<PAGE> 1
Filed pursuant to Rule 424(b)(3)
File No. 333-42292
PROSPECTUS SUPPLEMENT NO. 1
UP TO 2,204,720 AMERICAN DEPOSITARY SHARES
[SATYAM LOGO]
SATYAM INFOWAY LIMITED
REPRESENTING UP TO 551,180 EQUITY SHARES
------------
This prospectus supplement no. 1 is provided to update our prospectus,
dated July 31, 2000, for our unaudited consolidated financial statements for the
quarter ended June 30, 2000 and other information contained in our Form 6-K
filed August 14, 2000. In connection with any sales by the selling stockholders
of shares covered by the July 31, 2000 prospectus, the selling stockholder must,
in addition to the July 31, 2000 prospectus, also deliver to the purchaser a
copy of this supplement no. 1. To the extent that any information in this
prospectus supplement is inconsistent with information contained or incorporated
by reference in the prospectus, the previous information will be deemed to have
been updated and superceded by this prospectus supplement.
Our ADSs are listed for trading on the Nasdaq National Market under the
symbol "SIFY." On August 11, 2000, the last reported sale price of our ADSs was
$14.38 per ADS.
INVESTING IN THE AMERICAN DEPOSITARY SHARES INVOLVES RISKS WHICH ARE
DESCRIBED IN THE RISK FACTORS BEGINNING ON PAGE 7 OF THE PROSPECTUS.
------------
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------
The date of this prospectus supplement is August 14, 2000.
<PAGE> 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended June 30, 2000
Commission File Number 000-27663
SATYAM INFOWAY LIMITED
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of registrant's name into English)
Republic of India
(Jurisdiction of incorporation or organization)
Maanasarovar Towers
271-A, Anna Salai, Teynampet, Chennai 600 018, India
(91) 44-435-3221
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F. Form 20F [X] Form 40F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to registrant in
connection with Rule 12g3-2(b). Not applicable.
<PAGE> 3
CURRENCY OF PRESENTATION AND CERTAIN DEFINED TERMS
Unless the context otherwise requires, references herein to "we,"
"us," the "company" or "Satyam Infoway" are to Satyam Infoway Limited, a limited
liability company organized under the laws of the Republic of India. References
to "U.S." or the "United States" are to the United States of America, its
territories and its possessions. References to "India" are to the Republic of
India. We are a majority-owned subsidiary of Satyam Computer Services Limited, a
leading Indian information technology services company which is traded on the
major Indian stock exchanges ("Satyam Computer Services"). "Satyam" is a
trademark owned by Satyam Computer Services, which has licensed the use of the
"Satyam" trademark to us subject to specified conditions. "Satyam Online,"
"Satyam:Net" and "satyamonline.com" are trademarks used by us for which we have
registration applications pending in India. All other trademarks or tradenames
used in this Report on Form 6-K ("Quarterly Report") are the property of their
respective owners.
In this Quarterly Report, references to "$," "Dollars" or "U.S.
Dollars" are to the legal currency of the United States, and reference to "Rs.,"
"rupees" or "Indian Rupees" are to the legal currency of India. References to a
particular "fiscal" year are to our fiscal year ended March 31 of such year.
For your convenience, this Quarterly Report contains translations of
some Indian rupee amounts into U.S. dollars which should not be construed as a
representation that those Indian rupee or U.S. dollar amounts could have been,
or could be, converted into U.S. dollars or Indian rupees, as the case may be,
at any particular rate, the rate stated below, or at all. Except as otherwise
stated in this Quarterly Report, all translations from Indian rupees to U.S.
dollars contained in this Quarterly Report have been based on the noon buying
rate in the City of New York on June 30, 2000 for cable transfers in Indian
rupees as certified for customs purposes by the Federal Reserve Bank of New
York. The noon buying rate on June 30, 2000 was Rs.44.70 per $1.00.
Our financial statements are prepared in Indian rupees and presented
in accordance with United States generally accepted accounting principles ("U.S.
GAAP"). Solely for your convenience, current information contained in our
financial statements has been translated into U.S. dollars. In this Quarterly
Report, any discrepancies in any table between totals and the sums of the
amounts listed are due to rounding.
Information contained in our websites, including our principal
website, satyamonline.com, is not part of this Quarterly Report.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE
SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS QUARTERLY REPORT. YOU
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS,
WHICH REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE OF THIS REPORT. IN
ADDITION, YOU SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS QUARTERLY
REPORT AND IN OUR PERIODIC REPORTS AND OTHER DOCUMENTS FILED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") FROM TIME TO TIME. OUR
FILINGS WITH THE SEC ARE AVAILABLE ON ITS WEBSITE, WWW.SEC.GOV.
2
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SATYAM INFOWAY LIMITED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN INDIAN RUPEES, EXCEPT SHARE DATA AND AS OTHERWISE STATED)
<TABLE>
<CAPTION>
ASSETS
-------------------------------------------------
MARCH 31, 2000 JUNE 30, 2000 JUNE 30,2000
-------------- -------------- ------------
RS. RS. US$
-- -- --
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 7,307,624,832 4,237,061,140 94,788,840
Accounts receivable, net of allowances of Rs.2,420,628 and
Rs.8,420,628 as of March 31, 2000 and June 30, 2000 respectively 245,029,816 332,852,598 7,446,367
Due from officers and employees 6,387,228 10,639,944 238,030
Inventories 18,184,123 31,039,075 694,386
Investments 22,610,768 20,965,508 469,027
Investments in affiliate -- 20,077,097 449,152
Deferred tax assets 113,531 118,692 2,655
Prepaid expenses 251,537,335 324,996,884 7,270,624
Other current assets 166,430,957 231,900,317 5,187,927
-------------- -------------- -----------
TOTAL CURRENT ASSETS 8,017,918,590 5,209,651,255 116,547,008
Plant and equipment -- net 915,020,689 1,277,388,637 28,576,927
Goodwill and other intangible assets 1,630,417,553 4,808,049,099 107,562,620
Deferred taxes 268,606 633,779 14,179
Other assets 70,378,149 98,278,793 2,198,630
-------------- -------------- -----------
TOTAL ASSETS 10,634,003,587 11,394,001,563 254,899,364
============== ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt 40,266,667 -- --
Current installments of capital lease obligations 2,104,379 3,436,599 76,881
Short term borrowings -- -- --
Trade accounts payable 170,587,041 192,409,578 4,304,465
Due to parent company 17,114,393 14,079,424 314,976
Due for business acquisition -- 1,100,000,000 24,608,501
Accrued expenses 66,613,282 93,655,065 2,095,192
Deferred revenue 150,494,236 154,673,407 3,460,255
Taxes payable 2,285,000 2,330,000 52,125
Deferred tax liability 5,611,551 3,283,822 73,464
Advances from customers 20,652,522 26,746,686 598,360
Other current liabilities 38,670,073 14,584,365 326,272
-------------- -------------- -----------
TOTAL CURRENT LIABILITIES 514,399,144 1,605,198,946 35,910,491
NON-CURRENT LIABILITIES:
Long-term debt, excluding current installments 168,860,111 960,111 21,479
Capital lease obligations, excluding current installments 4,305,547 8,413,174 188,214
Other liabilities 10,300,000 10,383,500 232,293
-------------- -------------- -----------
TOTAL LIABILITIES 697,864,802 1,624,955,731 36,352,477
-------------- -------------- -----------
MINORITY INTEREST 8,298,211 -- --
STOCKHOLDERS' EQUITY
Common stock, Rs 10 par value; 25,000,000 Equity Shares authorized
as of March 31, 2000 ; Issued and outstanding Equity Shares -
22,249,425 as of March 31, 2000 and June 30, 2000 222,494,250 222,494,250 4,977,500
Additional paid-in capital 10,520,953,486 10,603,902,201 237,223,763
Deferred Compensation - Employee Stock Offer Plan (120,224,615) (184,305,385) (4,123,163)
Accumulated deficit (696,833,862) (875,179,017) (19,578,949)
Accumulated other comprehensive income 1,451,315 2,133,783 47,736
-------------- -------------- -----------
TOTAL STOCKHOLDERS' EQUITY 9,927,840,574 9,769,045,832 218,546,887
-------------- -------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 10,634,003,587 11,394,001,563 254,899,364
============== ============== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 5
SATYAM INFOWAY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN INDIAN RUPEES, EXCEPT SHARE DATA AND AS OTHERWISE STATED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
----------------------------------------
1999 2000 2000
RS. RS. US $
----------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES: 80,803,252 321,677,734 7,196,370
Cost of revenues (38,896,630) (196,804,112) (4,402,777)
----------- ------------ -----------
GROSS PROFIT/(LOSS) 41,906,622 124,873,622 2,793,593
----------- ------------ -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 84,131,759 312,390,410 6,988,600
Amortisation of goodwill -- 86,994,360 1,946,183
Amortisation of deferred stock compensation expense 206,250 18,867,946 422,102
----------------------------------------
TOTAL OPERATING EXPENSES 84,338,009 418,252,716 9,356,885
----------------------------------------
Operating loss (42,431,387) (293,379,094) (6,563,292)
Other (expense)/ income, net (9,317,307) 119,749,030 2,678,949
----------------------------------------
Loss before taxes, equity in losses of affiliate and minority interest (51,748,694) (173,630,064) (3,884,343)
========================================
Taxes -- 325,333 7,278
Equity in losses of affiliate -- (5,422,903) (121,318)
Minority Interest -- 382,479 8,557
----------------------------------------
NET LOSS (51,748,694) (178,345,155) (3,989,826)
========================================
NET LOSS PER SHARE (3.29) (8.02) (0.18)
========================================
Weighted Equity Shares used in computing loss per equity share 15,750,000 22,249,425 22,249,425
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
SATYAM INFOWAY LIMITED
STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY
(EXPRESSED IN INDIAN RUPEES, EXCEPT SHARE DATA AND AS OTHERWISE STATED)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Paid deficit during
Shares Par Value In Capital development stage
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AS OF MARCH 31, 1997 230 2,300 -- (26,971,114)
Common stock issued to the parent Company 7,500,000 75,000,000 -- --
Net loss -- -- -- (100,590,364)
-------------------------------------------------------------------
BALANCE AS OF MARCH 31, 1998 7,500,230 75,002,300 -- (127,561,478)
Deficit transfer -- -- -- 127,561,478
Common stock issued to the parent Company 4,879,770 48,797,700 44,986,200 --
Other issuance of common stock 3,370,000 33,700,000 180,000,000 --
Net loss -- -- -- --
Compensation related to stock option grants -- -- 1,650,000 --
Amortisation of compensation related to stock
option grants -- -- -- --
-------------------------------------------------------------------
BALANCE AS OF MARCH 31, 1999 15,750,000 157,500,000 226,636,200 --
Deficit transfer -- -- -- --
Common stock issued to the parent Company 150,000 1,500,000 76,620,000 --
Common stock issued during the period 6,349,425 63,494,250 10,078,427,094 --
Net loss -- -- -- --
Compensation related to stock option grants -- -- 139,270,192 --
Amortisation of compensation related to stock
option grants -- -- -- --
Other comprehensive income, net of tax -- -- -- --
-------------------------------------------------------------------
BALANCE AS OF MARCH 31, 2000 22,249,425 222,494,250 10,520,953,486 --
Net loss (unaudited)
Compensation related to stock option grants (unaudited) -- -- 82,948,716 --
Amortisation of compensation related to stock option
grants (unaudited) -- -- 18,867,946 --
Other comprehensive income, net of tax (unaudited) -- -- -- --
-------------------------------------------------------------------
BALANCE AS OF JUNE 30, 2000 (UNAUDITED) 22,249,425 222,494,250 10,603,902,202 --
BALANCE AS OF MARCH 31, 2000 (IN US$) 22,249,425 4,977,500 235,368,087 --
BALANCE AS OF JUNE 30, 2000 (IN US$) (UNAUDITED) 22,249,425 4,977,500 237,223,763 --
</TABLE>
<TABLE>
<CAPTION>
Deferred
Other Compensation -
Comprehensive Employee Stock Accumulated Stockholders'
income offer plan deficit Equity
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AS OF MARCH 31, 1997 -- -- -- (26,968,814)
Common stock issued to the parent Company -- -- -- 75,000,000
Net loss -- -- -- (100,590,364)
-----------------------------------------------------------------
BALANCE AS OF MARCH 31, 1998 -- -- -- (52,559,178)
Deficit transfer -- -- (127,561,478) --
Common stock issued to the parent Company -- -- -- 93,783,900
Other issuance of common stock -- -- -- 213,700,000
Net loss -- -- (187,375,665) (187,375,665)
Compensation related to stock option grants -- (1,650,000) -- --
Amortisation of compensation related to stock
option grants -- 68,751 -- 68,751
-----------------------------------------------------------------
BALANCE AS OF MARCH 31, 1999 -- (1,581,249) (314,937,143) 67,617,808
Deficit transfer -- -- -- --
Common stock issued to the parent Company -- -- -- 78,120,000
Common stock issued during the period -- -- -- 10,141,921,344
Net loss -- -- (381,896,719) (381,896,719)
Compensation related to stock option grants -- (139,270,192) -- --
Amortisation of compensation related to stock
option grants -- 20,626,826 -- 20,626,826
Other comprehensive income, net of tax 1,451,315 -- -- 1,451,315
-----------------------------------------------------------------
BALANCE AS OF MARCH 31, 2000 1,451,315 (120,224,615) (696,833,862) 9,927,840,574
Net loss (unaudited) -- -- (178,345,155) (178,345,155)
Compensation related to stock option grants (unaudited) -- (82,948,716) -- 0
Amortisation of compensation related to stock option
grants (unaudited) -- 18,867,946 -- 18,867,946
Other comprehensive income, net of tax (unaudited) 682,468 -- -- 682,468
-----------------------------------------------------------------
BALANCE AS OF JUNE 30, 2000 (UNAUDITED) 2,133,783 (184,305,385) (875,179,017) 9,769,045,833
BALANCE AS OF MARCH 31, 2000 (IN US$) 32,468 (2,689,589) (15,589,124) 222,099,342
BALANCE AS OF JUNE 30, 2000 (IN US$) (UNAUDITED) 47,736 (4,123,163) (19,578,949) 218,546,887
</TABLE>
5
<PAGE> 7
SATYAM INFOWAY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN INDIAN RUPEES, EXCEPT SHARE DATA AND AS OTHERWISE STATED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
------------------------------------------------
1999 2000 2000
------------------------------------------------
RS. RS. US$
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net loss (51,748,694) (178,345,155) (3,989,824)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 21,507,009 171,197,610 3,829,924
Minority interest -- (8,298,211) (185,642)
Changes in assets and liabilities:
Accounts receivable (net) (8,069,926) (87,822,782) (1,964,715)
Inventories 832,445 (12,854,952) (287,583)
Prepaid expenses (9,521,416) (73,459,549) (1,643,391)
Other assets (18,967,279) (93,370,004) (2,088,814)
Due to parent company 1,501,406 (3,034,969) (67,897)
Accrued expenses (3,876,342) 27,041,783 604,962
Deferred revenue 20,974,212 4,179,171 93,494
Trade accounts payable 5,843,329 21,822,537 488,200
Taxes payable -- (2,653,063) (59,354)
Advances from customers (3,150,403) 6,094,164 136,335
Due from officers and employees (29,326) (4,252,716) (95,139)
Other liabilities 7,447,102 (24,002,208) (536,962)
------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (37,257,883) (257,758,344) (5,766,406)
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditure on plant and equipment (109,577,914) (427,108,391) (9,554,998)
Expenditure on license fee -- -- --
Expenditure on investment -- 2,327,728 52,074
Expenditure on investment in affiliates -- (20,077,097) (449,152)
Purchase consideration for acquisition -- (3,265,220,768) (73,047,444)
Proceeds from sale of plant and equipment -- -- --
------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (109,577,914) (3,710,078,528) (82,999,520)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt -- (208,166,667) (4,656,972)
Proceeds from issuance of long-term debt -- -- --
Proceeds from short term loans 31,823,824 -- --
Principal payments under capital lease obligations (160,099) 5,439,847 121,697
Net proceeds from issuance of common stock -- -- --
Advance for share capital -- 1,100,000,000 24,608,501
Due to parent company -- -- --
------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 31,663,725 897,273,180 20,073,226
------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (115,172,072) (3,070,563,692) (68,692,700)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 125,547,453 7,307,624,832 163,481,540
------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 10,375,381 4,237,061,140 94,788,840
------------------------------------------------
SUPPLEMENTARY INFORMATION
Cash paid towards interest 10,060,759 16,142,248 361,124
Cash paid towards taxes -- -- --
SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITY
Additional common stock issued upon conversion of amounts
payable to parent company -- -- --
Capital leases 723,822 7,254,172 162,286
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 8
SATYAM INFOWAY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN INDIAN RUPEES, EXCEPT SHARE DATA AND AS OTHERWISE STATED)
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE QUARTER ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation of Financial Statements
The accompanying financial statements have been prepared
in Indian Rupees (Rs.), the national currency of India. Solely for
the convenience of the reader, the financial statements as of and
for the year ended March 31, 2000 and June 30, 2000 have been
translated into United States dollars at the noon buying rate in New
York City on June 30, 2000 for cable transfers in Indian rupees, as
certified for customs purposes by the Federal Reserve Bank of New
York of $1 = Rs.44.70. No representation is made that the Indian
rupee amounts have been, could have been or could be converted into
United States dollars at such a rate or at any other certain rate on
June 30, 2000 or at any other date.
(b) Interim Information (unaudited)
Interim information presented in the consolidated
financial statements has been prepared by the management without
audit and, in the opinion of management, includes all adjustments of
a normal recurring nature that are necessary for the fair
presentation of the financial position, results of operations, and
cash flows for the periods shown, in accordance with the
generally accepted accounting principles.
2. STOCK-BASED COMPENSATION PLAN
During the quarter ended June 30, 2000 the Company
granted 239,660 warrants to eligible employees at 90 % of the market
price of the shares on Nasdaq as on the grant date. The Company
recognized deferred stock compensation of Rs.88,948,716 of which
Rs.3,816,230 was amortized and charged to earnings for the quarter
ended June 30, 2000.
3. ACQUISITION OF BUSINESS
On November 29, 1999, the Company entered into an
agreement with the shareholders of IndiaWorld Communications Private
Limited ("IndiaWorld") to acquire 49,000 shares (equivalent to 24.5%
of the share capital) of IndiaWorld for a consideration of
Rs.1,222,500,000 ($27,348,993). IndiaWorld is engaged in the
business of providing web-based solutions and advertising services.
Satyam also entered into an agreement with the shareholders of
IndiaWorld as on the same date for the option to purchase the
remaining shares (the "option agreement") in IndiaWorld. The terms
of the option agreement provide that Satyam had the option to
acquire all of the remaining shares of IndiaWorld on the payment of
an initial non-refundable earnest money deposit of Rs.513,100,000
($11,478,474) and a second and final payment of Rs.3,254,300,000
($72,803,132) which is to be made on or before June 30, 2000. The
non-refundable earnest money deposit of Rs.513,100,000 was paid on
November 29, 1999.
On June 30, 2000, the Company completed the acquisition
of IndiaWorld by modifying the option agreement dated November 29,
1999. In accordance with the revised agreement, the Company settled
the second and the final payment of Rs.3,254,300,000 by paying
Rs.2,154,300,000 in cash and agreeing to pay the balance
Rs.1,100,000,000 by issue of 268,500 new equity shares in SIFY on or
before July 11, 2000. SIFY's equity shares to be issued for this
purpose are valued at Rs.4,097 per share (equivalent to the quote
for four ADRs on the Nasdaq National Market on June 23, 2000).
The transaction to purchase IndiaWorld has been
accounted for as a two-step acquisition under the purchase method of
accounting. The financial statements of the Company at March 31,
2000 have been
7
<PAGE> 9
consolidated with the accounts of IndiaWorld as of December 1, 1999
to give effect to Rs.1.73 billion investment on that date and the
financial statements of the Company at June 30, 2000 have been
consolidated to give effect to the complete acquisition.
4. OTHER EVENTS
On June 5, 2000 the Company announced its strategic
investment in, and partnership with CricInfo Limited ("CricInfo"), a
private company incorporated in England and Wales. Satyam will
purchase a 25% stake in CricInfo for an aggregate of $37.5 million
of Satyam's American Depository Shares ("ADSs"). Of the ADSs to be
issued, $21.5 million will be issued to the shareholders of CricInfo
in exchange for the transfer for the outstanding CricInfo shares to
Satyam and $16 million will be issued to CricInfo in exchange for
newly issued CricInfo shares. The number of shares issued will be
based on the price of the ADSs on Nasdaq on the day prior to the
acquisition of CricInfo shares.
On July 25, 2000, the Company announced that it has
entered into an agreement to acquire all of the outstanding capital
stock of IndiaPlaza.com, Inc. ("IndiaPlaza.com"), a private company
incorporated in California. Satyam will acquire 100% of
IndiaPlaza.com by issuing an aggregate of 480,000 of Satyam's ADSs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operations of our company should be read in conjunction with the audited
financial statements and the related notes included elsewhere in this report and
the audited financial statements and notes contained in our Annual Report on
Form 20-F for the fiscal year ended March 31, 2000. This discussion contains
forward-looking statements that involve risks and uncertainties. For additional
information regarding these risks and uncertainties, please see "Risk Factors."
OVERVIEW
We were incorporated in December 1995 as an independent business
unit of Satyam Computer Services to develop and offer connectivity-based
corporate services allowing businesses in India to exchange information,
communicate and transact business electronically. Satyam Computer Services, our
parent company, is a leading Indian information technology services company
traded on the principal Indian stock exchanges.
From December 1995 through 1997, we focused on the development and
testing of our private data network. In 1997, we began forming strategic
partnerships with a number of leading technology and electronic commerce
companies, including UUNet Technologies, Open Market and Sterling Commerce, in
order to broaden our product and service offerings to our corporate customers.
In March 1998, we obtained network certification for conformity with Indian and
international network operating standards from the Technical Evaluation
Committee of India. In April 1998, we began offering private network services to
businesses in India. Our initial products and services included electronic data
interchange, e-mail and other messaging services, virtual private networks, and
related customer support.
In October 1998, we initiated our online content offerings with two
websites: carnaticmusic.com and indiaupdate.com. We also started development of
satyamonline.com, our online portal, and other related content sites for
personal finance, movies and automobiles with the goal of offering a
comprehensive suite of websites offering content specifically tailored to Indian
interests worldwide.
On November 6, 1998, the Indian government opened the Internet
service provider marketplace to private competition. Capitalizing on our
existing private data network, we launched our Internet service provider
business, Satyam Online, on November 22, 1998 and became the first private
national Internet service provider in India. We began offering Satyam Online
Internet access and related services to India's consumer market as a complement
to the network services offered to our business customers. Our Satyam Online
service was the first in India to offer ready-to-use CD-ROMs enabling online
registration and immediate usage.
In October 1999, we completed our initial public offering and issued
19,205,000 ADSs (representing 4,801,250 equity shares) at a price of $4.50 per
ADS. We received approximately $79.2 million, net of underwriting discounts,
commissions and other offering costs.
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On November 29, 1999, we purchased 24.5% of the outstanding shares
of IndiaWorld Communications for a cash purchase price of Rs.1,222 million
($28.0 million). In connection with this purchase, we acquired an option to
purchase the remaining 75.5% of the outstanding shares in IndiaWorld
Communications for a cash purchase price of Rs.3,765 million ($87.0 million). We
completed the acquisition by exercising the option on June 30, 2000. For United
States GAAP reporting purposes, the financial statements of IndiaWorld
Communications have been consolidated with our financial statements from and
after December 1, 1999. The acquisition will be treated as a purchase. We plan
to amortize goodwill on a straight line basis over a period of five years. Most
of the purchase price will represent goodwill.
IndiaWorld Communications recognized revenue of Rs.14.0 million and
Rs.37.6 million ($861,000) in fiscal 1999 and 2000, respectively. IndiaWorld
Communications derives its revenues primarily from third-party advertising, web
design and hosting fees and, to a lesser extent, commissions from electronic
commerce transactions on its websites. IndiaWorld Communications' cost of
revenues were Rs.7.4 million and Rs.14.4 million ($331,000), respectively,
during these periods. IndiaWorld Communications had net income of Rs.11,256 and
Rs.568,152 ($13,000), respectively, during these periods.
In February 2000, we completed a secondary offering and issued
1,868,700 ADSs (representing 467,175 equity shares) at a price of $80.00 per
ADS. We received approximately $141.7 million, net of underwriting discounts,
commissions and other costs.
In addition to the IndiaWorld transaction, we have also recently
entered into several other investment and acquisition transactions. On June 5,
2000 we announced our strategic investment in, and partnership with, CricInfo, a
private company incorporated in England and Wales. Satyam will purchase a 25%
stake in CricInfo for an aggregate of $37.5 million of Stayam's ADSs. Of the
ADSs to be issued, $21.5 million will be issued to the shareholders of CricInfo
in exchange for newly issued CricInfo shares. This transaction was completed on
July 31, 2000 with the issuance of 2,204,720 ADSs.
On July 25, 2000, we announced our agreement to acquire all of the
outstanding capital stock of IndiaPlaza.com, a private company incorporated in
California. We will acquire 100% of IndiaPlaza.com by issuing an aggregate of
480,000 of Satyam's ADSs.
In the ordinary course of our business, we regularly engage in
discussions and negotiations relating to potential investments, strategic
partnerships and acquisitions. Some of these discussions may also contemplate
the other party making an investment in our company.
We currently operate India's largest private data network utilizing
Internet protocol with points of presence in 43 of the largest metropolitan
areas in India as of May 31, 2000. As of June 30, 2000, we had more than 500
corporate customers for our private network services and more than 200,000
subscribers for our Satyam Online services. During June 2000, our websites
generated approximately 80 million page views (including IndiaWorld
Communications' websites.).
We conduct our business in India and most of our revenues and
expenses are denominated in Indian rupees. Our foreign exchange loss was
Rs.5,613, Rs.615,189 ($14,000) and a gain of Rs.5,415,274 ($124,000) for fiscal
1998, 1999 and 2000, respectively.
REVENUES
For reporting purposes, we classify our revenues into three
divisions:
consumer Internet access services;
online portal and content offerings; and
corporate network and technology services.
Our consumer Internet access services division derives its revenues
primarily from prepaid dial-up subscriptions. We offer our prepaid subscriptions
in a number of time period and pricing plans through ready-to-use CD-ROMs sold
to our distribution partners. Our distribution partners resell the CD-ROMs to
consumers for online registration and immediate Internet access. Revenues are
recognized ratably as the prepaid subscription is used with any unused portion
recognized as revenues at the expiration date of the subscription. We also
generate revenues through international roaming and e-mail registration fees.
Our consumer Internet access services division accounted for approximately 12.9%
and 52.5% of our revenues in fiscal 1999 and 2000, respectively. This increase
in consumer Internet access services division revenues as a percentage of total
revenues is due to the introduction of our consumer Internet access services in
November 1998.
Our online portal and content offerings division derives revenues
from third-party advertising and commissions from electronic commerce
transactions on our websites. Advertising fees are recognized over the period in
which the advertisements are hosted on our websites. This division does not
currently constitute a material portion of our total revenues.
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Our corporate network and technology services division derives its
revenues from dial-up and dedicated Internet access, electronic commerce,
electronic data interchange, e-mail and other messaging services, virtual
private networks and web-based solutions. Our corporate private network
customers typically enter into one-year arrangements that provide for an initial
installation fee and recurring service fees. Web development is generally
charged on a fixed-price basis. We derive revenues from website hosting based
upon our customer's bandwidth requirements, and we charge co-location customers
for use of our physical facilities. We also generate a small portion of our
revenues through the sale of third-party hardware. Our corporate network and
technology services division accounted for approximately 87.1% and 42.5%
revenues in fiscal 1999 and 2000, respectively.
EXPENSES
Cost of revenues for the consumer Internet access services division
consists primarily of recurring telecommunications costs necessary to provide
service to subscribers. Telecommunications costs include the costs of providing
local telephone lines to our points of presence, the costs of using third-party
networks pursuant to service agreements and leased line costs. We anticipate
that our telecommunications costs will increase in the near term as we expand
our network and enter new markets. As utilization of our network increases in
future years, we expect to realize a reduction in per unit data transmission
costs due to our network's scalability and fixed cost structure. Another
recurring cost is the personnel and related operating expenses associated with
customer support and network operations. We expect that customer support and
network operations expenses will decrease as a percentage of revenues as we more
efficiently utilize these capabilities across a larger customer base. Cost of
revenues for consumer Internet access services also includes startup expenses
for new subscribers consisting primarily of the cost of CD-ROMs and other
product media, manuals and associated packaging and delivery costs.
The cost of revenues for the online portal and content offerings
division includes the labor cost of developing and maintaining our websites, the
cost of third-party software and the cost of obtaining content from third-party
vendors. IndiaWorld Communications' cost of revenues are mainly attributable to
payments to VSNL for web hosting and bandwidth services.
Cost of revenues for the corporate network and technology services
division is divided into three groups: corporate Internet access, corporate
network and electronic commerce products, and web development. Cost of revenues
for the corporate Internet access subdivision consists of telecommunications
costs necessary to provide service, customer support costs and the cost of
providing network operations. Cost of revenues for corporate network and
electronic commerce consists primarily of third-party software and hardware
purchased from our strategic partners for resale, direct labor costs for initial
installation and recurring customer support and network operation and associated
telecommunications costs. Cost of revenues for web development, website hosting
and co-location includes direct labor and associated telecommunications costs.
Selling, general and administrative expenses consist primarily of
salaries and commissions for sales and marketing personnel; salaries and related
costs for executives, financial and administrative personnel; sales, marketing,
advertising and other brand building costs; travel costs; and occupancy and
overhead costs. As we expand the scope of our operations, we expect selling,
general and administrative expenses to continue to increase for the foreseeable
future. We intend to continue to add more points of presence to our network and
hire new sales and marketing personnel for each of our new markets. We also have
and intend to continue to increase marketing expenses to build our brand
awareness in order to increase our subscriber base. Our business plan assumes
these costs will negatively impact our financial results in the short term but
will be offset by anticipated increases in revenues from overall subscriber
growth.
A total of 825,000 equity shares are reserved for issuance under our
Associate Stock Option Plan. As of June 30, 2000, we had granted an aggregate of
535,980 options (net of 21,840 options forfeited by employees) under our
ASOP with a weighted average exercise price equal to approximately Rs.28.41
per equity share. We recorded non-cash compensation charges related to these
grants in the aggregate amount of approximately Rs.223.9 million ($5.0 million)
to be recognized over a three-year period in accordance with vesting provisions.
We depreciate our tangible assets on a straight-line basis over the
useful life of assets, ranging from two to five years. We depreciate our
intangible assets on a straight-line basis over five years. Our planned
significant capital expenditures for the expansion and enhancement of our
network infrastructure will substantially increase our depreciation expenses in
the near future.
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We may face significant competitive pricing pressure from VSNL, the
government-controlled provider of international telecommunications services in
India, and a number of new competitors that are entering India's recently opened
Internet service provider market, including some competitors offering "free" ISP
service. In the face of expected increasing competition, we do not anticipate
being able to maintain our present subscriber retention rates as our subscriber
base grows.
Since our inception, we have experienced negative cash flow from
operations and have incurred net losses. Our ability to generate positive cash
flow from operations and achieve profitability is dependent on our ability to
continue to grow our revenues base and achieve further operating efficiencies.
For fiscal 1998, 1999, 2000 and the three months ended June 30,
2000, we incurred negative cash flow from operations of approximately Rs.74.0
million, Rs.171.4 million, Rs.373.9 and Rs.257.8 ($5.8 million), respectively.
For fiscal 1998, 1999, 2000 and the three months ended June 30, 2000, we
incurred net losses of approximately Rs.26.3 million, Rs.100.6 million, Rs.187.4
million, Rs.381.9 million and Rs.178.3 ($4.0 million), respectively. Giving pro
forma effect to our current investment in IndiaWorld Communications as if it had
occurred at the beginning of each period, we would have incurred net losses of
approximately Rs.535 million and Rs.612 million ($14 million) for fiscal 1999
and 2000, respectively. We intend to substantially increase our operating
expenses and capital expenditures to expand and enhance our network
infrastructure and online content offerings. We expect to experience significant
negative cash flow from operations and to incur net losses as a result of these
investments. We believe that the investment in our network infrastructure will
enable us to achieve further economies of scale as we expand our customer base.
Although consumer Internet access and corporate network and technology services
account for the majority of our revenues today, we expect our online portal and
content offerings to generate significant revenue growth through increased
third-party advertising and transaction and referral fees. However, we may not
be able to realize sufficient future revenues to offset our present investment
in network infrastructure and online content offerings or achieve positive cash
flow or profitability in the future. As of June 30, 2000, we had an accumulated
deficit of approximately Rs.875.2 million ($19.6 million).
RESULTS OF OPERATIONS
Quarter ended June 30, 2000 compared to quarter ended June 30, 1999
Revenues. We recognized Rs.321.7 million ($7.2 million) in revenues
for the quarter ended June 30, 2000, as compared to Rs.80.8 million for the
quarter ended June 30, 1999, representing an increase of Rs.240.9 million.
Current quarter revenues exclude Rs.4.2 million (less than $0.1 million) of
deferred income representing consumer access subscriptions which had been
purchased but not yet used by the consumer subscribers. The increase in revenue
compared to 1999 was primarily attributable to a significant increase in number
of customers and introduction of new service offerings. From June 30, 1999 to
June 30, 2000, our number of corporate customers grew from more than 350 to more
than 500, and our number of internet access subscribers grew from more than
61,000 to more than 200,000.
Cost of Revenues. Cost of revenues were Rs.196.8 million ($4.4
million) or 61% of revenues for the quarter ended June 30, 2000, compared to
Rs.38.9 million or 48% of revenues for the quarter ended June 30, 1999,
representing an increase of Rs.157.9 million, or 406%. This increase was
primarily attributable to a Rs.28.2 million increase in software and hardware
purchased for resale, a Rs.95.8 million increase in leased line charges due to
the increased capacity of our network backbone, and a Rs.25 million increase in
direct personnel costs for web development and customer technical support.
Selling, general and administrative expenses. Selling, general and
administrative expenses were Rs.247.0 million ($5.5 million) for the quarter
ended June 30, 2000, compared to Rs.62.8 million for the quarter ended June 30,
1999, representing an increase of Rs.184.2 million, or 293%. This increase was
primarily attributable to a growth in staff from 411 as of June 30, 1999 to 797
as of June 30, 2000 resulting in an increase in employee expenses of Rs.27
million, a Rs.107 million increase in marketing expenses relating to the launch
of our consumer Internet access services division and portals division, and
increases in travel expenses of Rs.17.6 million, office rental expenses of Rs.13
million and telephone charges of Rs.12 million.
Depreciation and amortization. Depreciation and amortization was
Rs.171.2 million ($3.8 million) for the quarter ended June 30, 2000, compared to
Rs.21.5 million for the quarter ended June 30, 1999, representing an increase of
Rs.149.7 million, or 696%. This increase was primarily attributable to capital
expenditures of
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Rs.1184.9 million during the period from June 1999 to June 2000, including the
purchase of routers, modems, ports, servers and other capital equipment in
connection with the addition of 28 points of presence to our network,
amortization of deferred compensation charge amounting to Rs.18.9 million ($0.4
million) and amortization of goodwill arising out of the IndiaWorld
Communications acquisition amounting to Rs.87 million ($1.9 million).
Interest expense. Interest income was Rs.117.5 million ($2.6
million) for the quarter ended June 30, 2000, compared to an interest expense of
Rs.10.4 million for the quarter ended June 30, 1999, representing a decrease of
Rs.127.9 million, or 1130%. This decrease was attributable to interest earned on
deposits placed with banks amounting to Rs.129.2 million ($2.9 million) offset
by an interest expense of Rs.11.7 million ($0.3 million). The investment funds
were provided by our public offerings.
Other income. Other income was Rs.2.2 million (less than $0.1
million) for the quarter ended June 30, 2000, compared to Rs.1.1 million for the
quarter ended June 30, 1999, representing an increase of Rs.1.1 million, or
100%.
Net Income. Our net loss was Rs.178.3 million ($4.0 million) for the
quarter ended June 30, 2000, compared to a net loss of Rs.51.7 million for the
quarter ended June 30, 1999.
SEASONALITY
Given the early stage of the development of the Internet in India,
the rapidly evolving nature of our business and our limited operating history,
we cannot predict to what extent, if at all, our operations will prove to be
seasonal.
LIQUIDITY AND CAPITAL EXPENDITURES
Since inception, we have financed our operations primarily through a
combination of equity sales and borrowings from institutions and banks. During
fiscal 1998, 1999 and 2000, we received Rs.38.5 million, Rs.307.5 million, and
Rs.10,220.0 million, respectively, in net proceeds from the sale of equity
shares.
In July 1999, we agreed to sell 481,000 equity shares to Sterling
Commerce for $5.0 million. We completed this transaction in September 1999 and
used the funds for general corporate purposes, primarily the repayment of debt.
In October 1999, we completed our initial public offering and issued
19,205,000 ADSs (representing 4,801,250 equity shares) at a price of $4.50 per
share. We received approximately $79.2 million in cash, net of underwriting
discounts, commissions and other offering costs. We used approximately $28.0
million of these proceeds to purchase 24.5% of the outstanding shares of
IndiaWorld Communications and an additional $12.0 million as a non-refundable
deposit towards the exercise of our option to complete the acquisition by
purchasing the remaining 75.5% of the outstanding shares of IndiaWorld
Communications. We also used approximately $24.7 million of these proceeds to
fund network expansion and enhancements and to advertise and promote our brand.
During the quarter ended June 30, 2000 we used the balance of the proceeds
from our initial public offering to complete the acquisition of IndiaWorld
Communications and for general corporate purposes. Pending this use we invested
these proceeds in high quality, interest bearing instruments.
In February 2000, we completed a secondary offering and issued
1,868,700 ADSs (representing 467,175 equity shares) at a price of $80.00 per
ADS. We received approximately $141.7 million, net of underwriting discounts,
commission and other costs. We used a portion of the proceeds from this public
offering to pay part of the balance due to complete the acquisition of
IndiaWorld Communications. We intend to use the balance of the proceeds for
general corporate purposes. Pending this use we intend to invest these proceeds
in high quality, interest bearing instruments.
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The following table summarizes our statements of cash flows for the
periods presented:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
------------------------------------------ ---------------------------
1998 1999 2000 2000 2000
----------- ----------- ----------- ----------- ------------
INDIAN RUPEES U.S. DOLLARS
--------------------------------------------------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net loss Rs.(100,590) Rs.(187,376) Rs.(381,897) Rs.(178,345) $ (3,990)
Net decrease (increase) in working capital 7,257 (33,212) (254,557) (242,313) (5,421)
Other adjustments for non-cash items 19,383 49,200 262,516 162,900 3,644
Net cash provided by (used in) operating activities (73,950) (171,388) (373,938) (257,758) (5,767)
Net cash provided by (used in) investing activities (77,070) (145,999) (2,611,694) (3,710,079) (83,000)
Net cash provided by (used in) financing activities 159,449 443,023 10,167,709 897,273 20,073,226
Net increase (decrease) in cash and cash equivalents 8,429 115,636 7,182,077 (3,070,564) (58,693)
</TABLE>
Our principal capital and liquidity needs historically have related
to developing our network infrastructure and our corporate network and
electronic commerce products, establishing our customer service and support
operations, developing our sales and marketing activities and for general
working capital needs. Prior to 1998, our capital needs were primarily met by
funding from our parent company, Satyam Computer Services, and borrowings from
institutions and banks. As we placed greater emphasis on expanding our network
infrastructure and developing our consumer Internet access and online portal and
content services, we sought additional capital from other sources, including
vendor capital leases and other vendor financing arrangements and through
private placements of our securities.
Cash used in operating activities for quarter ended June 30, 2000
was Rs.257.8 million ($5.8 million) primarily attributable to a net loss of
Rs.178.3 million ($3.9 million), increases in accounts receivable of Rs.87.8
million ($2.0 million), prepaid expenses of Rs.73.5 million ($1.6 million) and
other assets of Rs.93.4 million ($2.1 million), partially offset by depreciation
of plant and equipment and amortization of Rs.171.2 million ($3.8 million), an
increase in trade accounts payable by Rs.21.8 million ($0.5 million) and an
increase in deferred revenue of Rs.4.2 million ($0.1 million). Cash used in
investment activities during the quarter ended June 30, 2000 was Rs.3710.1
million ($83.0 million), principally as a result of the purchase consideration
paid for acquisition of IndiaWorld Communications amounting to Rs.3,265.2
million ($73.0 million) and an amount of Rs.427.1 million ($9.6 million) towards
the purchase of routers, modems, ports, servers and other capital equipment in
connection with the expansion of our servers and other capital equipment in
connection with the expansion of our network and installing the ATM backbone in
six cities. Cash provided by financing activities was Rs.897.3 million ($20.1
million) for the quarter ended June 30, 2000, which consisted primarily of
Rs.1,100.0 million ($24.6 million) advance for share capital, partially offset
by repayment of Rs.107.6 million ($2.4 million) of debentures to IDBI Bank and
repayment of Rs.100.6 million ($2.3 million) of term loan to Exim Bank.
Our aggregate billings for quarter ended June 30, 2000 were
approximately Rs.325.9 million ($7.3 million). This amount represents amounts
receivable by us from our customers for services to be provided over various
periods of time. In accordance with our revenue recognition policy, we
recognized Rs.321.7 million ($7.2 million) and deferred Rs.4.2 million ($0.1
million) of billings in the quarter ended June 30, 2000. Our deferred revenues
balance was Rs.154.7 million ($3.5 million) as of June 30, 2000.
INCOME TAX MATTERS
As of June 30, 2000, we had a net operating loss carryforward of
approximately Rs. 875.2 million ($19.6 million) for financial reporting
purposes. Under Indian law, loss carryforwards from a particular year may be
used to offset taxable income over the next eight years.
The statutory corporate income tax rate in India is currently 35.0%.
This tax rate is presently subject to a 10.0% surcharge resulting in an
effective tax rate of 38.5%. We cannot assure you that the 10.0% surcharge will
be in effect for a limited period of time or that additional surcharges will not
be implemented by the Government of India. Dividends declared, distributed or
paid by an Indian corporation are subject to a dividend tax of 22.0%, including
the presently applicable surcharge, of the total amount of the dividend
declared, distributed or paid. This tax is not paid by shareholders nor is it a
withholding requirement, but rather it is a direct tax payable by the
corporation.
EFFECTS OF INFLATION
Inflation has not had a significant effect on our results of
operations and financial condition to date. However, India has experienced
relatively high rates of inflation. According to the Economist Intelligence
Unit, the
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rates of inflation in India for 1997, 1998 and 1999 were 7.2%, 13.2%, and 5.0%,
respectively. Under our Internet service provider license, we are given the
right to establish the prices we charge to our subscribers, as determined by
market forces. However, under the conditions of our license, the Telecom
Regulatory Authority of India may review and fix the prices we charge our
subscribers at any time. If the Telecom Regulatory Authority were to fix prices
for the Internet service provider services we provide, we might not be able to
increase the prices we charge our subscribers to mitigate the impact of
inflation, which could have a material adverse effect on our business, results
of operations and financial condition.
DEBT FINANCING
In June 1998, we obtained from the Export Import Bank of India a
term loan of Rs.215.0 million. This term loan is secured by a first charge on
our fixed assets and is guaranteed by Satyam Computer Services. The loan bears
interest at a rate of 15.5% per annum and is repayable in six equal half-yearly
installments commencing on December 20, 1999. As of September 30, 1999, we had
borrowed approximately Rs.136.5 million under this facility. On December 20,
1999, we repaid Rs.35.8 million of the outstanding balance under this term loan.
We have prepaid the balance amount of Rs.100.7 million in May 2000.
In June 1999, we obtained from IDBI Bank Ltd. short term loan
commitments aggregating Rs.100.0 million and a short-term credit facility of
Rs.10.0 million. We used the proceeds from the short-term loans and the
short-term credit facility to purchase telecommunication equipment, including
Internet switches, for our network, and in turn repaid this indebtedness with
the proceeds from the issuance of equity shares to Sterling Commerce.
In March 2000, we privately placed 1,075,000 secured redeemable,
non-convertible debentures of Rs.100 each with IDBI Bank Ltd. resulting in net
proceeds of Rs.107.5 ($2.5 million). These debentures were secured by the
buildings of the company. We redeemed the debentures at par in June, 2000.
IMPACT OF THE YEAR 2000
As of the date of this prospectus, we had not experienced any Year
2000-related disruption in the operation of our systems. Although most Year 2000
problems should have become evident on January 1, 2000, additional Year
2000-related problems may become evident after that date.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
We currently do not engage or plan to engage in derivative instruments or
hedging activities.
RISKS RELATED TO OUR BUSINESS
Any investment in our ADSs involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this Report and our Form 20-F for the
fiscal year ended March 31, 2000, before you decide to buy our ADSs.
If any of the following risks actually occur, our company could be seriously
harmed. In any such case, the market price of our ADSs could decline, and you
may lose all or part of the money you paid to buy our ADSs.
RISKS RELATED TO INVESTMENTS IN INDIAN COMPANIES
We are incorporated in India, and virtually all of our assets and
our employees are located in India. Consequently, our financial performance and
the market price of our ADSs will be affected by changes in exchange rates and
controls, interest rates, Government of India policies, including taxation
policies, as well as political, social and economic developments affecting
India.
Political instability could halt or delay the liberalization of the
Indian economy and adversely affect business and economic conditions
in India generally and our business in particular.
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During the past decade, 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. The Government of India recently changed for the fifth
time since 1996. The rate of economic liberalization could change, and specific
laws and policies affecting technology companies, foreign investment, currency
exchange rates and other matters affecting investment in our securities could
change as well. A significant change in India's economic liberalization and
deregulation policies could adversely affect business and economic conditions in
India generally and our business in particular.
Economic sanctions imposed on India by the United States could
restrict our access to technology and limit our ability to construct
our network and operate our business.
In May 1998, the United States imposed economic sanctions against
India in response to India's testing of nuclear devices. Since then, the United
States has waived some of these sanctions subsequent to its discussions with the
Government of India. The economic sanctions imposed on India to date have not
had a material impact on our company. However, these sanctions, or additional
sanctions, could restrict our access to technology that is available only in the
United States and that is required to construct our network and operate our
business. We cannot assure you that any of these sanctions will continue to be
waived, that additional economic sanctions of this nature will not be imposed,
or that these sanctions or any additional sanctions that are imposed will not
have a material adverse effect on our business or on the market for our ADSs in
the United States.
Regional conflicts in South Asia could adversely affect the Indian
economy and cause our business to suffer.
South Asia has from time to time experienced instances of civil
unrest and hostilities among neighboring countries, including between India and
Pakistan. In April 1999, India and Pakistan conducted long-range missile tests.
Since May 1999, military confrontations between India and Pakistan have occurred
in the disputed Himalayan region of Kargil and other border areas. Further, in
October 1999 the leadership of Pakistan changed as a result of a coup led by the
military. Events of this nature in the future could influence the Indian economy
and could have a material adverse effect on the market for securities of Indian
companies, including our ADSs, and on the market for our services.
Indian law and the terms of our Internet service provider license
contain restrictive provisions that limit our ability to raise
capital, to issue equity securities in consideration for
acquisitions we may make or to be acquired which could prevent us
from constructing our network and operating our business or entering
into a transaction that is in the best interests of our
stockholders.
Indian law and the terms of our Internet service provider license
constrain our ability to raise capital through the issuance of equity or
convertible debt securities or to issue equity securities in consideration for
acquisitions we may make. Guidelines issued by the Department of Policy and
Promotion, Ministry of Industry in January 1997 state that the maximum foreign
equity investment in an Indian company engaged in business in the
telecommunications sector is 49%. Additional guidelines issued in November 1998
provide that the maximum foreign equity investment in an Indian company acting
as an Internet service provider is also 49%. This 49% limit applies to foreign
equity investment in our company. Likewise, our Internet service provider
license provides that the total foreign equity in our company may not, at any
time, exceed 49% of our total equity.
Approximately 44% of our equity interests are presently held by
foreign investors. As a result of the 49% limit on foreign equity ownership, we
will not be permitted to sell more than an additional 5% of our equity shares to
foreign investors in the future. We cannot assure you that other forms of
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, our ability to
fund our operations, take advantage of unanticipated opportunities, develop or
enhance our infrastructure or services, or otherwise respond to competitive
pressures would be significantly limited. Our business, results of operations
and financial condition could be materially adversely affected by any such
limitation. The 49% limit on foreign equity ownership also restricts our ability
to be acquired by a non-Indian company because a foreign company is prohibited
from acquiring a majority of our equity shares. Likewise, the terms of our
Internet service provider license prevents us from transferring the license to a
third person. This may prevent us from entering into a transaction which would
otherwise be beneficial for our company and the holders of our equity shares.
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We are subject to foreign investment restrictions under Indian law
that limit our ability to attract foreign investors which, together
with the lack of a public market for our equity shares, may
adversely impact the value of our ADSs.
Currently there is no public trading market for our equity shares
in India nor can we assure you that we will take steps to develop one. Our
equity securities are not traded publicly in India, but are only traded on
Nasdaq through the ADSs. Under current Indian laws and regulations, our
depositary cannot accept deposits of outstanding equity shares and issue ADRs
evidencing ADSs representing such equity shares without prior approval of the
Government of India. To our knowledge, as of the date of this Report, such an
approval had never been granted by the Government of India in respect of ADSs
traded in the United States. If you elect to surrender your ADSs and receive
equity shares, you will not be able to trade those equity shares on any
securities market. Under current Indian laws and regulations, you will be
prohibited from re-depositing those outstanding equity shares with our
depositary without prior approval of the Government of India.
If in the future a market for our equity shares is established in
India or another market outside of the United States, those shares may trade at
a discount or premium to the ADSs in part because of restrictions on foreign
ownership of the underlying shares. Under current Indian regulations and
practice, the approval of the Reserve Bank of India is required for the sale of
equity shares underlying ADSs by a non-resident of India to a resident of India
as well as for renunciation of rights to a resident of India, unless the sale of
equity shares underlying the ADSs is through a recognized stock exchange or in
connection with the offer made under the regulations regarding takeovers. Since
exchange controls still exist in India, the Reserve Bank of India will approve
the price at which the equity shares are transferred based on a specified
formula, and a higher price per share may not be permitted. Holders who seek to
convert the rupee proceeds from a sale of equity shares in India into foreign
currency and repatriate that foreign currency from India will have to obtain
Reserve Bank of India approval for each transaction. We cannot assure you that
any required approval from the Reserve Bank of India or any other government
agency can be obtained.
Because we operate our business in India, exchange rate fluctuations
may affect the value of our ADSs independent of our operating
results.
The exchange rate between the rupee and the U.S. dollar has changed
substantially in recent years and may fluctuate substantially in the future.
During the three-year period from April 1, 1997 through March 31, 2000, the
value of the rupee against the U.S. dollar declined by approximately 22%.
Devaluations of the rupee will result in higher expenses to our company for the
purchase of capital equipment, such as routers, modems, servers and other
telecommunications and computer equipment, which is generally manufactured in
the U.S. In addition, our market valuation could be materially adversely
affected by the devaluation of the rupee if U.S. investors analyze our value
based on the U.S. dollar equivalent of our financial condition and results of
operations.
The Government of India may change its regulation of our business or
the terms of our license to provide Internet access services without
our consent, and any such change could decrease our revenues and/or
increase our costs which would adversely affect our operating
results.
Our business is subject to government regulation under Indian law
and to significant restrictions under our Internet service provider license
issued by the Government of India. These regulations and restrictions include
the following:
Our Internet service provider license has a term of 15 years and we
have no assurance that the license will be renewed. If we are unable to renew
our Internet service provider license in 2013 for any reason, we will be unable
to operate as an Internet service provider in India and will lose one of our
primary sources of revenue.
The Government of India and the Telecom Regulatory Authority of
India, or TRAI, maintain the right to regulate the prices we charge our
subscribers. The success of our business model depends on our ability to price
our services at levels we believe are appropriate. If the government or the TRAI
sets a price floor, we may not be able to attract and retain subscribers.
Likewise, if the government or the TRAI sets a price ceiling, we may not be able
to generate sufficient revenues to fund our operations.
The Government of India maintains the right to take over our entire
operations or revoke, terminate or suspend our license for national security and
similar reasons without compensation to us. If the Government of India were to
take any of these actions, we would be prevented from conducting all or part of
our business.
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We had outstanding performance guarantees for various statutory
purposes totaling Rs.23.05 million ($0.5 million) as of March 31, 2000. These
guarantees are generally provided to government agencies, primarily the
Telegraph Authority, as security for compliance with and performance of terms
and conditions contained in an Internet service provider license and VSNL
towards the supply and installation of an electronic commerce platform. These
guarantees may be seized by the governmental agencies if they suffer any losses
or damage by reason of our failure to perform our obligations. Any failure on
our part to comply with governmental regulations and the terms of our Internet
service provider license could result in the loss of our license and any amount
outstanding as performance guarantees, which would also prevent us from carrying
on a very significant part of our business. Further, additional laws regulating
telecommunications, electronic records, the enforceability of electronic
documents and the liability of network service providers are under consideration
and if enacted could impose additional restrictions on our business.
The statutory corporate income tax rate in India is currently 35.0%.
This tax rate is presently subject to a 10.0% surcharge resulting in an
effective tax rate of 38.5%. However, we cannot assure you that the 10.0%
surcharge will be repealed in the future or that additional surcharges will not
be implemented by the Government of India. Dividends declared, distributed or
paid by an Indian corporation are subject to a tax of 22.0%, including the
presently applicable surcharge, of the total amount of the dividend declared,
distributed or paid at the corporate level. This tax is not paid by stockholders
nor is it a withholding requirement, but rather it is a direct tax payable by
the corporation.
RISKS RELATED TO THE INTERNET MARKET IN INDIA
Our success will depend in large part on the increased use of the
Internet by consumers and businesses in India. However, our ability to exploit
the Internet service provider and other data service markets in India is
inhibited by a number of factors. If India's limited Internet usage does not
grow substantially, our business may not succeed.
The success of our business depends on the acceptance of the
Internet in India which may be slowed or halted by high bandwidth
costs and other technical obstacles in India.
Bandwidth, the measurement of the volume of data capable of being
transported in a communications system in a given amount of time, remains very
expensive in India, especially when compared to bandwidth costs in the United
States. Bandwidth rates are commonly expressed in terms of Kbps (kilobits per
second, or thousands of bits of data per second) or Mbps (megabits per second,
or millions of bits of data per second). Prices for bandwidth capacity are set
by the Indian government and the Telecom Regulatory Authority of India and have
remained high due to, among other things, capacity constraints. Further,
limitations in network architecture in India limit Internet connection speeds to
28 Kbps and below, less than the 33 to 56 Kbps connection speeds on conventional
dial-up telephone lines, and significantly less than the up to 1.5 Mbps
connection speed on cable modems, in the United States. These speed and cost
constraints may severely limit the quality and desirability of using the
Internet in India. However, some providers have begun to deploy high bandwidth
technologies such as digital subscriber lines, or DSL, in India. If they can
deploy this technology in a cost-effective manner, it could present a
significant competitive challenge to our dial-up service.
The limited installed personal computer base in India limits our
pool of potential customers and restricts the amount of revenues
that our consumer Internet access services division may generate.
The market penetration rates of personal computers and online access
in India are far lower than such rates in the United States. For example,
according to International Data Corporation, in 1998 the Indian market contained
approximately 0.5 million Internet users compared to a total population in India
of 984.0 million, while the U.S. market contained approximately 62.8 million
Internet users compared to a total population in the U.S. of 270.3 million.
Alternate methods of obtaining access to the Internet, such as through cable
television modems or set-top boxes for televisions, are currently unavailable in
India to any significant extent. There can be no assurance that the number or
penetration rate of personal computers in India will increase rapidly or at all
or that alternate means of accessing the Internet will develop and become widely
available in India.
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The high cost of accessing the Internet in India limits our pool of
potential customers and restricts the amount of revenues that our
consumer Internet access services division may generate.
Our growth is limited by the cost to Indian consumers of obtaining
the hardware, software and communications links necessary to connect to the
Internet in India. If the costs required to access the Internet do not
significantly decrease, most of India's population will not be able to afford to
use our services. The failure of a significant number of additional Indian
consumers to obtain affordable access to the Internet would make it very
difficult to execute our business plan.
The success of our business depends on the acceptance and growth of
electronic commerce in India which is uncertain and, to a large
extent, beyond our control.
Many of our existing and proposed products and services are designed
to facilitate electronic commerce in India, although there is virtually no
electronic commerce currently being conducted in India. Demand and market
acceptance for these products and services by businesses and consumers,
therefore, are highly uncertain. Critical issues concerning the commercial use
of the Internet, such as legal recognition of electronic records, validity of
contracts entered into online and the validity of digital signatures, remain
unresolved. In addition, many Indian businesses have deferred purchasing
Internet access and deploying electronic commerce initiatives for a number of
reasons, including the existence or perception of, among other things:
inconsistent quality of service;
need to deal with multiple and frequently incompatible vendors;
inadequate legal infrastructure relating to electronic commerce in
India;
lack of security of commercial data such as credit card numbers; and
low number of Indian companies accepting credit card numbers over
the Internet.
If usage of the Internet in India does not substantially increase
and the legal infrastructure and network infrastructure in India are not further
developed, we are not likely to realize any benefits from our investment in the
development of electronic commerce products and services.
RISKS RELATED TO SATYAM INFOWAY
Our limited operating history makes it difficult to evaluate our
business.
We commenced operation of our private data network business in April
1998 and launched our Internet service provider operations and Internet portal
website in November 1998. Accordingly, we have a limited operating history to
evaluate our business. You must consider the risks and difficulties frequently
encountered by companies in the early stages of development, particularly
companies in the new and rapidly evolving Internet service markets. These risks
and difficulties include our ability to:
continue to develop and upgrade our technology, including our
network infrastructure;
maintain and develop strategic relationships with business partners;
offer compelling online services and content; and
promptly address the challenges faced by early stage, rapidly
growing companies which do not have an experience or performance
base to draw on.
Not only is our operating history short, but we have determined to
compete in three businesses that we believe are complementary. These three
businesses are business network and connectivity services, Internet service
provider and consumer portal. Our three businesses were started at different
times and have only been functioning together since late in 1998. We do not yet
know whether these businesses will prove complementary. We cannot assure you
that we will successfully address the risks or difficulties described above.
Failure to do so could lead to an inability to attract and retain subscribers
for our Internet services and corporate customers for our network services as
well as the loss of advertising revenues.
We have a history of losses and negative cash flows and anticipate
this to continue because our business plan, which is unproven, calls
for additional subscribers and other customers to attain
profitability.
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Since our founding, we have incurred significant losses and negative
cash flows. As of June 30, 2000, we had an accumulated deficit of approximately
$19.6 million. We have not been profitable and expect to incur operating losses
as we expand our services, invest in expansion of our network infrastructure and
sales and marketing staff, and advertise and promote our brand. Our business
plan assumes that consumers in India will be attracted to and use Internet
access services and content available on the Internet in increasing numbers. Our
business plan also assumes that businesses in India will demand private network
and related electronic commerce services. This business model is not yet proven
in India, and we cannot assure you that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.
Our ability to compete in the Internet service provider market is
hindered by the fact that our largest competitor is a
government-controlled provider of international telecommunications
services in India which enjoys significant competitive advantages
over our company.
Videsh Sanchar Nigam Limited, or VSNL, is a government-controlled
provider of international telecommunications services in India. VSNL is also the
largest Internet service provider in India which we estimate had approximately
350,000 subscribers as of March 31, 2000. This amount is only an estimate
because VSNL does not publicly disclose this information. VSNL enjoys
significant competitive advantages over our company, including the following:
Longer service history. VSNL has offered Internet service provider
services since August 1995 whereas we have offered Internet service provider
services only since November 1998.
Access to network infrastructure. Because VSNL is controlled by the
Government of India, it has direct access to network infrastructure which is
owned by the Indian government.
Greater financial resources. VSNL has significantly greater total
assets and annual revenues than our company.
If we are unable to distinguish our Internet service provider
services from those of VSNL, these competitive advantages may prevent us from
attracting and retaining subscribers and generating advertising revenue. This
could result in loss of market share, price reductions or reduced margins for
our company's operations.
We may be required to further lower the rates we charge for our
products and services in response to new pricing models introduced
by new and existing competition in the Internet services market
which would significantly decrease our revenues.
A significant number of new competitors have recently entered
India's recently liberalized Internet service provider market, and we expect
additional competitors to emerge in the near future. As of May 20, 2000,
approximately 315 companies had obtained Internet service provider licenses in
India, including 54 companies which have obtained licenses to offer Internet
service provider services throughout India. New entrants into the national
Internet service provider market in India may enjoy significant competitive
advantages over our company, including greater financial resources, which could
allow them to charge Internet access fees that are lower than ours in order to
attract subscribers. Commencing in May 2000, we offer unlimited Internet access
to consumers for a fixed price. A number of our competitors, including Dishnet,
Zee Telefilms and VSNL, also offer unlimited Internet access for a fixed price.
In addition, some competitors offer free Internet service. We
expect the market for consumer Internet access to become increasingly price
competitive as late market entrants attempt to acquire customers.
Our online portal, satyamonline.com, faces significant competition
from well-established Indian content providers, including RediffontheNet. Some
of these sites currently have greater traffic than our site and offer some
features that we do not. Further, the dominant Internet portals continue to be
the online services and search engine companies based in the United States, such
as America Online, Microsoft Network, Yahoo!, Excite@Home, Infoseek and Lycos.
These companies have been developing specially branded or co-branded products
designed for audiences in specific markets. We expect that these companies will
deploy services that are targeted at the Indian market. For example, Yahoo!
launched an Indian service in June 2000.
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Our corporate and technology services business faces significant
competition from well-established companies, including Global E-Commerce
Limited, Sprint-RPG Limited and WIPRO-CSD.
Increased competition may result in reduced operating margins or
operating losses, loss of market share and diminished value in our services, as
well as different pricing, service or marketing decisions. We cannot assure you
that we will be able to successfully compete against current and future
competitors.
Our marketing campaign to establish brand recognition and loyalty
for the Satyam Online brand could be unsuccessful or, if successful,
may not benefit our company if in the future we are no longer
permitted to use the "Satyam" trademark that we license from Satyam
Computer Services.
In order to expand our customer base and increase traffic on our
websites, we must establish, maintain and strengthen the Satyam Online brand. We
plan to increase substantially our marketing expenditures to establish brand
recognition and brand loyalty. If our marketing efforts do not produce a
significant increase in consumer traffic to offset our marketing expenditures,
our losses will be increased or, to the extent that we are generating profits,
our profits will be decreased. Furthermore, our Internet portal will be more
attractive to advertisers if we have a large audience of consumers with
demographic characteristics that advertisers perceive as favorable. Therefore,
we intend to introduce additional and enhanced content, interactive tools and
other services and features in the future in an effort to retain our current
subscribers and users and attract new ones. Our reputation and brand name could
be adversely affected if we are unable to do so successfully.
"Satyam" is a trademark owned by Satyam Computer Services Limited,
or Satyam Computer Services, our parent company. We have a license to use the
"Satyam" trademark for so long as Satyam Computer Services continues to own at
least 51% of our company. If there is a change of control in our company,
however, Satyam Computer Services may terminate our license to use the "Satyam"
trademark upon two years' prior written notice. Termination of our license to
use the "Satyam" trademark would require us to invest significant funds in
building a new brand name and could have a material adverse effect on our
business, results of operations and financial condition.
If our efforts to retain our subscribers through investment in
network infrastructure and customer and technical support are
unsuccessful, our revenues will decrease without a corresponding
reduction in costs.
Our sales, marketing and other costs of acquiring new subscribers
are substantial relative to the fees actually derived from these subscribers.
Accordingly, our long-term success depends to a great extent on our ability to
retain our existing subscribers, while continuing to attract new subscribers. We
invest significant resources in our network infrastructure and in our customer
and technical support capabilities to provide high levels of customer service.
We cannot be certain, however, that these investments will maintain or improve
subscriber retention. We believe that intense competition from our competitors,
some of whom may offer free hours of service or other enticements for new
subscribers, has caused, and may continue to cause, some of our subscribers to
switch to our competitors' services. In addition, some new subscribers use the
Internet only as a novelty and do not become consistent users of Internet
services, and therefore are more likely to discontinue their service. Any
decline in our subscriber retention rate could decrease the revenues generated
by our consumer Internet access services division.
Our future operating results could fluctuate in part because our
expenses are relatively fixed in the short-term while future
revenues are uncertain, and any adverse fluctuations could
negatively impact the price of our ADSs.
Our revenues, expenses and operating results have varied in the past
and may fluctuate significantly in the future due to a number of factors, many
of which are outside our control. Our business involves significant capital
outlays and, thus, a significant portion of our investment and cost base is
relatively fixed in the short term. Our revenues for the foreseeable future will
depend on the following:
the number of subscribers to our Internet service provider service
and the level of Internet and other online service usage by those subscribers
determines the amount of revenues generated by our consumer Internet access
services division;
advertising and electronic commerce activity on satyamonline.com
determines the amount of revenues generated by our online portal and content
offerings division; and
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the products developed by our strategic partners and the usage
thereof by our customers determines the amount of revenues generated by our
corporate network and technology services division.
Our future revenues are difficult to forecast and, in addition to
the foregoing, will depend on the following:
new Internet sites, services, products or pricing policies
introduced by our competitors may require us to introduce new offerings or
reduce the prices we charge our customers for Internet access;
our capital expenditures and other costs relating to the expansion
of our operations could affect the completion of our network or could require us
to generate additional revenue in order to be profitable;
the timing and nature of any agreements we enter into with strategic
partners will determine the amount of revenues generated by our corporate
network and technology services division;
the timing and nature of our marketing efforts could affect the
number of our subscribers and the level of electronic commerce activity on our
websites;
our ability to successfully integrate operations and technologies
from any acquisitions, joint ventures or other business combinations or
investments, including our joint ventures with ICICI Bank, Citibank, Bank of
Madura and RPG Netcom and our acquisition of IndiaWorld Communications and
investment in CricInfo;
the introduction of alternative technologies may require us to
reevaluate our business strategy and/or to adapt our products and services to be
compatible with such technologies; and
technical difficulties or system failures affecting the
telecommunication infrastructure in India, the Internet generally or the
operation of our websites.
We plan to increase our expenditures for our sales and marketing
operations, expand and develop content and enhance our technology and
infrastructure development. Many of our expenses are relatively fixed in the
short-term. We cannot assure you that our revenues will increase in proportion
to the increase in our expenses. We may be unable to adjust spending quickly
enough to offset any unexpected revenues shortfall. This could lead to a
shortfall in revenues in relation to our expenses.
You should not rely on yearly comparisons of our results of
operations as indicators of future performance. It is possible that in some
future periods our operating results may be below the expectations of public
market analysts and investors. In this event, the price of our ADSs may
underperform or fall.
Because we lack full redundancy for our computer systems, a systems
failure could prevent us from operating our business.
We rely on the Internet and, accordingly, depend upon the
continuous, reliable and secure operation of Internet servers, related hardware
and software and network infrastructure such as lines leased from service
providers operated by the Government of India. We have a back-up data facility
but we do not have full redundancy for all of our computer and
telecommunications facilities. As a result, failure of key primary or back-up
systems to operate properly could lead to a loss of customers, damage to our
reputation and violations of our Internet service provider license and contracts
with corporate customers. These failures could also lead to a decrease in value
of our ADSs, significant negative publicity and litigation. Recently, several
large Internet companies have suffered highly publicized system failures which
resulted in adverse reactions to their stock prices, significant negative
publicity and, in some instances, litigation.
We have suffered service outages from time to time. We guarantee to
our corporate customers that our network will be operational 99% of the time,
and our Internet service provider license requires that we provide an acceptable
level of service quality and that we remedy customer complaints within a
specified time period. Our computer and communications hardware are protected
through physical and software safeguards. However, they are still vulnerable to
fire, storm, flood, power loss, telecommunications failures, physical or
software break-ins and similar events. We do not carry business interruption
insurance to protect us in the event of a catastrophe even though such an event
could lead to a significant negative impact on our business. Any sustained
disruption in Internet access provided by third parties could also have a
material adverse effect on our business.
Security breaches could damage our reputation or result in liability
to us.
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Our facilities and infrastructure must remain secure and be
perceived by consumers to be secure, because we retain confidential customer
information in our database. Despite the implementation of security measures,
our infrastructure may be vulnerable to physical break-ins, computer viruses,
programming errors or similar disruptive problems. If a person circumvents our
security measures, he or she could jeopardize the security of confidential
information stored on our systems, misappropriate proprietary information or
cause interruptions in our operations. We may be required to make significant
additional investments and efforts to protect against or remedy security
breaches. A material security breach could damage our reputation or result in
liability to us, and we do not carry insurance that protects us from this kind
of loss.
The security services that we offer in connection with our business
customers' networks cannot assure complete protection from computer viruses,
break-ins and other disruptive problems. Although we attempt to limit
contractually our liability in such instances, the occurrence of these problems
could result in claims against us or liability on our part. These claims,
regardless of their ultimate outcome, could result in costly litigation and
could damage our reputation and hinder ability to attract and retain customers
for our service offerings.
If we are unable to manage the rapid growth required by our business
strategy, our results of operations will be adversely affected.
We have experienced and are currently experiencing a period of
significant growth. As of March 31, 2000, we had 622 employees, an increase of
83% from the 340 employees we had as of March 31, 1999. We currently anticipate
hiring an additional 120 employees during the current fiscal year, most of whom
will be hired into our sales, marketing and customer support teams. This growth
has placed, and the future growth we anticipate in our operations will continue
to place, a significant strain on our managerial, operational, financial and
information systems resources. As part of this growth, we will have to implement
new operational and financial systems and procedures and controls, expand our
office facilities, train and manage our employee base, and maintain close
coordination among our technical, accounting, finance, marketing, sales and
editorial staffs. If we are unable to manage our growth effectively, we will be
unable to implement our growth strategy, upon which the success of our business
depends.
We face a competitive labor market in India for skilled personnel
and therefore are highly dependent on our existing key personnel and
on our ability to hire additional skilled employees.
Our success depends upon the continued service of our key personnel,
particularly Mr. Ramaraj, our Chief Executive Officer, Mr. Zacharias, our
President and Chief Operating Officer, Mr. Santhanakrishnan, our Chief Financial
Officer, and each of our vice presidents. Substantially all of our employees are
located in India, and each of them may voluntarily terminate his or her
employment with us. We do not carry key person life insurance on any of our
personnel. Our success also depends on our ability to attract and retain
additional highly qualified technical, marketing and sales personnel. The labor
market for skilled employees in India is extremely competitive, and the process
of hiring employees with the necessary skills is time consuming and requires the
diversion of significant resources. While we have not experienced difficulty in
employee retention or integration to date, we may not be able to continue to
retain or integrate existing personnel or identify and hire additional personnel
in the future. The loss of the services of key personnel, especially the
unexpected death or disability of such personnel, or the inability to attract
additional qualified personnel, could disrupt the implementation of our growth
strategy, upon which the success of our business depends.
We are highly dependent on our relationships with strategic partners
to provide key products and services to our customers.
We rely on our arrangements with strategic partners to provide key
network and electronic commerce products and services to our business clients.
Our relationships with UUNet Technologies, Open Market and Sterling Commerce are
exclusive to us within the Indian market with regard to specific products, so
long as we maintain stated minimum performance levels. If we were to lose
exclusivity, we would likely be subject to intense competition for these
products and services. These arrangements can be terminated by our partners in
some circumstances. We also rely on our strategic partners to provide us with
access to their customer base. If our relationships with our strategic partners
do not continue, the ability of our corporate network and technology services
division to generate revenues will be decreased significantly.
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Our subsidiary, IndiaWorld Communications, is engaged in disputes
which, if resolved unfavorably, could diminish the value of the
business we are acquiring, impose costs on us or have other
undesirable effects.
We and IndiaWorld Communications have been contacted by a party
located in the United States which has alleged that the activities of IndiaWorld
Communications infringe with a United States trademark for the term
"IndiaWorld," and associated logos and trade dress purportedly owned by this
third party. We have been advised by the prior owners of IndiaWorld
Communications that no such infringement has taken place and that they have
commenced legal action in federal court in New York to cancel the United States
trademark which they believe was improperly granted and to assert other claims.
Our contract with the prior owners of IndiaWorld Communications includes an
indemnity for past infringement. Further, we presently do not believe that the
disputed marks are material to our business strategy as this dispute does not at
this time pertain to the key assets of IndiaWorld Communications, including the
websites samachar.com, khel.com, khoj.com, dhan.com and bawarchi.com. We and
IndiaWorld Communications have also been contacted by a party who alleges, among
other things, that he is entitled to an equity ownership in IndiaWorld
Communications. We believe that this claim is also covered by the contractual
indemnity provided by the prior owners of IndiaWorld Communications.
Nonetheless, any dispute such as those described above creates uncertainty as to
the possible outcome, including whether or not our indemnity will be effective
in protecting us, and also could divert management time and attention away from
the business.
We face risks associated with our joint ventures with ICICI Bank,
Citibank, Bank of Madura and RPG Netcom, our acquisition of
IndiaWorld Communications, our investment in CricInfo Limited and
with other potential acquisitions, investments, strategic
partnerships or other ventures, including whether any such
transactions can be located, completed and the other party
integrated with our business on favorable terms.
In November 1999, we acquired 24.5% of the outstanding shares of
IndiaWorld Communications, together with an option to acquire IndiaWorld
Communications' remaining outstanding shares which we exercised in June 2000. In
November and December 1999, we also formed alliances with ICICI Bank, Citibank,
Bank of Madura and RPG Netcom. In May 2000, we entered into a partnership with
VeriSign to provide managed digital certificate-based authentication services in
India. In June 2000, we also agreed to acquire a 25% stake in CricInfo Limited
and entered into an agreement with America Online to distribute a co-branded
version of the AOL Instant Messenger. We completed our investment in CricInfo
Limited in July 2000. These transactions were only recently entered into and
none of these ventures is yet operational. We may acquire or make investments in
other complementary businesses, technologies, services or products, or enter
into additional strategic partnerships with parties who can provide access to
those assets, if appropriate opportunities arise in the future. From time to
time we have had discussions and negotiations with a number of companies
regarding our acquiring, investing in or partnering with their businesses,
products, services or technologies, and we regularly engage in such discussions
and negotiations in the ordinary course of our business. Some of those
discussions also contemplate the other party making an investment in our
company. We may not identify suitable acquisition, investment or strategic
partnership candidates in the future, or if we do identify suitable candidates,
we may not complete those transactions on commercially acceptable terms or at
all. We may experience difficulty in integrating the services of ICICI Bank,
Citibank, Bank of Madura, RPG Netcom, VeriSign, CricInfo and AOL Instant
Messenger with our services, and these alliances may not provide all or a
portion of the anticipated benefits. We could have difficulty in assimilating
IndiaWorld Communications' personnel, operations, technology and software, or
that of another company we acquire, with our company. In addition, the key
personnel of an acquired company may decide not to work for us. If we make other
types of acquisitions, we could have difficulty in integrating the acquired
products, services or technologies into our operations. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses which could adversely affect our operating results and cause the
price of our ADSs to decline. Furthermore, we may incur indebtedness or issue
additional equity securities to pay for any future acquisitions. The issuance of
additional equity securities would dilute the ownership interests of the holders
of our ADSs.
Satyam Computer Services controls our company and may have interests
which conflict with those of our other stockholders or holders of
our ADSs.
As of the date of this prospectus, Satyam Computer Services
beneficially owned approximately 53% of our equity shares. As a result, it is
able to exercise control over many matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. Under Indian law, a simple majority is sufficient to
control all stockholder action except for those items which require approval by
a special
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resolution. If a special resolution is required, the number of votes cast in
favor of the resolution must not be less than three times the number of votes
cast against it. Examples of actions that require a special resolution include:
altering our Articles of Association;
issuing additional shares of capital stock, except for pro rata
issuances to existing stockholders;
commencing any new line of business; and
commencing a liquidation.
Circumstances may arise in which the interests of Satyam Computer
Services could conflict with the interests of our other stockholders or holders
of our ADSs. Satyam Computer Services could delay or prevent a change of control
of our company even if a transaction of that sort would be beneficial to our
other stockholders, including the holders of our ADSs. In addition, we have an
agreement with South Asia Regional Fund, an investor in our company, which
assures them a board seat and provides specified additional rights to them.
We must make substantial capital expenditures in new network
infrastructure which, if not offset by additional revenue, will
adversely affect our operating results.
We must continue to expand and adapt our network infrastructure as
the number of users and the amount of information they wish to transfer
increases and as the requirements of our customers change. The expansion of our
Internet network infrastructure will require substantial financial, operational
and management resources. The development of private Internet access and other
data networks in India is a new business for private markets entrants such as
our company and we may encounter cost overruns, technical difficulties or other
project delays in connection with any or all of the new facilities. We can give
no assurance that we will be able to expand or adapt our network infrastructure
to meet the additional demand or our customers' changing requirements on a
timely basis, or at a commercially reasonable cost, or at all. A portion of our
capital expenditures for network development are fixed, and the success of our
business depends on our ability to grow our business to utilize this capacity.
In addition, if demand for usage of our network were to increase faster than
projected, our network could experience capacity constraints, which would
adversely affect the performance of the system.
The laws of India do not protect intellectual property rights to the
same extent as those of the United States, and we may be
unsuccessful in protecting our intellectual property rights.
Our intellectual property rights are important to our business. We
rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our
intellectual property.
Our efforts to protect our intellectual property may not be
adequate. Our competitors may independently develop similar technology or
duplicate our products or services. Unauthorized parties may infringe upon or
misappropriate our products, services or proprietary information. In addition,
the laws of India do not protect proprietary rights to the same extent as laws
in the United States, and the global nature of the Internet makes it difficult
to control the ultimate destination of our products and services. For example,
Indian statutory law does not protect service marks. The misappropriation or
duplication of our intellectual property could disrupt our ongoing business,
distract our management and employees, reduce our revenues and increase our
expenses. In the future, litigation may be necessary to enforce our intellectual
property rights or to determine the validity and scope of the proprietary rights
of others. Any such litigation could be time-consuming and costly.
We could be subject to intellectual property infringement claims as
the number of our competitors grows and the content and functionality of our
websites or other product or service offerings overlap with competitive
offerings. Defending against these claims, even if not meritorious, could be
expensive and divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
could be required to pay a substantial damage award and forced to develop
non-infringing technology, obtain a license or cease selling the applications
that contain the infringing technology. We may be unable to develop
non-infringing technology or obtain a license on commercially reasonable terms,
or at all.
Our platform infrastructure and its scalability are not proven, and
our current systems may not accommodate increased use while
maintaining acceptable overall performance.
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Currently, only a relatively limited number of consumers use our
Internet service provider services and Internet portal. We must continue to
expand and adapt our network infrastructure to accommodate additional users,
increasing transaction volumes and changing customer requirements. We may not be
able to project accurately the rate or timing of increases, if any, in the use
of our websites or expand and upgrade our systems and infrastructure to
accommodate such increases. Our systems may not accommodate increased use while
maintaining acceptable overall performance. Service lapses could cause our users
to use the online services of our competitors.
We do not plan to pay dividends in the foreseeable future.
We do not anticipate paying cash dividends to the holders of our
ADSs in the foreseeable future. Accordingly, investors must rely on sales of
their ADSs after price appreciation, which may never occur, as the only way to
realize on their investment. Investors seeking cash dividends should not
purchase our ADSs.
RISKS RELATED TO THE INTERNET
We may be liable to third parties for information retrieved from the
Internet.
Because users of our Internet service provider service and visitors
to our websites may distribute our content to others, third parties may sue us
for defamation, negligence, copyright or trademark infringement, personal injury
or other matters. We could also become liable if confidential information is
disclosed inappropriately. These types of claims have been brought, sometimes
successfully, against online services in the United States and Europe. Others
could also sue us for the content and services that are accessible from our
websites through links to other websites or through content and materials that
may be posted by our users in chat rooms or bulletin boards. We do not carry
insurance to protect us against these types of claims, and there is no precedent
on Internet service provider liability under Indian law. Further, our business
is based on establishing the satyamonline.com network as a trustworthy and
dependable provider of information and services. Allegations of impropriety,
even if unfounded, could damage our reputation, disrupt our ongoing business,
distract our management and employees, reduce our revenues and increase our
expenses.
The success of our strategy depends on our ability to keep pace with
technological changes.
Our future success depends, in part, upon our ability to use leading
technologies effectively, to continue to develop our technical expertise, to
enhance our existing services and to develop new services that meet changing
customer requirements. The market for our service is characterized by rapidly
changing technology, evolving industry standards, emerging competition and
frequent new service introductions. We may not successfully identify new
opportunities and develop and bring new services to market in a timely manner.
Our business may not be compatible with delivery methods of Internet
access services developed in the future.
We face the risk that fundamental changes may occur in the delivery
of Internet access services. Currently Internet services are accessed primarily
by computers and are delivered by modems using telephone lines. As the Internet
becomes accessible by cellular telephones, personal data assistants, television
set-top boxes and other consumer electronic devices, and becomes deliverable
through other means involving digital subscriber lines, coaxial cable or
wireless transmission mediums, we will have to develop new technology or modify
our existing technology to accommodate these developments. Our pursuit of these
technological advances, whether directly through internal development or by
third party license, may require substantial time and expense. We may be unable
to adapt our Internet service business to alternate delivery means and new
technologies may not be available to us at all.
Our product and service offerings may not be compatible with
industry standards developed in the future.
Our ability to compete successfully depends upon the continued
compatibility and interoperability of our services with products and
architectures offered by various vendors. Although we intend to support emerging
standards in the market for Internet access, industry standards may not be
established and, if they become established, we may not be able to conform to
these new standards in a timely fashion or maintain a competitive position in
the market. The announcement or introduction of new products or services by us
or our competitors and any change in industry standards could cause customers to
deter or cancel purchases of existing products or services.
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RISK RELATED TO THE ADSs AND OUR TRADING MARKET
Holders of ADSs are restricted in their ability to exercise
preemptive rights under Indian law and thereby may suffer future
dilution of their ownership position.
Under the Companies Act, 1956 of India, or 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 the preemptive rights have been waived by adopting a special resolution
by holders of three-fourths of the company's shares which are voted on the
resolution. At our 2000 Annual General Meeting, our stockholders approved a
special resolution pursuant to which we may issue up to one million equity
shares in connection with acquisitions, 268,500 of which we issued in connection
with our acquisition of IndiaWorld Communications and 551,180 of which we issued
in connection with our acquisition of a 25% stake in CricInfo Limited. Another
120,000 equity shares will be issued if we complete our pending acquisition of
IndiaPlaza.com. As a result, ADS holders are deemed to have waived their
preemptive rights with respect to their shares. In addition, U.S. holders of
ADSs may be unable to exercise preemptive rights for equity shares underlying
ADSs unless approval of the Ministry of Finance of the Government of India is
obtained and a registration statement under the Securities Act of 1933, as
amended, is effective with respect to the rights or an exemption from the
registration requirements of the Securities Act is available. Our decision to
file a registration statement will depend on the costs and potential liabilities
associated with any given registration statement as well as the perceived
benefits of enabling the holders of our ADSs to exercise their preemptive rights
and any other factors that we deem appropriate to consider at the time the
decision must be made. We may elect not to file a registration statement related
to preemptive rights otherwise available by law to our stockholders. In the case
of future issuances, the new securities may be issued to our depositary, which
may sell the securities for the benefit of the holders of the ADSs. The value,
if any, our depositary would receive upon the sale of such securities cannot be
predicted. 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 our company would be reduced.
Holders of ADSs may be restricted in their ability to exercise
voting rights.
As a holder of ADSs, you generally have the right under the deposit
agreement to instruct the depositary bank to exercise the voting rights for the
equity shares represented by your ADSs.
At our request, the depositary bank will mail to you any notice of
stockholders' meeting received from us together with information explaining how
to instruct the depositary bank to exercise the voting rights of the securities
represented by ADSs. If the depositary bank timely receives voting instructions
from a holder of ADSs, it will endeavor to vote the securities represented by
the holder's ADSs in accordance with such voting instructions. However, the
ability of the depositary bank to carry out voting instructions may be limited
by practical and legal limitations and the terms of the securities on deposit.
We cannot assure you that you will receive voting materials in time to enable
you to return voting instructions to the depositary bank in a timely manner.
Securities for which no voting instructions have been received will not be voted
on a poll.
The market price of our ADSs has been and may continue to be highly
volatile.
The market price of our ADSs has fluctuated widely and may continue
to do so. For example, since our initial public offering in October 1999 through
August 11, 2000 and, after giving effect to the 4-for-1 split of our ADSs in
January 2000, the trading price of our ADSs has ranged from a high of $113 per
ADS to a low of $7.50 per ADS. Many factors could cause the market price of our
ADSs to rise and fall. Some of these factors include:
our failure to integrate successfully our operations with those of
IndiaWorld Communications;
actual or anticipated variations in our quarterly operating results;
announcement of technological innovations;
conditions or trends in the Internet and electronic commerce
industries;
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the successful implementation by competitors of the free Internet
access model, or the introduction of alternative pricing models, in India;
the perceived attractiveness of investment in Indian companies;
acquisitions and alliances by us or others in the industry;
changes in estimates of our performance or recommendations by
financial analysts;
market conditions in the industry and the economy as a whole;
introduction of new services by us or our competitors;
changes in the market valuations of other Internet service
companies;
announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
additions or departures of key personnel; and
other events or factors, many of which are beyond our control.
The financial markets in the United States and other countries have
experienced significant price and volume fluctuations, and the market prices of
technology companies, particularly Internet-related companies, have been and
continue to be extremely volatile. Volatility in the price of our ADSs may be
caused by factors outside of our control and may be unrelated or
disproportionate to our operating results. In the past, following periods of
volatility in the market price of a public company's securities, securities
class action litigation has often been instituted against that company. Such
litigation could result in substantial costs and a diversion of our management's
attention and resources.
An active or liquid market for the ADSs is not assured, particularly
in light of Indian legal restrictions on equity share conversion and
foreign ownership of an Internet service provider.
We cannot predict the extent to which an active, liquid public
trading market for our ADSs will exist. Active, liquid trading markets generally
result in lower price volatility and more efficient execution of buy and sell
orders for investors. Liquidity of a securities market is often a function of
the volume of the underlying shares that are publicly held by unrelated parties.
Although ADS holders are entitled to withdraw the equity shares underlying the
ADSs from the depositary at any time, there is no public market for our equity
shares in India or the United States. Under current Indian law, equity shares
may not be re-deposited into our depositary without prior approval of the
Government of India. Therefore, the number of outstanding ADSs will decrease to
the extent that equity shares are withdrawn from our depositary, which may
adversely affect the market price and the liquidity of the market for the ADSs.
Furthermore, foreign ownership in our company, which includes all ADSs, is
limited to 49% under present Indian law. This limitation means that, unless
Indian law changes, 51% of our equity shares will never be available to trade in
the United States market.
The future sales of securities by our company or existing
stockholders may hurt the price of our ADSs.
The market price of our ADSs could decline as a result of sales of a
large number of equity shares or ADSs or the perception that such sales could
occur. Such sales could include the sale of the ADSs described in this
prospectus which were originally issued in a private transaction. Such sales
also might make it more difficult for us to sell equity securities in the future
at a time and at a price that we deem appropriate. We intend to issue additional
equity shares and ADSs to fund acquisitions and investments, and the parties to
any such future transactions could also decide to sell them.
Forward-looking statements contained in this prospectus may not be
realized.
This quarterly report contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of the risks
faced by us described above and elsewhere in this prospectus. We do not intend
to update any of the forward-looking statements after the date of this quarterly
report to conform such statements to actual results.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this Quarterly Report, Satyam Infoway is not a
party to any material legal proceedings except for those described below related
to our subsidiary IndiaWorld Communications.
We and IndiaWorld Communications have been contacted by a party
located in the United States which has alleged that the activities of IndiaWorld
Communications infringe with a United States trademark for the term
"IndiaWorld," and associated logos and trade dress purportedly owned by this
third party. We have been advised by the current majority owners of IndiaWorld
Communications that no such infringement has taken place and that they have
commenced legal action in federal court in New York to cancel the United States
trademark which they believe was improperly granted and to assert other claims.
Our contract with the majority owners of IndiaWorld Communications includes an
indemnity for past infringement. Further, we presently do not believe that the
disputed marks are material to the business strategy that we intend to implement
after the acquisition is completed as this dispute does not at this time pertain
to the key assets of IndiaWorld Communications, including the websites
samachar.com, khel.com, khoj.com, dhan.com and bawarchi.com. We and IndiaWorld
Communications have also been contacted by a party who alleges, among other
things, that he is entitled to an equity ownership in IndiaWorld Communications.
We believe that this claim is also covered by the contractual indemnity provided
by the majority owners of IndiaWorld Communications. Nonetheless, any dispute
such as those described above creates uncertainty as to the possible outcome,
including whether or not our indemnity will be effective in protecting us, and
also could divert management time and attention away from the business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the quarter, we entered into a transaction to acquire
a 25% stake in CricInfo Limited. This transaction was completed on July 31, 2000
on which date we issued 2,404,720 ADSs (representing 551,180 equity shares). The
issuance was made solely in the United Kingdom in a transaction exempt from
registration under Regulation S and Section 4(2) under the Securities Act of
1933.
During the quarter, we agreed to issue 268,000 equity
shares in connection with our acquisition of IndiaWorld Communications. The
issuance was made solely in India in a transaction exempt from registration
under Regulation S and Section 4(2) under the Securities Act of 1933.
(d) We completed our initial public offering in the United
States in October 1999 (File No. 333-10852). After giving effect to the
completion of the IndiaWorld Communications acquisition, the net proceeds from
this offering have been fully invested in our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual general meeting of stockholders on May 22,
2000. As a matter of corporate practice in India, holders of our equity shares
voted on the following matters by a show of hands at the meeting, and the
majority of equity shareholders who were present at the meeting approved each of
the matters that were submitted. Holders of our ADSs voted by submitting voting
cards. Following are the descriptions of matters voted on by each of the equity
shareholders and the ADS holders and the tabulation of votes cast by our ADS
holders:
<TABLE>
<CAPTION>
Number of ADSs
-----------------------------
Matter Voted On For Against Abstain
------- ------ ------
<S> <C> <C> <C>
Re-election of directors:
R. Ramaraj 522,656 5,594 2,588
T. Hanuman Chowdary 522,226 5,856 2,756
(The other directors of the company are:
B. Ramalinga Raju, Pranab Barua, Donald Peck,
C. Srinivasa Raju and S. Srinivasan.)
Adoption of the Audited Balance Sheet, as of March
31, 2000, and the Profit and Loss Account, the
Auditors' Report and the Directors' Report for the
year ended March 31, 2000 N/A N/A N/A
Re-appointment of Bharat S. Raut & Co. as chartered
accountants 522,058 6,582 2,199
Issuance of additional equity shares for
acquisitions by the company 472,278 13,698 44,862
Issuance of additional equity shares under the
Associate Stock Option Plan to Satyam Computer
Services Limited 460,483 22,000 48,356
</TABLE>
ITEM 5. OTHER INFORMATION
On July 31, 2000, we completed our acquisition of a 25% stake in
CricInfo Limited through the issuance of an aggregate of 2,204,720 ADSs
(representing 551,180 equity shares).
ITEM 6. EXHIBITS AND REPORTS
(a) The exhibit index attached hereto is incorporated by
reference to this item.
(b) Our Report on Form 6-K, filed with the SEC on June 14, 2000.
(c) Our Report on Form 6-K, filed with the SEC on May 3, 2000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
10.1 Debenture Subscription Agreement, dated as of March 16,
2000, by and between Satyam Infoway Limited and IDBI
Bank. (1)
10.2 Debenture Subscription Agreement, dated as of March 31,
2000, by and between Satyam Infoway Limited and IDBI
Bank. (1)
10.3 Agreement for the Sale of Shares in CricInfo Limited by and
between Indigo Holdings Limited and Satyam Infoway Limited.
(2)
10.4 Subscription Agreement by and among CricInfo Limited,
Satyam Infoway Limited and the Senior Management. (2)
10.5 Agreed Form of Shareholders Agreement by and among CricInfo
Limited, Satyam Infoway Limited and the Non-SIL
Shareholders. (2)
10.6 Letter Agreement between Satyam Infoway Limited and Indigo
Holdings Limited. (2)
10.7 Share Purchase Agreement, dated as of June 30, 2000, by and
among Rajesh Jain, Bhavana Jain, C.M. Jain Impex and
Investments Private Limited, Satyam Infoway Limited and
IndiaWorld Communications Private Limited. (2)
27.1 Financial Data Schedule.
---------------
(1) Previously filed with the Commission as an exhibit to the
Annual Report on Form 20-F (File No. 000-27663) filed on
June 29, 2000 and incorporated herein by reference.
(2) Previously filed with the Commission as an exhibit to the
Registration Statement on Form F-2 (File No. 333-42292)
filed on July 26, 2000 and incorporated herein by
reference.
---------------
(b) Financial Statement Schedules
None.
28
