1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 i) Basis of Accounting
 
 The financial statements have been prepared under the historical cost
 convention in accordance with generally accepted accounting principles
 in India, the accounting standards issued by the Institute of Chartered
 Accountants of India and the provisions of the Companies Act, 1956, as
 adopted consistently by the Company.
 
 The Company follows the mercantile system of accounting and recognises
 items of income and expenditure on an accrual basis.
 
 ii) Use of Estimates
 
 The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent assets and liabilities at the
 date of the financial statements and the reported amounts of revenues
 and expenses for the years presented. Actual results could differ from
 those estimates.
 
 iii) Revenue Recognition
 
 Revenue from software development contracts priced on a time and
 material basis is recognised as services are performed on the basis of
 billable time spent by employees working on the project, priced at the
 contracted rate. A provision is made for future warranty costs based on
 management's estimates of such future costs.
 
 In certain contracts the price at which the company provides product
 development services includes royalties that would become receivable in
 the future upon successful sale of products by the customers of the
 company. Such royalties are recognised only when such future sales
 occur.  Revenue from software development on fixed price contracts is
 recognised on the proportionate completion method and where no
 significant uncertainty exists regarding the amount of consideration
 that will be derived on completion of the contract. Where the outcome
 of the contract cannot be reliably estimated, revenue is recognised
 only to the extent of cost incurred. A provision for anticipated loss
 is recognised where it is probable that the estimated contract costs
 are likely to exceed the total contract revenue.
 
 Revenue from sale of software user license/products with a conditional
 clause on acceptance but without any obligation for warranty, is
 recognised on acceptance of the software. Where such a sale also has an
 obligation for warranty, revenue is adjusted for the fair value of
 warranty and recognised on acceptance of the software and the portion
 of revenue represented by the fair value of warranty is recognised over
 the period of warranty. Where the sale is not conditional on acceptance
 but has an obligation for warranty, revenue is adjusted for the fair
 value of warranty and recognised on delivery of the software and the
 portion of revenue represented by the fair value of warranty is
 recognised over the period of warranty.
 
 Revenue from sale of goods is recognised as goods are despatched to the
 customers. Sales are recorded at invoice value, net of sales tax.
 
 Revenue from business process outsourcing services is recognised on the
 basis of billable time spent by employees, as per the terms of specific
 contracts.
 
 Revenue from maintenance services is recognised pro-rata over the
 period in which the services are rendered.  Revenue from lease rent,
 commission and interest on bank deposits is recognised on accrual
 basis.
 
 iv) Fixed Assets
 
 Fixed assets are stated at cost, less accumulated depreciation.  Cost
 includes original cost of acquisition, including incidental expenses
 related to such acquisition and installation.  The company does not
 capitalise the cost of equipment acquired specifically for client
 projects, for which the client has borne the cost and where there is no
 enduring benefit to the company following conclusion of the project.
 Such equipment is included in the project cost.
 
 v) Depreciation
 
 Depreciation on all fixed assets is provided on the straight-line
 method over the estimated useful life of the assets at rates which are
 equal to or higher than the rates specified in Schedule XIV to the
 Companies Act, 1956. The depreciation rates used by the Company are as
 follows:
 
 Category of Fixed Assets            Rate of Depreciation
 
 Factory Building                          3.34%
 Plant & Machinery
 Computers                                33.33%
 Air Conditioners                         20.00%
 Others                                   14.29%
 Motor Vehicles                           33.33%
 Furniture & Fixtures                     20.00%
 Office Equipment                         20.00%
 Software                                 33.33%
 
 Depreciation on addition to fixed assets is provided on pro-rata basis
 from the date the assets are put to use.  Depreciation on
 sale/deduction from fixed assets is provided for upto the date of sale,
 deduction and discardment as the case may be.
 
 All assets costing Rs.5,000 or below are depreciated in full by way of
 a one-time depreciation charge.
 
 Leasehold improvements are amortised over the period of lease,
 including the optional period of lease,
 
 vi) Inventories
 
 Inventories are valued at lower of cost and net realisable value, cost
 being determined on FIFO basis. Cost includes all expenses incurred in
 bringing the goods to their present location and condition.
 
 vii) Impairment of Assets
 
 Whenever events indicate that assets may be impaired, the assets are
 subject to a test of recoverability based on estimates of future cash
 flows arising from continuing use of such assets and from its ultimate
 disposal. A provision for impairment loss is recognised where it is
 probable that the carrying value of an asset exceeds the amount to be
 recovered through use or sale of the asset.
 
 viii) Investments
 
 Long term investments are stated at cost, less provision for diminution
 in value of investments, which is considered to be permanent. Current
 investments are stated at lower of cost or fair market value. Cost
 includes original cost of acquisition, including brokerage and stamp
 duty.
 
 ix) Foreign Currency Transactions
 
 Transactions denominated in foreign currencies with respect to purchase
 of fixed assets are recorded at the exchange rates prevailing on the
 date of the purchase order and all other transactions denominated in
 foreign currencies are recorded at the exchange rates prevailing on the
 date of the transaction. The financial statements of foreign branches
 of the company are translated and recorded in the functional currency
 of the company.
 
 Monetary items denominated in foreign currencies at the year-end are
 translated at the exchange rates prevailing on the date of the Balance
 Sheet. Non-monetary items denominated in foreign currencies are carried
 at cost.
 
 Any income or expense on account of exchange differences either on
 settlement or on translation of transactions other than those relating
 to fixed assets acquired from sources outside India is recognised in
 the Profit and Loss Account.  Gain or loss on translation of long-term
 liabilities incurred to acquire fixed assets from sources outside India
 is treated, as an adjustment to the carrying cost of related fixed
 assets.  In respect of forward exchange contracts, the difference
 between the forward rate and the rate at the inception of a forward
 contract is recognised as income or expense over the life of the
 contract. Any income or expense on account of exchange differences
 either on settlement of the contract or on translation of the unmatured
 foreign currency contract at the rate prevailing on the date of the
 Balance Sheet date is recognised in the Profit and Loss Account.
 
 x) Retirement Benefits
 
 In accordance with the provisions of the Employees Provident Funds and
 Miscellaneous Provisions Act, 1952, eligible employees of the company
 are entitled to receive benefits with respect to provident fund, a
 defined contribution plan in which both the company and the employee
 contribute monthly at a determined rate (currently 12% of employee's
 basic salary). These contributions are made to a fund set up by the
 company and administered by a board of trustees. The company has no
 liability for future provident fund benefits other than its monthly
 contribution, and recognises such contribution as an expense in the
 year incurred.
 
 Benefits payable to eligible employees of the company with respect to
 gratuity, a defined benefit plan is accounted for on the basis of an
 actuarial valuation as at the balance sheet date. In accordance with
 the Payment of Gratuity Act, 1972, the plan provides for lump sum
 payments to vested employees on retirement, death while in service or
 on termination of employment in an amount equivalent to 15 days basic
 salary for each completed year of service.  Vesting occurs upon
 completion of one to five years of service. The company contributes all
 the ascertained liabilities to a fund set up by the company and
 administered by a board of trustees. The present value of such
 obligation is determined by the projected unit credit method and
 adjusted for past service cost and fair value of plan assets as at the
 balance sheet date through which the obligations are to be settled. The
 resultant actuarial gain or loss on change in present value of the
 defined benefit obligation or change in return of the plan assets is
 recognised as an income or expense in the Profit and Loss Account. The
 expected return on plan assets is based on the assumed rate of return
 of such assets.
 
 Leave encashment benefits payable to employees with respect to
 accumulated leaves outstanding at the year end are accounted for on the
 basis of basic salary drawn by the employees as at the balance sheet
 date.
 
 The Company maintains a defined benefit pension plan in respect of
 employees transferred from Lucent Technologies GmbH (`Lucent') in terms
 of an agreement executed on February 18, 2003 whereby certain pension
 benefit • obligations were transferred to the company. The annual
 contribution to the plan is based on an actuarial valuation and is
 charged to the Profit & Loss Account.
 
 xi) Income Taxes
 
 Income taxes consist of current taxes and changes in deferred tax
 liabilities and assets.
 
 Income taxes are accounted for on the basis of estimated taxes payable
 and adjusted for timing differences between the taxable income and
 accounting income as reported in the financial statements. Current
 income tax has been provided at the enacted tax rates on income not
 exempt under the tax holiday, rental income, interest on deposits,
 investment income, capital gains and income taxes payable in foreign
 jurisdictions.
 
 Deferred tax assets or liabilities in respect of timing differences
 which originate during the tax holiday period but reverse after the tax
 holiday are recognised in the year in which the timing differences
 originate if they result in taxable Amounts. Deferred tax assets or
 liabilities are established at the enacted tax rates. Changes in the
 enacted rates are recognised in the period of enactment.
 
 Deferred tax assets are recognised only if there is a reasonable
 certainty that they will be realised and are reviewed for the
 appropriateness of their respective carrying values at each balance
 sheet date.
 
 xii) Leases
 
 Lease rentals are expensed with reference to lease terms.
 
 xiii) Earnings per Share
 
 Basic earnings per share are calculated by dividing the net profit or
 loss for the year attributable to equity shareholders by the weighted
 average number of equity shares outstanding during the year.
 
 For calculating diluted earnings per share, the net profit or loss for
 the year attributable to equity shareholders and the weighted average
 number of shares outstanding during the year are adjusted for the
 effects of all dilutive potential equity shares.
 
 xiv) Miscellaneous Expenditure
 
 Costs incurred for the development of computer software are deferred
 when technological feasibility has been established. Technological
 feasibility is based upon completion of a detailed program design.
 Thereafter, all software production costs are deferred and subsequently
 reported at the lower of unamortised cost and net realisable value.
 
 The company also incurs costs to develop new custom software modules
 that are generally included as components of larger systems developed
 by customers.  Technological feasibility of the sub-system is largely
 dependent on the feasibility of the larger system, into which it is
 incorporated, over which the company has little control. Deferral of
 costs incurred to develop such software intended for sale is thus
 inappropriate and such amounts are expensed as they are incurred.
 
 Software development cost is amortised on a product-by-product basis.
 The periodic amortisation is the greater of the ratio of the current
 estimated revenues for each product over their estimated lifetime
 revenues and the straight-line amortisation over the remaining useful
 life.
 
 xv) Material Events
 
 Material events occurring after the Balance Sheet date are taken into
 cognisance.