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

SIFY TECHNOLOGIES LIMITED

(Translation of registrant’s name into English)

Tidel Park, Second Floor
No. 4, Canal Bank Road, Taramani
Chennai 600 113, India
(91) 44-2254-0770
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20F þ Form 40 F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b) (1). Yes o No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b) (7). Yes o No þ

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 o No þ

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b). Not applicable.

 

 

Table of Contents

SIFY TECHNOLOGIES LIMITED

FORM 6-K

For the Quarter ended December 31, 2007

INDEX

			Page
Part I Financial Information
Item 1. Financial Statements			4
a) Unaudited Condensed Consolidated Balance Sheets			4
b) Unaudited Condensed Consolidated Statements of Income			5
c) Unaudited Condensed Consolidated Statements of Cash Flows			6
d) Unaudited Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income			7
e) Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosure About Market Risk			34
Item 4. Controls and Procedures			34
Part II Other Information
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds			34
Item 3. Defaults Upon Senior Securities			34
Item 4. Submission of Matters to a Vote of Security Holders			35
Item 5. Other Information			35
Item 6. Exhibits			35

Currency of Presentation and Certain Defined Terms

     Unless the context otherwise requires, references herein to “we,” “us,” the “Company” or “Sify” are to Sify Technologies Limited, a limited liability Company organized under the laws of the Republic of India. References to “U.S.” or the “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. Until December 2002, we were a majority-owned subsidiary of Satyam Computer Services Limited (“Satyam Computer Services”), a leading Indian information technology services Company which is traded on the New York Stock Exchange and the major Indian stock exchanges. In January 2003, we changed the name of our Company from Satyam Infoway Limited to Sify Limited. In October 2007, we again changed our name from Sify Limited to Sify Technologies Limited. “Sify”, “SifyMax.in,”, “Sify iway” and “Sify online” are trademarks used by us for which we have already obtained the registration certificates in India. All other trademarks or trade names used in this quarterly report are the property of their respective owners.

     In this report, references to “$,” “US$,” “Dollars” or “U.S. dollars” are to the legal currency of the United States, and references to “Rs,” “rupees” or “Indian Rupees” are to the legal currency of India. References to a particular “fiscal” year are to our fiscal year ended March 31 of that year.

     For your convenience, this 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 report, all translations from Indian rupees to U.S. dollars contained in this report have been based on the noon buying rate in the City of New York on December 31, 2007 for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York. The noon buying rate on December 31, 2007 was Rs 39.41 per $1.00.

     Our financial statements are prepared in Indian rupees and presented in accordance with United States generally accepted accounting principles, or U.S. GAAP. In this 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 corporate website, www.sifycorp.com, is not part of this report.

Forward-looking Statements May Prove Inaccurate

     IN ADDITION TO HISTORICAL INFORMATION, THIS 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 “RISK FACTORS” AND ELSEWHERE IN THIS 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 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.

Part I. Financial Information

SIFY TECHNOLOGIES LIMITED and Subsidiaries

		As at March 31,				As at December
		2007				2007				2007
										Convenience
										translation
										into US$
										(Note 2)
		Rs.				Rs.				$
ASSETS
Current assets:
Cash and cash equivalents		Rs.	2,131,824			Rs.	1,262,396			$	32,032
Restricted cash			938,333				629,100				15,963
Investment in short-term mutual funds			—				24,147				613
Accounts receivable			1,188,406				1,987,214				50,424
Due from employees			7,726				6,107				155
Inventories			28,686				35,018				889
Prepaid expenses			118,207				128,255				3,254
Net investment in leases			16,560				6,869				174
Other current assets			289,673				282,730				7,174
Total current assets			4,719,415				4,361,836				110,678
Restricted cash			1,000				1,000				25
Deferred income taxes			66,104				13,380				340
Net investment in leases			12,032				6,937				176
Property, plant and equipment-net			1,644,564				1,950,580				49,495
Goodwill and other intangible assets			192,390				182,548				4,632
Investments in affiliated companies			302,956				450,007				11,419
Other assets			224,491				385,385				9,779
Total assets		Rs.	7,162,952			Rs.	7,351,673			$	186,544
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings from banks			800,000				237,704				6,032
Current instalments of capital lease obligations			2,476				2,823				72
Trade accounts payable			316,935				912,349				23,150
Accrued liabilities			737,284				793,434				20,133
Deferred revenue			450,030				508,389				12,900
Advances from customers			89,908				110,540				2,805
Other current liabilities			89,855				106,667				2,707
Total current liabilities			2,486,488				2,671,906				67,799
Capital lease obligations, excluding current instalments			3,671				3,268				83
Other liabilities			121,938				141,913				3,601
Total liabilities			2,612,097				2,817,087				71,483
Minority interest			169,765				189,775				4,815
Stockholders’ equity
Common stock, Rs 10 par value; 50,000,000 equity shares authorized (as of March 31, 2007 : 50,000,000) ; Issued and outstanding: 42,820,082 shares as of December 31,2007 and 42,800,265 shares as of March 31, 2007			428,003				428,201				10,865
Additional paid-in capital			16,325,960				16,370,042				415,378
Accumulated deficit			(12,378,114	)			(12,462,961	)			(316,239	)
Accumulated other comprehensive income			5,241				9,529				242
Total stockholders’ equity			4,381,090				4,344,811				110,246
Total liabilities and stockholders’ equity		Rs.	7,162,952			Rs.	7,351,673			$	186,544

See accompanying notes to unaudited consolidated financial statements

SIFY TECHNOLOGIES LIMITED and Subsidiaries

		Quarter ended December 31												Nine Months ended December 31
		2006				2007				2007				2006				2007				2007
										Convenience												Convenience
										translation												translation
										into US$												into US$
										(Note 2)												(Note 2)
		Rs.				Rs.				$				Rs.				Rs.				$
Revenue
Products		Rs.	136,457			Rs.	213,570			$	5,419			Rs.	385,407			Rs.	523,449			$	13,282
Services			1,254,830				1,318,717				33,461				3,707,359				3,885,443			$	98,590
Total Revenue			1,391,287				1,532,287				38,880				4,092,766				4,408,892				111,872
Cost of revenue
Products			121,744				201,470				5,112				334,420				461,749				11,717
Services			624,536				655,224				16,626				1,813,215				1,978,319				50,198
			746,280				856,694				21,738				2,147,635				2,440,068				61,915
Selling, general and administrative expenses			437,853				539,613				13,692				1,397,427				1,653,032				41,944
Provision for doubtful receivables and advances			68,676				29,440				747				142,340				110,107				2,794
Impairment of assets			—				—				—				—				—				—
Depreciation			102,385				118,864				3,016				297,705				352,900				8,955
Amortisation of intangible assets			10,964				10,529				267				44,400				23,332				592
Employee stock compensation expense			5,039				10,295				261				46,509				39,618				1,005
Foreign exchange (gain) / loss, net			20,558				(1,830	)			(46	)			(23,781	)			18,149				461
Total operating expenses			1,391,755				1,563,605				39,675				4,052,235				4,637,206				117,666
Operating profit/(loss)			(468	)			(31,318	)			(795	)			40,531				(228,314	)			(5,794	)
Other income, net			31,059				24,735				628				97,125				94,290				2,393
Gain on sale of investment in subsidiary			226				—				—				226				—				—
Equity in net profit of affiliate			18,650				81,409				2,066				42,544				147,051				3,731
Net Profit / (Loss) before income tax and minority interest			49,467				74,826				1,899				180,426				13,027				330
Income tax expense			—				(42,803	)			(1,086	)			—				(77,864	)			(1,976	)
Net Profit / (Loss) before minority interest			49,467				32,023				813				180,426				(64,837	)			(1,646	)
Minority interest			7,896				5,824				148				7,896				20,010				508
Net Profit / (loss) after tax		Rs.	41,571			Rs.	26,199			$	665			Rs.	172,530			Rs.	(84,847	)		$	(2,154	)
Net Profit/(loss) per share (basic)			0.97				0.61				0.02				4.03				(1.98	)			(0.05	)
Net Profit/(loss) per share (diluted)			0.97				0.61				0.02				4.02				(1.98	)			(0.05	)
Basic Weighted average Equity Shares used in computing Profit/(loss) per Share			42,743,011				42,820,082				42,820,082				42,822,399				42,838,055				42,838,055
Diluted Weighted average Equity Shares used in computing Profit/(loss) per share			42,842,653				42,846,165				42,846,165				42,927,221				42,838,055				42,838,055

See accompanying notes to unaudited condensed consolidated financial statements

SIFY TECHNOLOGIES LIMITED and Subsidiaries

		Nine months ended December 31,
		2006				2007				2007
										Convenience
										translation
										into US$
										(Note 2)
		Rs.				Rs.				$
Net profit / (loss)		Rs.	172,530			Rs.	(84,847	)		$	(2,154	)
Adjustments to reconcile net loss to net cash provided by / (used in) operating activities:
Income taxes			—				77,864				1,976
Depreciation			297,705				352,900				8,955
Amortization of intangible assets			44,400				23,332				592
Employee stock compensation expense			46,509				39,618				1,005
Equity in profit of affiliate			(42,544	)			(147,051	)			(3,731	)
(Gain) / loss on sale of property, plant and equipment			(165	)			598				15
Provision for doubtful receivables and advances			142,340				110,107				2,794
Gain on disposal of subsidiary			(226	)			—				—
Minority interest			147,356				20,010				508
Unrealized gain / (loss) on account of exchange differences			(3,543	)			(6,897	)			(175	)
Changes in assets and liabilities:											—
Accounts receivable			(343,971	)			(905,194	)			(22,969	)
Due from employees			17,378				1,619				41
Inventories			147				(6,332	)			(161	)
Prepaid expenses			(40,126	)			(10,048	)			(255	)
Other assets			(41,016	)			(153,951	)			(3,906	)
Trade accounts payable and accrued liabilities			(92,773	)			653,315				16,577
Deferred revenue			(53,296	)			58,359				1,481
Advances from customers			(49,817	)			20,632				524
Other liabilities			(116,371	)			11,646				295
Net cash provided/(used) by operating activities		Rs.	84,517			Rs.	55,680			$	1,412
Cash flows from investing activities:
Net movement in cash-restricted			—				309,233				7,847
Expenditure on property, plant and equipment			(481,995	)			(665,923	)			(16,897	)
Proceeds from sale of property, plant and equipment			3,909				6,410				163
Expenditure on intangible assets			(66,177	)			(13,490	)			(342	)
Business acquisition (net of cash)			(92,934	)			—				—
Receipts in respect of assets given on sale-type leases			8,019				14,786				375
Purchase of short term investments			—				(20,316	)			(516	)
Net cash used in investing activities		Rs.	(629,178	)		Rs.	(369,300	)		$	(9,370	)
Cash flows from financing activities:
Repayments of short term borrowings from Banks,net			—				(562,296	)			(14,268	)
Payments under capital lease obligation			(4,805	)			(56	)			(1	)
Net proceeds from issuance of common stock			68,275				4,662				118
Net cash provided by financing activities		Rs.	63,470			Rs.	(557,690	)		$	(14,151	)
Effect of exchange rate changes on cash and cash equivalents			(2,857	)			1,882				48
Net increase / (decrease) in cash and cash equivalents			(484,048	)			(869,428	)			(22,061	)
Cash and cash equivalents at the beginning of the period			2,822,501				2,131,824				54,093
Cash and cash equivalents at the end of the period		Rs.	2,338,453			Rs.	1,262,396			$	32,032
Supplementary Information
Cash paid towards interest			566				4,056				103
Cash paid / (refund received) towards income taxes			46,102				92,730				2,353
Additions to property, plant and equipment represented by capital lease obligations			4,453				3,751				95

See accompanying notes to unaudited condensed consolidated financial statements

SIFY TECHNOLOGIES LIMITED and Subsidiaries

										Additional								Accumulated								Total
		Common Stock								Paid In				Comprehensive				Other				Accumulated				Stockholders’
		Shares				Par Value				Capital				Income				Comprehensive				Deficit				Equity
		Nos.				Rs.				Rs.				Rs.				Income				Rs.				Rs.
Balance as of March 31, 2007			42,800,265				428,003				16,325,960								5,241				(12,378,114	)			4,381,090
Issue of common stock			19,817				198				4,464																4,662
Employee stock compensation expense											39,618																39,618
Comprehensive income
Net Profit / (loss)															(84,847	)							(84,847	)			(84,847	)
Other comprehensive income/ (loss)
Translation adjustments															457												—
Unrealised gain on investment in securities															3,831
															4,288				4,288								4,288
Comprehensive Income															(80,559	)
Balance as of December 31, 2007			42,820,082				428,201				16,370,042								9,529				(12,462,961	)			4,344,811
Balance as of December 31, 2007 (Convenience translation into US $- Note 2)							10,865				415,378								242				(316,239	)			110,246

See accompanying notes to unaudited condensed consolidated financial statements

SIFY TECHNOLOGIES LIMITED and Subsidiaries

1.		Description of business
		Sify Technologies Limited (Sify) together with its subsidiaries (India World Communications Limited, Sify Communications Limited, Sify Networks Private Limited and Sify International Inc.) (collectively referred to as the ‘Company’) is engaged in providing various services, such as Corporate Network and Data Services, Internet Access Services, Online Portal and Content Offerings and selling products related to such services.
2.		Summary of significant accounting policies
		a. Basis of preparation of financials statements
		The accompanying unaudited condensed financial statements have been prepared in accordance with U.S GAAP in Indian Rupees (Rs), the national currency of India. Solely for the convenience of the reader, the financial statements as of and for the nine months ended December 31, 2007 have been translated into United States dollars at the noon buying rate in New York City on December 31, 2007 for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York of U.S. $1 = Rs 39.41 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 rate on, December 31, 2007 or at any other date.
		b. Interim Information
		Interim information presented in the condensed 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, is in accordance with US GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2007.
		c. Investment securities.
		The Company classifies its debt and equity securities in one of the three categories: trading, held-to-maturity or available-for-sale, at the time of purchase and re-evaluates such classifications as of each balance sheet date. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in income. Temporary unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from income and are reported as a part of other comprehensive income in stockholders’ equity until realized. Realized gains and losses from the sale of trading and available-for-sale securities are determined on a first-in-first out basis and are included in income. A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value with a charge to the income statement. Fair value for mutual fund units is based on published per unit value, which is the basis for current transactions. Non-readily marketable equity securities for which there is no readily determinable fair value are recorded at cost, subject to an impairment charge to the income statement for any other than temporary decline in value.

		d. Recent accounting pronouncement
		SFAS No. 157:
		In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements SFAS No. 157 defines ‘fair value’ as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 provides guidance on determination of fair value and lays down the fair value hierarchy to classify the source of information used in fair value measurement. The Company is currently evaluating the impact of SFAS No. 157 on its financial statements and will adopt the provisions of SFAS No. 157 for the fiscal year beginning April 1, 2008.
		SFAS No. 159:
		In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for the fiscal year beginning April 1, 2008. The Company is currently evaluating the impact that the adoption of SFAS No. 159 will have on its consolidated financial statements.
		SFAS No. 141R:
		In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141R), which is a revision of SFAS No. 141, Business Combinations. This statement establishes principles and requirements for how an acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any no controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The Company will be required to apply this new standard prospectively to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact of SFAS No. 141R on its consolidated financial statements.
3.		Acquisition of Globe Travel Business
		During the quarter ended June 2006, the Company acquired the business of Globe Travels which operates an online travel agency. Management believes that this acquisition marks Sify’s entry into the fast growing online travel business, particularly e-ticketing, the category with highest revenues and fastest growth in online e-commerce today. The management also believes that the addition of a travel portal is in line with the Company’s strategy of providing end-to-end services to Sify users Price paid / payable amounting to Rs 116,219 (USD 2,571,303) in respect of the acquisition was allocated based on a preliminary allocation of estimated fair value (determined by the management) of the assets, properties and rights on the date of acquisition.
		During the nine months ended December 31, 2007, the Company has finalised the purchase price allocation resulting in an increase in recorded goodwill from Rs 26,921 to Rs 36,200.
4.		Income taxes
		Effective April 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income taxes — An interpretation of Statement of Financial Accounting Standards No.109 (FIN 48). The interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions considered or to be considered in income tax returns. Historically, the Company has not incurred any penalties or interest relating to unrecognized tax benefits.

Upon adoption the Company did not have any liability for income tax relating to uncertain tax positions. The adoption of FIN 48 did not have any impact on the retained earnings or provision for taxation as of April 1, 2007.

		FIN 48 also requires that changes in judgment that result in subsequent recognition, de-recognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs This change will not impact the manner in which the Company recorded income taxes on an annual basis and did not impact its recorded income tax provision in the quarter ended December 31, 2007.
		A listing of open tax years is given below:

Jurisdiction		Open tax years
India		1997-98 to 2006-2007

5.		Cash and cash equivalents
		Restricted cash presented under current assets of Rs 629,100 ( Rs 938,333 as at March 31, 2007) and non current assets of Rs 1,000 (Rs 1,000 as at March 31, 2007), represent deposits held under lien against overdraft facilities and bank guarantees available to the Company towards future performance obligations. The fair values of cash and cash equivalents approximate their carrying values.

6.		Accounts receivable
		Account receivable as of March 31, 2007 and December 31, 2007 are stated net of allowance for doubtful receivables. The Company maintains an allowance for doubtful receivables based on its age and collectability. Accounts receivable are not collateralised except to the extent of refundable deposits received from cyber café’s franchisees and from cable television operators
		Accounts receivables consist of:

		As at				As at
		March 31, 2007				December 31, 2007
Due from customers			1,290,030				2,159,897
Less: Allowance for doubtful debts			101,624				172,683
Balance at the end of the period			1,188,406				1,987,214

The activity in the allowance for doubtful accounts receivable is given below:

		As at				As at
		March 31, 2007				December 31, 2007
		Rs				Rs
Balance at the beginning of the year			200,047				101,624
Add : Additional provision			153,638				110,107
Less : Bad debts written off			252,061				39,048
Balance at the end of the year			101,624				172,683

7.		Other current assets
		Other current assets consist of:

		As at				As at
		March 31, 2007				December 31, 2007
		Rs				Rs
Vendor advances and deposits			159,785				87,088
Advances for expenses			5,025				82,983
Accrued income			73,702				41,774
Interest earned but not due			51,161				70,885
			289,673				282,730

8.		Investment securities
		Investment in securities consists of the following:

As at

As at

March 31, 2007

December 31, 2007

Gross

Gross

Unrealized

Unrealized

Carrying

Holding

Carrying

Holding

value

Gains

Fair value

value

Gains

Fair value

Available-for-sale:

Investment in short-term mutual funds

—

—

—

20,316

3,831

24,147

9.		Investments in affiliates
		In March 2006, MF Global Overseas Limited (MFG), a Company incorporated in United Kingdom acquired 70.15% of equity share capital of MF Global Sify Securities Private Limited, formerly Man Financial-Sify Securities India Private Limited (‘MF Global) from Refco Group Inc., USA (‘Refco’). Thereby, MFG holds 70.15% of MF Global and the balance, 29.85% of MF Global equity shares, is held by Sify. MFG is a subsidiary of Man Group plc, a Company incorporated in United Kingdom.
		The summarized unaudited financial information as to assets, liabilities and results of operations of MF Global and its subsidiaries is presented below:

Balance Sheet		As at				As at
		March 31, 2007				December 31, 2007
		Rs				Rs
Current assets			4,097,993				21,452,436
Non-current assets			280,079				189,018
Total Assets			4,378,072				21,641,454
Current liabilities			3,363,146				20,133,892
Shareholders’ equity			1,014,926				1,507,562
Total Liabilities and Shareholders’ equity			4,378,072				21,641,454

Statement of Operations		For the quarter ended December 31,
		2006				2007
		Rs				Rs
Revenues			289,916				852,981
Net Profit			62,479				272,728

10.		Goodwill and other intangible assets, net
		As at December 31, 2007, the Company’s goodwill and other intangible assets amounted to Rs 50,796 and Rs 131,752 respectively (Rs 41,517 and Rs 150,873, as at March 31, 2007 respectively). The following are the details of other intangible assets:

		Weighted				As at March 31, 2007								As at December 31, 2007
		average				Gross carrying				Accumulated				Gross carrying				Accumulated
		life				Amount				Amortization				Amount				Amortization
Technical know-how fees			—				82,753				82,753				82,753				82,753
Portals and web content			—				52,730				52,711				52,730				52,730
Customer contracts and others			4.58				141,881				60,252				128,770				73,874
Systems software			2.87				239,846				219,714				257,163				227,526
ILD / NLD License fee			20.00				50,000				907				50,000				2,781
						Rs	567,210			Rs	416,337				571,416				439,664

Estimated amortization expense in future years for the carrying value of other intangible assets:

For the year ended March 31,
		Rs
2007-08			25,927
2008-09			23,988
2009-10			20,110
2010-11			17,601
2011-12			2,500

		In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company does not amortize goodwill but tests it for impairment on an annual basis. The Company has not recognized any impairment of goodwill during the year ended March 31, 2007 and for nine months ended December 31, 2007.
11.		Other assets
		Other assets consist of:

		As at				As at
		March 31, 2007				December 31, 2007
		Rs				Rs
Deposits			105,653				126,733
Staff advances recoverable			150				—
Witholding taxes			105,734				187,405
Deposit with Department of Income Tax			12,954				71,247
			224,491				385,385

		Withholding taxes represent taxes deducted at source by the customer and paid to the Government, which is refundable to the Company. Deposit with Department of Income Tax represents tax demands paid to the authorities under protest. Refer to note 20 (a).
12.		Employee stock options
		Compensation cost in respect of the stock option plans is accounted under FASB Statement No.123 (revised 2004), Share Based Payment. Accordingly, the Company has recorded stock compensation expense of Rs 10,295 and Rs 39,618 for the quarter and period ended December 31, 2007.
		During the nine months ended December 31, 2007, the Company has also issued 119,400 options under Associate stock option plan 2005 and 128,900 options under Associate stock option plan 2007. The fair value of each option was estimated on the date of grant using the Black-Scholes model with the following assumptions:

		Quarter		Nine months
		ended		ended
		December 31,		December 31,
		2007		2007
Dividend yield		—		—
Assumed Volatility		46.30% - 95.45%		46.30% - 95.45%
Risk Free interest rate		3.25% - 4.84%		3.25% - 4.84%
Expected Term		18-45 months		18-45 months

		In September 2007, the Shareholders of the Company approved a new scheme for allotment of             shares to employees i.e. Associate Stock Option Plan 2007. Consequently 797,600 unissued options available under the earlier Associate Stock Option Plan 2005 are no longer available for issuance.
13.		Earnings per share
		In accordance with SFAS No. 128, Earnings per Share, basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted income / (loss) is computed by considering the impact of the potential issuance of ordinary shares on the weighted average number of shares outstanding.

A reconciliation of equity shares used in the computation of basic and diluted earnings per equity share is set out below:

		Quarter ended								Nine months ended
		December 31,								December 31,
		2006				2007				2006				2007
Earnings
Net Profit / (loss)			41,571				26,199				172,530				(84,847	)
Equity shares
Weighted average number of equity shares outstanding			42,743,011				42,820,082				42,822,399				42,838,055
Effect of dilutive equivalent shares-stock options			99,642				26,083				104,822				—
Weighted average number of equity shares and equivalent shares outstanding			42,842,653				42,846,165				42,927,221				42,838,055

		Certain potential ordinary shares were excluded from the calculation of diluted income/loss per share for the nine months period ended December 31, 2007 as the shares would have had an antidilutive effect due to the loss reported by the Company. The Company’s outstanding shares include shares held with a depositary to represent equity shares underlying the Company’s ADSs.
14.		Gratuity
		The Company provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering all employees. The Gratuity Plan commenced on April 1, 1997. The plan provides a lump sum payment to vested employees at retirement or termination of employment of an amount based on the respective employee’s salary and the years of employment with the Company. The Company provides the gratuity benefit through annual contributions to a fund managed by the Life Insurance Corporation of India (LIC). Under this scheme, the settlement obligation remains with the Company, although the LIC administers the scheme and determines the contribution premium required to be paid by the Company.
		Net gratuity costs for the quarter and period ended December31, 2006 and 2007 included:

		Quarter ended								Nine months ended
		December 31,								December 31,
		2006				2007				2006				2007
		Rs				Rs				Rs				Rs
Service cost			1,904				1,752				5,712				5,254
Interest cost			416				412				1,249				1,235
Expected returns on plan assets			(41	)			(239	)			(122	)			(717	)
Recognized net actuarial (gain)/ loss			(117	)			—				(350	)			—
Net gratuity costs			2,163				1,925				6,489				5,772

Principal weighted average assumptions:

		Quarter ended								Period ended
		December 31,								December 31,
		2006				2007				2006				2007
Discount rate			8.	%			9.45	%			8	%			9.45	%
Long-term rate of compensation increase			6	%			6	%			6	%			6	%
Rate of return on plan assets			7.5	%			7.5	%			7.5	%			7.5	%

The Company estimates the long-term return on plan assets at 7.50% based on the average long-term rate of return expected to prevail over the next 15 to 20 years on the types of investments held with LIC.

The employer’s best estimate of contributions expected to be paid to the plan during the year 2007–2008 amounts to Rs 5,000. Further, the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter are:

For the year ended March 31,
2008			1,425
2009			2,078
2010			3,374
2011			5,080
2012			8,719
2013 to 2018			50,896

15.		Deferred revenue
		Deferred revenue includes the following amounts of unearned income:

	•		For the Company’s corporate network / data services division, revenue relating to the connectivity / hosting charges and from provision of digital certificates;
	•		For the Company’s Internet access services and online portal services divisions, revenue relating to the internet access charges and the advertisement charges respectively; and
	•		For the Company’s other service division, revenue relating to development of e-learning software.

The components of deferred revenue for these segments are:

						As at
		As at				December 31,
		March 31, 2007				2007
		Rs				Rs
Corporate network/data services			351,933				410,868
Internet access services			61,459				56,126
Online portal services			21				64
Other services			36,617				41,331
			450,030				508,389

16.		Borrowings
		The Company has short term borrowings of Rs 237,704 as at December 31, 2007 (Rs 800,000 as at March 31, 2007), from its bankers for working capital requirements. The borrowings are secured by fixed deposits held by the Company. The borrowings bear interest ranging from 8 to 9.75% and are repayable within one year from the balance sheet date.

17.		Products and services
		Breakup of revenues against products and services are as follows:

		Quarter ended December 31,								Nine months ended December 31,
		2006				2007				2006				2007
		Rs				Rs				Rs				Rs
Revenue
Service revenue		Rs	1,176,129				1,230,783			Rs	3,458,028				3,621,867
Initial franchise fee			11,666				7,944				47,244				33,993
Installation service revenue			67,035				79,990				202,087				229,583
			1,254,830				1,318,717				3,707,359				3,885,443
Product revenue			136,457				213,570				385,407				523,449
		Rs	1,391,287				1,532,287			Rs	4,092,766				4,408,892

18.		Segment reporting
		SFAS No 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas and major customers. The Company’s operations predominantly relate to connectivity to enterprises and providing Internet access to retail subscribers (both home access and public access). The Company also operates portals, “Sify.com”, “Samachar.com” and “SifyMax.in” that provide a variety of India-related content to audiences both in India and abroad, and which generates revenue from advertisements and other value added services.
		The primary operating segments of the Company are:

	•		Corporate network/data services, which provides Internet, connectivity, security and consulting, hosting and managed service solutions;
	•		Retail Internet access services, from homes and through cybercafés;
	•		Online portal and content offerings; and
	•		Other services, such as development of e-learning software.

The Chief Operating Decision Maker (“CODM”) evaluates the Company’s performance and allocates resources to various strategic business units that are identified based on the products and services that they offer and on the basis of the market served. Revenue in relation to segments is categorized based on items that are individually identifiable to that segment. Bandwidth costs, which form a significant part of the total expenses, are allocated primarily between the corporate network/data services and Internet access services businesses as described below:

International bandwidth refers to bandwidth that is required for access to sites and offices outside the country. For all these businesses, bandwidth is allocated based on actual utilization captured by monitoring traffic per IP pool

assigned at the egress points. The Company has packet shapers in the main locations to monitor bandwidth use by each of the above categories of users. This information is used in determining norms like bandwidth per port and bandwidth per PC. The actual utilization is cross validated against assumptions / norms for each business.

National bandwidth refers to the inter-city link bandwidth implemented within the country. Inter-city link bandwidth was allocated based on the number of subscribers or iway cybercafés at “non gateway” points and the bandwidth sold to and used by business enterprises (determined using packet shapers). However, in order to strengthen its corporate business, the Company enhanced its national backbone to carry Internet traffic to the international fibre gateways, shifting from hybrid satellite and fibre gateways to fibre only gateways for international bandwidth. National bandwidth costs are now allocated based on international bandwidth allocation ratios because most of the traffic carried on the national backbone is directed towards the international gateways. The Company believes that the resulting allocations are reasonable.

Last mile costs related to dial-up access that can be directly identified to businesses are allocated directly. Spectrum charges that are paid for the license that has been provided to enable Sify to operate on the 5.7 GHz wireless spectrum are allocated based on the bandwidth that is used by the various businesses that use this spectrum. Certain expenses, such as depreciation, technology and administrative overheads, which form a significant component of total expenses, are not allocable to specific segments as the underlying services are used interchangeably. Management believes that it is not practical to provide segment disclosure of these expenses and, accordingly, they are separately disclosed as “unallocated” and adjusted only against the total income of the Company.

A significant part of the fixed assets used in the Company’s business are not identifiable to any of the reportable segments and can be used interchangeably between segments. Management believes that it is not practicable to provide segment disclosures relating to total assets since a meaningful segregation of the available data is onerous.

The Company operating segment information for the quarters ended December 31, 2006 and December 31, 2007 and for the Nine months ended December 31, 2006 and 2007 is given below:

		Quarter ended December,  31  2006
		Corporate				Internet
		Network / Data				Access				Online Portal				Other
		Services				Services				Services				Services				Total
Revenues			810,151				458,311				75,668				47,157				1,391,287
Allocated Expenses			(519,090	)			(431,031	)			(86,354	)			(39,598	)			(1,076,073	)
Minority interest			(7,896	)															(7,896	)
Segment operating income / (loss)			283,165				27,280				(10,686	)			7,559				307,318
Unalllocated Corporate expenses																			(180,958	)
Foreign exchange gain / (loss)																			(20,558	)
Other income / (expense), net																			(2,518	)
Equity in profits of affiliates																			18,650
Depreciation & amortization																			(118,388	)
Interest income net																			38,025
Income taxes
Net Profit / (loss)																			41,571

Quarter ended December, 31 2007
		Corporate				Internet
		Network / Data				Access				Online Portal				Other
		Services				Services				Services				Services				Total
Revenues			1,053,154				369,511				55,636				53,986				1,532,287
Allocated Expenses			(678,707	)			(342,377	)			(72,168	)			(54,553	)			(1,147,805	)
Minority interest			(5,824	)							—								(5,824	)
Segment operating income / (loss)			368,623				27,134				(16,532	)			(567	)			378,658
Unalllocated Corporate expenses																			(291,062	)
Foreign exchange gain / (loss)																			1,830
Other income / (expense), net																			71
Depreciation & amortization																			(139,689	)
Interest income net																			37,785
Income Taxes																			(42,803	)
Equity in profits of affiliates																			81,409
Net Profit / (loss)																			26,199

Nine Months ended December, 31 2006
		Corporate				Internet
		Network / Data				Access				Online Portal				Other
		Services				Services				Services				Services				Total
Revenues			2,351,441				1,410,435				211,409				119,481				4,092,766
Allocated Expenses			(1,420,130	)			(1,353,647	)			(203,658	)			(106,365	)			(3,083,800	)
Minority interest			(7,896	)			—				—				—				(7,896	)
Segment operating income / (loss)			923,415				56,788				7,751				13,116				1,001,070
Unallocated Corporate expenses																			(614,368	)
Foreign exchange gain / (loss)																			23,781
Other income / (expense), net																			(1,721	)
Equity in profits of affiliates																			42,544
Depreciation & amortization																			(388,614	)
Interest income net																			109,838
Net Profit / (loss)																			172,530

Nine Months ended December, 31 2007
		Corporate				Internet
		Network / Data				Access				Online Portal				Other
		Services				Services				Services				Services				Total
Revenues			2,905,366				1,187,296				149,726				166,504				4,408,892
Allocated expenses			(1,857,775	)			(1,095,560	)			(227,445	)			(153,221	)			(3,334,001	)
Minority interest			(20,010	)			—				—				—				(20,010	)
Segment operating income / (loss)			1,027,581				91,736				(77,719	)			13,283				1,054,881
Corporate expenses																			(893,901	)
Foreign exchange gain / (loss)																			(18,149	)
Other income / (expense), net																			1,515
Depreciation & amortization																			(415,851	)
Interest income net																			117,471
Income taxes																			(77,864	)
Equity in profits of affiliates																			147,051
Net Profit / (loss)																			(84,847	)