date of March 5, 1999. Such Equity
Shares issued to ESOP participants in connection with the stock dividend are
not subject to vesting. As a result, one-half of the deferred stock
compensation expense that would have been amortized over the remaining vesting
periods for the Equity Shares issued under the ESOP will be accelerated in the
fourth quarter of fiscal 1999. As a result, the Company expects to recognize
deferred stock compensation expense in the approximate amounts of $13.7
million for the fourth quarter of fiscal 1999 and $16.1 million for fiscal
1999.

F-18
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

17. Employees Stock Offer Plan (Continued)

The Company has adopted the pro forma disclosure provisions of SFAS No. 123.
Had compensation cost for the Company's stock-based compensation plan been
determined in a manner consistent with the fair value approach described in
SFAS No. 123, the Company's net income and basic earnings per share as
reported would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Net income:
As reported............................ $6,823,637 $8,642,002 $12,344,188
Adjusted pro forma..................... 6,584,901 8,488,121 12,067,107
Basic earnings per
share:
As reported............................ $0.24 $0.30 $0.42
Adjusted pro forma..................... $0.23 $0.29 $0.41
</TABLE>

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

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Dividend yield %................................... 0.1% 0.1% 0.1%
Expected life...................................... 5 years 5 years 5 years
Risk free interest rates........................... 10.8% 10.8% 10.8%
Volatility......................................... 90.0% 90.0% 90.0%
</TABLE>

Activity in the warrants/Equity Shares held by the ESOP during the periods
is as follows:

<TABLE>
<CAPTION>
As of
December 31, 1998
1996 1997 1998 (unaudited)
-------------------- -------------------- --------------------- --------------------
Shares Weighted- Shares Weighted- Shares Weighted- Shares Weighted-
Arising average Arising average Arising average Arising average
Out of Exercise Out of Exercise Out of Exercise Out of Exercise
Options Price Options Price Options Price Options Price
--------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 470,000 1,024,400 1,501,600 518,600
Granted................ 632,000 $0.75 498,400 $0.71 553,600 $0.69 828,200 $ 1.18
Forfeited.............. (77,600) 0.75 (17,200) 0.71 (35,000) 0.69 (9,400) 1.18
Exercised.............. -- -- (4,000) -- (1,501,600) --
--------- --------- ---------- ---------
Outstanding at end of
year................... 1,024,400 1,501,600 518,600 1,337,400
========= ========= ========== =========
Exercisable at end of
year................... -- -- -- --
Weighted-average fair
value of grants during
the year at less than
market................. $2.39 $4.78 $7.33 $26.08
===== ===== ===== ======
</TABLE>

F-19
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

17. Employees Stock Offer Plan (Continued)

The following table summarizes information about stock options outstanding
as of March 31, 1998:

<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------- -----------------------------
Range of Number of Weighted-average Weighted- Number of Weighted-
Exercise Shares Arising Remaining average Shares Arising average
Price Out of Options Contractual Life Exercise Price Out of Options Exercise Price
-------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$0.69 - $0.75 518,600 3.13 years $0.71 518,600 $0.71
</TABLE>

The following table summarizes information about stock options outstanding
as of December 31, 1998:

<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------- -----------------------------
Range of Number of Weighted-average Weighted- Number of Weighted-
Exercise Shares Arising Remaining average Shares Arising average
Price Out of Options Contractual Life Exercise Price Out of Options Exercise Price
-------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$0.69 - $1.18 1,337,400 2.88 years $0.88 1,337,400 $0.88
</TABLE>

Yantra Stock Option Plan

Apart from the above, effective September 29, 1997, Yantra implemented the
1997 Stock Plan, which provides for the issuance of up to 2,500,000 stock
options, as defined in the Plan. Stock options granted under the Plan will
allow eligible participants to purchase Yantra's common stock at a price
determined by Yantra's Board of Directors on the date of grant. The purchase
price per share of Incentive Stock Options ("ISO's"), as defined under
Internal Revenue Code Section 422(b), shall not be less than 100% (110%, in
the case of ISO's granted to a greater-than-10% shareholder) of the fair
market value of Yantra's common stock on the date of grant. The Plan also
allows for the issuance of options which do not qualify as ISO's ("Non-
Qualified Options").

Under the above Plan, on September 29, 1997, Yantra granted certain officers
options to purchase a maximum of 700,000 shares of its common stock, $0.01 par
value, at the price of $0.10 per share, which represented the fair market
value of the common stock at that time. Shares of common stock issuable under
these options vest as follows:

<TABLE>
<CAPTION>
Non-Qualified Incentive Stock
December 31, Stock Options Options
------------ ------------- ---------------
<S> <C> <C>
1997........................................ 10,000 60,000
1998........................................ 15,000 90,000
1999........................................ 20,000 120,000
2000........................................ 25,000 150,000
2001........................................ 30,000 180,000
------- -------
100,000 600,000
======= =======
</TABLE>

The above options expire on September 29, 2007. As of March 31, 1998, no
options were exercised.

F-20
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

18. Income Taxes

The provision for income taxes was composed of:

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------- ---------- ---------- ---------------------
1996 1997 1998 1997 1998
---------- ---------- ---------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Current taxes
Domestic taxes..... $1,206,093 $1,269,490 $ 803,116 $ 579,681 $1,416,049
Foreign taxes...... 80,000 300,000 674,895 507,928 2,668,314
---------- ---------- ---------- --------- ----------
1,286,093 1,569,490 1,478,011 1,087,609 4,084,363
Deferred taxes
Domestic taxes..... (391,988) (249,220) (707,553) (109,744) (552,363)
Foreign taxes...... 456 -- -- -- --
---------- ---------- ---------- --------- ----------
(391,532) (249,220) (707,553) (109,744) (552,363)
---------- ---------- ---------- --------- ----------
Aggregate taxes..... $ 894,561 $1,320,270 $ 770,458 $ 977,865 $3,532,000
========== ========== ========== ========= ==========
</TABLE>

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

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------- -------- ---------- -------------------
1996 1997 1998 1997 1998
-------- -------- ---------- -------- ----------
Deferred tax assets: (Unaudited)
<S> <C> <C> <C> <C> <C>
Property, plant and equip-
ment...................... $133,175 $382,395 $1,089,948 $492,139 $1,642,311
Cash, cash equivalents and
short-term investments.... 307,929 -- -- -- --
Net operating loss in
Yantra.................... -- 94,000 558,000 -- --
-------- -------- ---------- -------- ----------
441,104 476,395 1,647,948 492,139 1,642,311
Less: Valuation allowance... -- (94,000) (558,000) -- --
-------- -------- ---------- -------- ----------
441,104 382,395 1,089,948 492,139 1,642,311
Deferred tax liabilities:
Foreign taxes.............. 456 -- -- -- --
-------- -------- ---------- -------- ----------
Net deferred tax
assets/(liabilities)..... $440,648 $382,395 $1,089,948 $492,139 $1,642,311
======== ======== ========== ======== ==========
</TABLE>

F-21
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

18. Income Taxes (Continued)

The difference in net deferred tax expenses/(benefit) during fiscal years
1996, 1997 and 1998 has been allocated as follows:

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
--------- ---------- --------- --------------------
1996 1997 1998 1997 1998
--------- ---------- --------- --------- ---------
Deferred tax
expense/(benefit)
allocated to: (Unaudited)
<S> <C> <C> <C> <C> <C>
Continuing operations.. $(391,532) $(249,220) $(707,553) ($109,744) ($552,363)
Shareholders equity--
unrealized investment
(loss)/gain........... (358,524) 307,473 -- -- --
--------- ---------- --------- --------- ---------
$(750,056) $ 58,253 $(707,553) ($109,744) ($552,363)
========= ========== ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
----------- ----------- ----------- -----------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income before tax-
es..................... $ 7,718,198 $ 9,962,272 $13,182,146 $9,525,350 $24,200,158
Enacted tax rates in In-
dia.................... 46.0% 43.0% 35.0% 35.0% 35.0%
Computed expected tax
expense................ 3,550,371 4,283,777 4,613,751 3,333,873 8,470,055
Less: Tax effect due to
non-taxable export in-
come................... (3,221,241) (3,816,452) (4,493,920) (3,241,094) (8,359,751)
Others................ 271,313 277,594 (355,821) 416,529 753,382
Effect of tax rate
change................. -- (28,738) (71,143) (39,371) --
Effect of prior period
tax adjustments........ 214,118 304,089 402,696 -- --
----------- ----------- ----------- ---------- -----------
Provision for Indian in-
come tax............... 814,561 1,020,270 95,563 469,937 863,686
Effect of tax on foreign
income................. 80,000 300,000 674,895 507,928 2,668,314
----------- ----------- ----------- ---------- -----------
Total current taxes..... $ 894,561 $ 1,320,270 $ 770,458 $ 977,865 $ 3,532,000
=========== =========== =========== ========== ===========
</TABLE>

The provision for foreign taxes is due to income taxes payable overseas,
principally in the United States.

At present, in India, profits from export activities are deductible from
taxable income. Further, most of the Company's operations come from "Hundred
percent export oriented units," which are entitled to a tax holiday during any
consecutive five years in a block of eight years from the date of commencement
of operations.

F-22
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

19. Earnings per Equity Share

The following is a reconciliation of the Equity Shares used in the
computation of basic and diluted earnings per Equity Share:

<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------- ---------- ---------- ---------------------
1996 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Basic earnings per
Equity Share--weighted
average number of
common shares
outstanding............ 29,034,400 29,036,394 29,787,144 29,416,886 30,540,000
Effect of dilutive com-
mon equivalent shares--
stock options outstand-
ing.................... 249,114 667,666 616,760 843,434 84,604
---------- ---------- ---------- ---------- ----------
Diluted earnings per Eq-
uity Share--weighted
average number of com-
mon shares and common
equivalent shares out-
standing............... 29,283,514 29,704,060 30,403,904 30,260,320 30,624,604
========== ========== ========== ========== ==========
</TABLE>

20. Lines of Credit

The Company has a line of credit from its bankers for its working capital
requirement of $1,380,000, bearing interest at prime lending rates as
applicable from time to time. As of March 31, 1998, the prime lending rate was
13.5%. This facility is secured by inventories and accounts receivable. The
line of credit contains certain financial covenants and restrictions on
indebtedness and is renewable every 12 months. As of March 31, 1998, the
Company had no balance outstanding under this facility.

21. Financial Instruments

Foreign exchange forward contracts. The Company enters into foreign exchange
forward contracts to offset the foreign currency risk arising from accounts
receivable denominated in currencies other than the Indian rupee, primarily
the U.S. dollar.

The counterparty to the Company's foreign currency forward contracts is
generally a bank. The Company considers that risks or economic consequences of
non-performance by the counterparty are not material.

There were no significant foreign exchange gains and losses for fiscal years
1996, 1997 and 1998 and for the nine months ended December 31, 1997 and 1998.
The table below summarizes by currency the contractual amounts of the
Company's open foreign exchange forward contracts as of March 31, 1997 and
1998. There were no open foreign exchange forward contracts as of December 31,
1998. The "sell" amounts represent the Indian rupee equivalent of contracts to
sell foreign currencies.

<TABLE>
<CAPTION>
Fiscal Year Ended Type of Contract Currency Contract Amount
----------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
1997 Sell U.S. dollars $2,400,000
1998 Sell U.S. dollars $3,800,000
</TABLE>

All the above contracts mature within a period of one year. The fair value
of the foreign currency contracts as of March 31, 1997 and 1998 was $2,434,000
and $3,716,000 respectively.

F-23
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

22. Segment Reporting

Revenues from export sales by geographic area are as follows:

Significant customers. One customer accounted for 15.1% and 10.5% of
revenues in 1996 and 1998, respectively, while another customer accounted for
21.4% of revenues in 1996. As of March 31, 1998, the accounts receivable from
the former customer was $1,033,061. One customer accounted for approximately
12% of revenue in the nine months ended December 31, 1997. As of December 31,
1997, the accounts receivable from that customer was $1,622,449.

23. Year 2000

Certain organizations anticipate that they will experience operational
difficulties at the beginning of the Year 2000 as a result of computer
programs being written using two digits rather than four to define the
applicable year. The Company's plan for the Year 2000 calls for compliance
verification with external vendors supplying the Company software, testing in-
house engineering and manufacturing software tools, testing software in the
Company's products for the Year 2000 and communication with significant
suppliers to determine the readiness of third parties' remediation of their
own Year 2000 issues.

Any Year 2000 compliance problems of the Company or its customers or
suppliers could have a material adverse effect on the Company's business,
financial condition and results of operations. During the past three years,
the Company completed an effort to convert its financial applications to
commercial products that, according to their suppliers, are Year 2000
compliant. The Company has received confirmations from its primary suppliers
indicating that they are either Year 2000 compliant or have plans in place to
ensure readiness. As part of the Company's assessment, it is evaluating the
level of validation it will require of third parties to ensure their Year 2000
readiness.

To date, the Company has not encountered any material Year 2000 issues
concerning its respective computer programs. The Company plans to complete its
Year 2000 research and testing by early 1999. All costs associated with
carrying out the Company's plan for the Year 2000 problem are being expensed
as incurred. The costs associated with preparation for the Year 2000 are not
expected to have a material adverse effect on the Company's business,
financial condition and results of operations. Nevertheless, there is
uncertainty concerning the potential costs and effects associated with any
Year 2000 compliance.

F-24
<PAGE>

INFOSYS TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of December 31, 1998, and for the nine months ended December
31, 1997 and 1998 is unaudited)

24. Commitments and Contingencies

The Company has various letters of credit outstanding to different vendors
totaling $948,583, $100,324 and $15,587 as of March 31, 1997, and December 31,
1997 and 1998 respectively. The letters of credit are generally established
for the import of hardware, software and other capital items.

The Company has outstanding performance guarantees for various statutory
purposes totaling $194,212, $556,393, $438,429, $457,978 and $552,040 as of
March 31, 1996, 1997 and 1998 and December 31, 1997 and 1998 respectively.
These guarantees are generally provided to governmental agencies.

25. Litigation

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

26. Recent Accounting Pronouncements

The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development of internal-use software be
capitalized or amortized over the estimated useful life of the software. SOP
98-1 is effective for financial statements issued for fiscal years beginning
after December 15, 1998. The Company estimates that all software acquired for
internal use has a relatively short useful life, usually less than one year.
The Company therefore currently charges to income the cost of acquiring such
software entirely at the time of acquisition. The Company does not believe
that adopting the provisions of SOP 98-1 will have a significant impact on its
consolidated financial statements.

F-25
<PAGE>

[INFOSYS LOGO]

ILLUSTRATIONS OF THE COMPANY'S FACILITIES AND PERSONNEL APPEAR HERE.
<PAGE>

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

No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with the Of-
fering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securi-
ties other than the American Depositary Shares to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company or that the information
contained herein is correct as of any time subsequent to the date hereof.

--------------------
TABLE OF CONTENTS
--------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Currency of Presentation and Certain Defined Terms....................... 3
Enforcement of Civil Liabilities......................................... 3
Reports to Security Holders.............................................. 4
Summary.................................................................. 5
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Price Range of Equity Shares............................................. 21
Exchange Rates........................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Consolidated Financial Data..................................... 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 27
Business................................................................. 40
Management............................................................... 54
Principal Shareholders................................................... 61
Certain Transactions..................................................... 62
Description of Equity Shares............................................. 63
Description of American Depositary Shares................................ 67
Restrictions on Foreign Ownership of Indian Securities................... 76
Government of India Approvals............................................ 79
Taxation................................................................. 81
Equity Shares Eligible For Future Sale................................... 85
Underwriting............................................................. 86
Legal Matters............................................................ 88
India Financial Advisor.................................................. 88
Experts.................................................................. 88
Change of Accountants.................................................... 88
Additional Information................................................... 89
Index to Consolidated Financial Statements............................... F-1
</TABLE>

Until April 4, 1999 (25 days after the date of this Prospectus), all dealers
effecting transactions in the American Depositary Shares offered hereby,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a Pro-
spectus when acting as Underwriters and with respect to their unsold allotments
or subscriptions.

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

1,800,000
American Depositary Shares

[INFOSYS LOGO]

Representing 900,000
Equity Shares

---------------
PROSPECTUS
---------------

NationsBanc Montgomery Securities LLC

BancBoston Robertson Stephens

BT Alex. Brown

Thomas Weisel Partners LLC

March 10, 1999

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