UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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 September 30, 2004

Commission File Number 001-15190

Satyam Computer Services Limited

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

Republic of India
(Jurisdiction of incorporation or organization)

Satyam Technology Center
Bahadurpally Village
Qutbullapur Mandal,
R.R. District — 500855
Hyderabad, Andhra Pradesh
India
(91) 40-5523-3505
(Address of principal executive offices)

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

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.

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

The Company is incorporating by reference the information and exhibits set forth in this Form 6-K into its
registration statement on Form S-8 (Registration No. 333-13772).

TABLE OF CONTENTS

Currency of Presentation and Certain Defined Terms

Unless the context otherwise requires, references herein to “we,” “us,” the “company,” “SAY” or “Satyam” are to Satyam Computer Services Limited, a limited liability company organized under the laws of the Republic of India, and its consolidated subsidiaries. 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 leading Indian information technology services company which is traded on the New York Stock Exchange, or NYSE, under the symbol “SAY” as well as the major Indian stock exchanges. “Satyam” is a trademark owned by us and all other trademarks or tradenames used in this Report on Form 6-K (this “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 references to “Rs.,” “rupees” or “Indian rupees” are to the legal currency of India. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

For your convenience, this 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 September 30, 2004 for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York. The noon buying rate on September 30, 2004 was Rs. 45.91 per $1.00.

Information contained in our websites, including our corporate website, www.satyam.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 “RISK FACTORS” 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 QUARTERLY 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.

PART I

Item 1. Financial Statements

Please see our Form 6K dated October 25, 2004 submitted to the SEC on October 26, 2004 for our unaudited U.S. GAAP Consolidated Financial Statements for the six months ended September 30, 2004, which are incorporated herein by reference.

Item 2. Operating and financial review and prospects

The following discussion of the financial condition and results of operations of our company should be read in conjunction with the financial statements and the related notes included in our Form 6K dated October 25, 2004 and the audited financial statements and related notes contained in our Annual Report on Form 20-F for the fiscal year ended March 31, 2004. This discussion contains forward-looking statements that involve risks and uncertainties. For additional information regarding these risks and uncertainties, please see “Item 3.-Risk Factors”. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

We are the fourth largest provider of IT services in India, based on the amount of export revenues generated during our year ended March 31, 2004. We offer a comprehensive range of services, including software development, system maintenance, packaged software integration, engineering design services, and business process outsourcing, or BPO. We use our global infrastructure to deliver value-added services to our customers to address IT needs in specific industries and to facilitate e-Business initiatives. Our total revenues increased by 43.7% to $363.9 million during the six months ended September 30, 2004 from $253.3 million during the six months ended September 30, 2003. Our reportable operating segments are divided into IT services, BPO and software products.

On June 5, 2002 we formed Nipuna Services Limited or Nipuna, a wholly owned subsidiary in Secunderabad, Andhra Pradesh, India to provide various services connected with BPO.

Consolidation of Subsidiaries

Up to March 2004, we owned 100% of the outstanding stock of VisionCompass Inc., or VCI, which had developed and marketed our software product, VisionCompass. However, keeping in view the business and economic conditions, the relative size and managerial time, we decided to discontinue the operations of VCI so as to focus on our core business of IT services. VCI was formally dissolved on March 24, 2004. We have applied for one patent in the United States related to VisionCompass which we intend to pursue despite closure of VCI operations as this product remains in use by customers. We intend to continue to market VisionCompass. Since its inception in January 1999, VCI incurred significant operating losses and negative cash flows. We had invested, including advances and net of payables, $27.6 million in VCI and cumulative net losses incurred by VCI amounted to $27.6 million.

As at September 30, 2004 we had invested including advances and net of payables $15.3 million in five of our other subsidiaries and the cumulative net losses incurred by these subsidiaries amounted to $21.6 million. The results of our subsidiaries are reflected in our consolidated audited financial statements under U.S. GAAP.

Our Investment in Associated Companies

Our investments in business entities in which we do not have control, but have the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are referred to as associated companies and are accounted for by the equity method.

The following table gives details regarding our percentage holding, share of earnings/(losses) and carrying value of our associated companies for the six months ended September 30, 2004 and 2003.

Sify

We continue to be the single largest shareholder of Sify, which provides Internet services in India Our ownership interest in Sify was 31.9% as at September 30, 2004.

The holding in Sify reduced from 37.2% as at March 31, 2003 to 35.0% as at July 31, 2003 due to Sify’s private placements to Softbank Asia Infrastructure Fund, or SAIF, and VentureTech Solutions Private Ltd, or VentureTech, in December 2002, May 2003 and July 2003. Subsequent to December 9, 2002, we have accounted for our interest in Sify under the equity method of accounting, as we no longer hold a controlling interest in Sify. We are under no future obligation to provide additional funds to Sify and would be unwilling to do so.

On June 23, 2003, Sify’s shareholders approved sponsoring the sale of its 4,600,200 unlisted Indian equity shares through a secondary issue of Sify’s American Depository Shares, or ADS. In September 2003, we sold 1,000,000 Indian equity shares out of our total holding of 12,182,600 Indian equity shares in Sify at a sale price of $4.4 (Rs.198.90) per share as determined by Sify based on the recommendation of the lead manager to the sponsored ADS program.

Satyam Venture

On October 28, 1999, we entered into an agreement with Venture Industries to form an equally held joint venture company Satyam Venture Engineering Services Private Limited or Satyam Venture. We hold 50% of Satyam Venture and have invested $0.8 million for our share in the joint venture. Satyam Venture is engaged in providing engineering solutions, software development and customization services specifically for the automotive industry worldwide.

CA Satyam

On December 29, 2000, we entered into an agreement with Computer Associates International, Inc. to form an equally held joint venture company, CA Satyam ASP Private Limited or CA Satyam. We hold 50% of CA Satyam. As per the agreement, both we and Computer Associates have invested $1.5 million each in the joint venture. CA Satyam is engaged in providing a portfolio of information and knowledge management solutions that are intended to enhance employee productivity and organizational agility.

Deferred Stock-based Compensation

We have 3 associate stock option plans of Satyam Computer Services: our Associate Stock Option Plan, or ASOP, established in May 1998; our Associate Stock Option Plan B, or ASOP B, established in May 1999; our Associate Stock Option Plan ADS, or ASOP ADS, established in May 1999. We also have Employee Stock Option Plan, or ESOP, established by Nipuna in April 2004.

On March 31, 2004, the FASB issued a proposed Statement, “Share-Based Payment, an amendment of FASB Statements No. 123 and 95. Refer “Recently issued accounting pronouncements” and “Risk Factors” for the discussion on the same.

ASOP

The aspects of the ASOP differ significantly from typical U.S. stock option plans. We established a controlled associate welfare trust called the Satyam Associate Trust, (the “SC-Trust”), to administer the ASOP, and issued warrants to purchase 13.0 million equity shares of Satyam Computer Services. In December 1999 the SC-Trust exercised all its warrants to purchase our shares prior to the stock split using the proceeds obtained from bank loans. As and when the SC-Trust issues warrants to eligible associates, the difference between the market price and the exercise price is accounted as deferred stock based compensation and amortized over the vesting period. The warrants vest immediately or vest over a period ranging from two to three years, depending on the associate’s length of service and performance. Upon vesting, associates have 30 days in which to exercise these warrants.

We account for the ASOP as a fixed plan in accordance with Accounting Principles Board Opinion No. 25. Under U.S. GAAP, during the six months ended September 30, 2004 and 2003, we recognized deferred stock-based compensation of $1,304 thousand and $51 thousand, and $665 thousand and $622 thousand was amortized and charged to earnings, respectively. As at September 30, 2004, warrants (net of forfeited and cancelled) to purchase 11,635,520 equity shares have been granted to associates pursuant to ASOP, and warrants to purchase 11,379,520 equity shares have been exercised. As at September 30, 2004, the Trust held warrants to purchase 1,364,480 equity shares that had not yet been granted to associates pursuant to the ASOP but are expected to be granted in the future. Under current accounting rules, we expect to recognize amortization of deferred stock-based compensation expense in respect of our ASOP in the approximate amounts of $3,901 thousand in fiscal 2005, $3,403 thousand in fiscal 2006 and $1,191 thousand in fiscal 2007 based on the price of our equity shares on September 30, 2004 and in connection with both granted and ungranted warrants on such date. Depending on the market value of our equity shares on the dates future grants are made, amortization of deferred stock-based compensation expense with respect to ungranted warrants may cause the expected amounts to change.

ASOP B

In April 2000, we established Associate Stock Option Plan B (the “ASOP B”) and reserved warrants for 41,727,140 shares to be issued to eligible associates with the intention to issue the warrants at the market price of the underlying equity shares on the date of the grant. These warrants vest over a period ranging from two to four years, starting with 20% in second year, 30% in the third year and 50% in the fourth year. Upon vesting, associates have 5 years to exercise these warrants.

We account for the ASOP B as a fixed plan in accordance with Accounting Principles Board Opinion No. 25. Under U.S. GAAP, during the six months ended September 30, 2004 and 2003, we recognized deferred stock-based compensation of $(28) thousand and $(13) thousand, and $(27) thousand, $14 thousand was amortized and charged to earnings, respectively. As at September 30, 2004, options (net of forfeited and cancelled) to purchase 25,712,766 equity shares have been granted to associates under this plan and warrants to purchase 2,655,400 equity shares have been exercised. We expect to recognize amortization of deferred stock-based compensation expense in respect of these granted options in the approximate amounts of $Nil thousand in each of fiscal 2005, 2006 and 2007. Under current accounting rules, we expect that the exercise prices of options granted in the future under the ASOP B will generally be not less than the fair market value of the underlying shares and therefore we do not expect to incur significant compensation expense. We also account for the ASOP B as a fixed option plan.

ASOP ADS

In May 2000, we established Associate Stock Option Plan (ADS) (the ‘ASOP (ADS)’) to be administered

by the Administrator of the ASOP (ADS) which is a committee appointed by our Board of Directors and reserved 2,574,665 ADSs (5,149,330 shares) to be issued to eligible associates with the intention to issue the warrants at a price per option which is not less than 90% of the value of one ADS as reported on NYSE on the date of grant converted into Indian Rupees at the rate of exchange prevalent on the grant date. These warrants vest over a period of 1-10 years from the grant date.

As at September 30, 2004, warrants (net of forfeited and cancelled) for 1,439,700 ADSs representing 2,879,400 equity shares have been granted to associates under the ASOP ADS, and warrants to purchase 199,086 ADSs representing 398,172 equity shares have been exercised. We expect that the exercise prices of options granted in the future under the plan will not be less than the fair market value of the underlying ADSs and therefore we do not expect to incur significant compensation expense with respect to those future grants under current accounting rules.

Nipuna-ESOP

In April 2004, Nipuna established its Employee Stock Option Plan (the “ESOP”). As per the ESOP, the options are granted at fair value as determined by an independent valuer as on the date of the grant and hence no compensation cost has been recognised. These options vest starting with 33.33% at the end of the second year, 33.33% at the end of the third year and remaining 33.34% at the end of the fourth year from the date of grant.

During the six months ended September 30, 2004, Nipuna issued options for 813,578 equity shares at weighted average exercise price of Rs.80 (US$1.78) being the fair market value per share. No options were exercised during the period.

Revenues

Our revenues are generated from professional services fees and product development provided through three segments, IT services, BPO and software products. Management evaluates performance based on stand-alone revenues and net income for these segments.

Currently our executive management evaluates Satyam’s operating segments based on the following three-business groups:

The following table sets forth the total revenues (excluding inter-segment sales) for our three business segments for the six months ended September 30, 2004 and 2003 (in millions, except percentages):

Our total revenues increased by 43.7% to $363.9 million during the six months ended September 30, 2004 from $253.3 million during the six months ended September 30, 2003. Our top two customers accounted for 19.2% of revenues during the six months ended September 30, 2004 down from 26.2% of revenues during the six months ended September 30, 2003. Our top 5 customers accounted for 30.3% of revenues during the six months ended September 30, 2004 as compared to 37.9% of revenues during the six months ended September 30, 2003. Our worldwide technical headcount increased to 17,115 as at September 30, 2004 compared to 10,399 as at September 30, 2003, while the number of our technical associates offshore increased by 5,847 and technical associates onsite increased by 869 during this period.

IT services

Our IT services revenues (excluding inter-segment revenues) represented 99.2% and 99.9% of our total revenues during the six months ended September 30, 2004 and 2003 respectively. These revenues increased by 42.7% to $361.1 million during the six months ended September 30, 2004 from $253.0 million during the six months ended September 30, 2003. This growth of $108.1 million in revenue during six months ended September 30, 2004 was primarily the result of an increase in business from existing customers and the generation of new business from new customers. We added 52 and 49 customers including 8 and 6 from the Fortune 500 list during the six months ended September 30, 2004 and 2003 respectively.

BPO

Nipuna generated revenues of $4.0 million during the six months ended September 30, 2004 of which $1.2 million was from inter-segment revenues. Nipuna had 1,277 employees as on September 30, 2004.

Software products

Revenues from software products to date have been immaterial.

Expenses

Cost of revenues. Cost of revenues increased by 43.7% to $223.5 million during the six months ended September 30, 2004 from $155.5 million during the six months ended September 30, 2003. Cost of revenues represented 61.4% of revenues, both during the six months ended September 30, 2004 and 2003. Inter-segment cost of revenues were $1.3 million during the six months ended September 30, 2004 as compared to $669 thousand during the six months ended September 30, 2003 and have not been allocated to the individual components that make up cost of revenues.

The increase in cost of revenues by $68.0 million to $223.5 million during the six months ended September 30, 2004 from $155.5 million during the six months ended September 30, 2003 was attributable primarily to increases in associate compensation and benefits expenses and traveling expenses. Associate compensation and benefit expenses increased 58.3% to $175.7 million or 48.3% of revenue during the six months ended September 30, 2004 from $111.0 million during the six months ended September 30, 2003.

The increase in the associate compensation and benefits is due to: (1) increase in the total number of technical associates by 6,516 to 17,115 as at September 30, 2004 from 10,599 as at September 30, 2003; (2) increase in number of onsite technical associates by 869 to 3,857 as at September 30, 2004 from 2,988 as at September 30, 2003 for which we pay a higher compensation; (3) on account of salary increments (approximately 17%) given to associates during the year, and (4) increase in sub-contracting charges by 39.5% to $21.2 million during the six months ended September 30, 2004 from $15.2 million during the six months ended September 30, 2003. The increase is mainly on account of hiring a greater number of people during the six months ended September 30, 2004 since the projects entered during such period required specific skill sets. Traveling expenses increased 7.0% to $16.8 million or 4.6% of revenue during the six months ended September 30, 2004 from $15.7 million or 6.2% of revenue during the six months ended September 30, 2003. These increases were partly compensated by a decrease in depreciation expense. Depreciation expense decreased by 2.0% to $10.0 million or 2.7% of revenues during the six months ended September 30, 2004 from $10.2 million or 4.0% of revenues during the six months ended September 30, 2003. Deferred stock-based compensation expense was $368 thousand and communication expenses amounted to $3.0 million during the six months ended September 30, 2004 compared to $489 thousand and $2.7 million during the six months ended September 30, 2003 respectively.

Gross profit. Our gross profit was $140.4 million during the six months ended September 30, 2004, representing an increase of 43.4% over gross profit of $97.9 million during the six months ended September 30, 2003. As a percentage of total revenues, gross profit was 38.6%, both during the six months ended September 30, 2004 and 2003. This was primarily due to cost of revenues remaining constant as a percentage of revenue during the six months ended September 30, 2004 as compared to the six months ended September 30, 2003.

Selling, general and administrative expense. Selling, general and administrative expenses increased 55.4% to $64.5 million during the six months ended September 30, 2004 from $41.5 million during the six months ended September 30, 2003. Selling, general and administrative expenses represented 17.7% of revenues during the six months ended September 30, 2004 as compared to 16.4% of revenues during the six months ended September 30, 2003. This increase was a result primarily of increase in associate compensation and benefits, marketing expenses and professional charges. Associate compensation and benefits increased 97.3% to $29.4 million or 8.1% of revenues during the six months ended September 30, 2004 as compared to $14.9 million or 5.9% of revenues during the six months ended September 30, 2003 on account of (1) incentives amounting $3.6 million and (2) on account of salary increments (approximately 17%) given to associates during the year. Marketing expenses increased 23.5% to $6.3 million or 1.7% of revenues during the six months ended September 30, 2004 as compared to $5.1 million or 2.0% of revenues during the six months ended September 30, 2003. Professional charges increased 47.1% to $5.0 million or 1.4% of revenues during the six months ended September 30, 2004 as compared to $3.4 million or 1.3% of revenues during the six months ended September 30, 2003.

Operating income. Our operating income was $75.9 million during the six months ended September 30, 2004, representing an increase of 34.6% over the operating income of $56.4 million during the six months ended September 30, 2003. As a percentage of revenues, operating income decreased to 20.9% during the six months ended September 30, 2004, from an operating income of 22.2% during the six months ended September 30, 2003. This decrease was due to increase in selling, general and administrative expense from 16.4% of revenue during the six months ended September 30, 2003 to 17.7% of revenues during the six months ended September 30, 2004.

Interest income. Interest income increased to $10.5 million during the six months ended September 30, 2004 from $9.6 million during the six months ended September 30, 2003. This increase was due to additional deposits amounting to $45.6 million placed with banks in July 2003.

Net income. Our net income was $73.7 million during the six months ended September 30, 2004, representing an increase of 38.5% over net income of $53.2 million during the six months ended September 30, 2003. As a percentage of total revenues, net income decreased to 20.3% during the six months ended September 30, 2004 from 21.0% during the six months ended September 30, 2003. This decrease in net income as percentage of revenue was primarily due to (i) increase in selling, general and administrative

expenses to 17.7% of revenue during the six months ended September 30, 2004 from 16.4% during the six months ended September 30, 2003, (ii) decrease in interest income to 2.9% of revenue during the six months ended September 30, 2004 from 3.8% of revenue during the six months ended September 30, 2003, (iii) gain on sale of shares of Sify of $2.6 million or 1.0% of revenue during the six months ended September 30, 2003, and (iv) loss on forward exchange contracts of $5.2 million or 1.4% of revenues during the six months ended September 30, 2004 as compared to gain of $1.6 million or 0.6% of revenue during the six months ended September 30, 2003. The decrease was partially offset by gain on account of foreign exchange transactions of $6.0 million or 1.7% of revenue during the six months ended September 30, 2004 as against loss of $4.0 million or 1.6% of revenue during the six months ended September 30, 2003.

Foreign Currency Transactions / Translation

During the six months ended September 30, 2004 and 2003, 82.2% and 86.5%, respectively, of our total revenues were generated in U.S. dollars. A significant amount of our expenses were incurred in Indian Rupees and the balance was primarily incurred in U.S. dollars, European currencies and Japanese yen. Our functional currency and the functional currency for our subsidiaries located in India is the Indian rupee; however, the Japanese yen, U.S. dollars, Sterling pounds and Singapore dollars are the functional currencies of our foreign subsidiaries located in Japan, the U.S., the U.K. and Singapore, respectively. The translation of such foreign currencies into U.S. dollars (our reporting currency) is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using monthly simple average exchange rates prevailing during the reporting periods. Adjustments resulting from the translation of functional currency financial statements to reporting currency are accumulated and reported as other comprehensive income, a separate component of shareholders’ equity.

We expect that a majority of our revenues will continue to be generated in U.S. dollars for the foreseeable future and that a significant portion of our expenses, including personnel costs as well as capital and operating expenditures, will continue to be denominated in Indian rupees. Consequently, our results of operations will be affected to the extent the rupee appreciates/ depreciates against the U.S. dollar. The average exchange rate of rupee to US dollar during the six months ended September 30, 2004 was 45.50 against 46.54 during the six months ended September 30, 2003. During the six months ended September 30, 2004, rupee depreciated to 45.91 against 43.4 in March 31, 2004. During the six months ended September 30, 2003 rupee appreciated to 45.78 against 47.53 in March 31, 2003. As a result, gain on foreign exchange transactions was $6.0 million during the six months ended September 30, 2004 as compared to a loss of $4.0 million during the six months ended September 30, 2003.

Risk management policy

Our functional currency is the Indian Rupee, although we transact a major portion of our business in US dollars and accordingly face foreign currency exposure through our sales in the United States. Accordingly, we are exposed to substantial risk on account of adverse currency movements in global foreign exchange markets. The exchange rate between the rupee and the dollar has changed substantially in recent years and may fluctuate substantially in the future.

We manage risk on account of foreign currency fluctuations through treasury operations. Our risk management strategy is to identify risks we are exposed to, evaluate and measure those risks, decide on managing those risks, regular monitoring and reporting to management. The objective of our risk management policy is to minimize risk arising from adverse currency movements by managing the uncertainty and volatility of foreign exchange fluctuations by hedging the risk to achieve greater predictability and stability. Our risk management policies are approved by senior management and include implementing hedging strategies for foreign currency exposures, specification of transaction limits; specifying authority and responsibility of the personnel involved in executing, monitoring and controlling such transactions.

We purchase forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates

on cash flows denominated in US dollars. We enter into forward exchange contracts where the counter party is generally a bank. We consider the risks of non-performance by the counter party as non-material. These forward exchange contracts mature between one and eight months. These contracts do not qualify for hedge accounting under SFAS 133, as amended. Any derivative that is either not a designated hedge, or is so designated but is ineffective per SFAS 133, is marked to market and recognized in earnings.

The following table gives details in respect of Satyam’s outstanding foreign exchange forward contracts:

As at September 30, 2004, we had outstanding forward exchange contracts worth $87.8 million with maturity dates over next eight months to cover the risks of US dollar to Rupee fluctuations.

Restatement of Previously Reported Amounts

Satyam has restated beginning shareholder’s equity as at March 31, 2001 and shareholder’s equity and net income as at and for the years ended March 31, 2003 and 2002, to reflect the impact on deferred tax liabilities and income taxes of Satyam’s equity in the losses of Sify. Such impact was not previously recognized. Satyam recognized a deferred tax liability of $36.92 million as at March 31, 2001 for the outside basis difference between the book carrying value and tax basis of its investment in Sify. This outside basis difference was generated from the increase in the book carrying value of Satyam’s investment in Sify resulting from Sify’s issuance of its shares to third parties. In subsequent periods, Satyam recognized its equity in the losses of Sify as a reduction in the book carrying value of its investment and as a charge to the income statement. However, Satyam did not recognize the tax benefit resulting from the decrease in the outside basis difference deferred tax liability.

The effect of these adjustments as at September 30, 2003 was as follows:

Results of Operations for the six months ended September 30, 2004 and 2003

The following tables set forth selected operating data as value of revenues by segment (including inter-segment revenues) for the periods indicated:

The following tables set forth selected operating data as a percentage of revenues by segment (including inter-segment revenues) for the periods indicated:

Comparison of six months ended September 30, 2004 and 2003

The following period on period comparison is based on our reportable segments.

IT Services:

Our principal business is providing IT services and we seek to provide our customers with the ability to meet all of their IT needs from one service provider.

Revenues

Our IT services revenues (excluding inter-segment revenues) represented 99.2% and 99.9% of our total revenues during the six months ended September 30, 2004 and 2003 respectively. These revenues increased by 42.7% to $361.1 million during the six months ended September 30, 2004 from $253.0 million during the six months ended September 30, 2003.

This growth of $108.1 million or 42.7% in IT services revenue during the six months ended September 30, 2004 was primarily the result of an increase in business from existing customers and the generation of new business from new customers. Revenues from existing business increased by 33.1% to $293.6 million during the six months ended September 30, 2004 from $220.6 million during the six months ended September 30, 2003. Revenues from new business increased by 108.3% to $67.5 million during the six months ended September 30, 2004 from $32.4 million during the six months ended September 30, 2003. Of this, revenues from new business from new customers amounted to $7.6 million during the six months ended September 30, 2004. We added 52 and 49 customers including 8 and 6 from the Fortune 500 list during the six months ended September 30, 2004 and 2003 respectively. The revenue share of Fortune 500 customers was 65.8% during the six months ended September 30, 2004 and 66.5% during the six months ended September 30, 2003.

IT services revenues and gross profits are affected by the rate at which associates are utilized. We calculate utilization rates on a monthly basis, based on the ratio of the actual number of hours billed by technical associates in such month to the total number of billable hours. For purposes of such calculation, we assume that an associate is 100.0% utilized if he works 157 hours per month. Utilization rates for IT services were 81.7% and 83.1% during the six months ended September 30, 2004 and 2003, respectively.

Revenues by technology

The following table presents our IT services revenues (excluding inter-segment revenues) by type of IT service offering (in millions, except percentages).

During the six months ended September 30, 2004, revenues from engineering design services, which offer a spectrum of engineering services in CAD, CAM, CAE, PDM and customization to various industries, has grown by 340.7% followed by revenues from packaged software integration services which grew by 73.8%. In absolute terms, revenues from packaged software integration has shown significant growth of $44.4 million or 73.8%, revenues from software development has increased by $31.3 million or 25.5%

followed by engineering design services and system maintenance services which, grew by $18.4 million and $14.0 million representing growth of 340.7% and 21.7% respectively. We expect these trends to continue in the near future.

Revenues by contract type

The following table gives the composition of IT services revenues (excluding inter-segment revenues) by type of contract (in millions, except percentages).

Our revenues are generated principally from IT services provided on either a time-and-material or a fixed-price basis. Revenues from IT service provided on a time-and-material basis are recognized in the period that services are performed. Revenues from IT services provided on a fixed-price basis are recognized under the percentage of completion method of accounting when the work executed can be reasonably estimated. The percentage of completion estimates are subject to periodic revisions and the cumulative impact of any revision in the estimates of the percentage of completion is reflected in the period in which the changes become known. Although from time to time we have revised our project completion estimates, to date such revisions have not materially affected our reported revenues.

Revenues from IT services (excluding inter-segment revenues) provided on a time-and-materials basis decreased to 67.4% during the six months ended September 30, 2004 from 69.5% during the six months ended September 30, 2003. The revenues from fixed-price basis increased to 32.6% during the six months ended September 30, 2004 from 30.5% during the six months ended September 30, 2003.

The increase during the six months ended September 30, 2004 for fixed bid contracts is primarily due to a shift in type of contracts from time-and-material to fixed bid since based on current market trends majority of the customers prefer to enter into fixed price contracts. We expect that revenue from fixed bid contracts will continue to increase in fiscal 2005 since current market trends indicate customer preference towards fixed price contracts.

Revenues based on offshore and onsite / off site

The following tables gives the composition of revenues from IT services (excluding inter-segment revenues) based on the location where services are performed (in millions, except percentages).

We provide our IT services through our offshore centers located throughout India, through our onsite teams on customer’s premises and through our offsite centers in United States, United Kingdom, Japan, Australia, Singapore, Malaysia, Dubai, Germany and Canada.

Offshore IT services revenues consist of revenues from IT services work conducted in our offshore centers and onsite work conducted at customers’ premises which is related to offshore work. Offshore IT services revenues do not include revenues from offsite centers or onsite work which is not related to any offshore work.

We charge higher rates and incur higher compensation expenses for work performed by our onsite teams on a customer’s premises or at our offsite centers as compared to work performed at our offshore centers in India. Services performed by our onsite teams or at our offsite centers typically generate higher revenues per capita but at a lower gross margin than the same amount of services performed at our offshore centers in India.

The onsite percentage increased as a result of new engagements during six months ended September 30, 2004, since in the early stages of new engagements we require extensive interactions with customers to understand the business scenario and create the right process and the methodology before we move the work offshore at the most appropriate time. Revenues from new customers increased by 108.3% to $67.5 million during the six months ended September 30, 2004 from $32.4 million during the six months ended September 30, 2003.

Revenues based on geography

The following table gives the composition of our revenues based on the location of our customers (in millions, except percentages).

Of the total increase of $107.9 million in revenue during the six months ended September 30, 2004, $60.1 million increased in North America followed by $24.1 million in Europe and $18.3 million in rest of the world. Revenue in India increased by $4.8 million and in Japan by $0.6 million.

Our increased business in the North America and Europe was due to new clients and additional business from existing customers. We expect that most of our revenues will be generated in North America, followed by Europe, in fiscal 2005.

Cost of Revenues. Cost of revenues increased by 43.3% to $221.8 million during the six months ended September 30, 2004 from $154.8 million during the six months ended September 30, 2003. Cost of revenues represented 61.4% of IT services revenues during the six months ended September 30, 2004 and 61.1% during the six months ended September 30, 2003. This increase by $67.0 million was attributable primarily to increases in associate compensation and benefits expenses and traveling expenses and other expense. Associate compensation and benefits expenses increased by 57.5% to $174.8 million, or 48.4% of revenues during the six months ended September 30, 2004 from $111.0 million, or 43.8% of revenues during the six months ended September 30, 2003. The increase in the associate compensation and benefits is due to: (1) increase in the total number of technical associates by 5,555 to 15,954 during the six months ended September 30, 2004 from 10,399 during the six months ended September 30, 2003; (2) increase in number of onsite technical associates by 849 to 3,834 during the six months ended September 30, 2004 from 2,985 during the six months ended September 30, 2003 for which we pay a higher compensation; (3) an increase of existing salaries (approximately 17%) during the period; and (4) increase in sub-contracting charges by 39.5% to $21.2 million during the six months ended September 30, 2004 from $15.2 million during the six months ended September 30, 2003. The increase is mainly on account of hiring a greater number of people during the six months ended September 30, 2004 since the projects entered into during such period required specific skill sets. Traveling expenses increased 5.7% to $16.6 million, or 4.6% of revenues, during the six months ended September 30, 2004 from $15.7 million, or 6.2% of revenues, during the six months ended September 30, 2003. These increases were compensated by decrease in depreciation, deferred stock compensation and communication expenses. Depreciation expense decreased by 4.1% to

$9.7 million or 2.7% of revenues during the six months ended September 30, 2004 from $10.1 million or 4.0% of revenues during the six months ended September 30, 2003. Deferred stock-based compensation expense was $368 thousand and communication expenses amounted to $2.5 million during the six months ended September 30, 2004 compared to $489 thousand and $2.6 million during the six months ended September 30, 2003 respectively.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 48.4% to $60.1 million during the six months ended September 30, 2004 from $40.5 million during the six months ended September 30, 2003. Selling, general and administrative expenses represented 16.6% of revenues during the six months ended September 30, 2004 and 16.0% during the six months ended September 30, 2003. This increase was a result primarily of increase in associate compensation and benefits, marketing expenses and professional charges. Associate compensation and benefits increased 99.3% to $29.1 million or 8.0% of revenues during the six months ended September 30, 2004 as compared to $14.6 million or 5.8% of revenues during the six months ended September 30, 2003 primarily on account of incentives amounting to $3.6 million and salary increments (approximately 17%) given to associates during the year. Marketing expenses increased 23.5% to $6.3 million or 1.7% of revenues during the six months ended September 30, 2004 as compared to $5.1 million or 2.0% of revenues during the six months ended September 30, 2003. Professional charges increased 39.4% to $4.6 million or 1.3% of revenues during the six months ended September 30, 2004 as compared to $3.3 million or 1.3% of revenues during the six months ended September 30, 2003.

Operating income. Our operating income was $79.6 million for the six months ended September 30, 2004, representing an increase of 37.5% over the operating income of $57.9 million for the six months ended September 30, 2003. As a percentage of revenues, operating income decreased to 22.0% for the six months ended September 30, 2004, from 22.9% for the six months ended September 30, 2003. This decrease was due to (i) increase in the associate compensation and benefits expenses by $78.3 million to $203.9 million or 56.4% of revenue during the six months ended September 30, 2004 from $125.6 million or 49.6% of revenues during the six months ended September 30, 2003 and (ii) offset by decrease in the traveling, communication, professional expenses and depreciation. As a percentage of revenues these expenses decreased to 11.8% during the six months ended September 30, 2004 from 16.0% during the six months ended September 30, 2003.

Interest income. Interest income increased to $10.5 million during the six months ended September 30, 2004 from $9.6 million during the six months ended September 30, 2003. This increase was due to additional deposits amounting to $45.6 million placed with banks in July 2003.

Gain on sale of shares in associate company/others. During the six months ended September 30, 2004, gain on sale of investments was $Nil thousand as compared to $2.6 million during the six months ended September 30, 2003. During the six months ended September 30, 2003, gain on sale of 1,000,000 Indian equity shares of Sify amounted to $2,606 thousand whereas gain on other investments amounted to $7 thousand.

Gain/(loss) on foreign exchange transactions. During the six months ended September 30, 2004 and the six months ended September 30, 2003, 82.4% and 86.4% respectively, of our revenues were generated in U.S. dollars. The average exchange rate of rupee to US dollar during the six months ended September 30, 2004 was 45.50 against 46.54 during the six months ended September 30, 2003. During the six months ended September 30, 2004, rupee depreciated to 45.91 against 43.4 in March 31, 2004. During the six months ended September 30, 2003, rupee appreciated to 45.78 against 47.53 in March 31, 2003. As a result, gain on foreign exchange transactions was $6.0 million during the six months ended September 30, 2004 as compared to a loss of $4.0 million during the six months ended September 30, 2003.

Other income/(expenses), net. Other expenses were $5.1 million during the six months ended September 30, 2004 as compared to other income of $1.7 million during the six months ended September 30, 2003. The increase in the expenses is primarily on account of loss on forward contracts amounting to $5.2 million {$3.0 million on outstanding forward contracts} for the six months ended September 30, 2004 as compared to a gain of $1.6 million ($1.0 million on outstanding forward contracts) for the six months ended September 30, 2003.

Income taxes. Income taxes were $12.9 million during the six months ended September 30, 2004 as compared to $10.6 million during the six months ended September 30, 2003. This increase in income taxes is primarily due to increase in income taxable in United States.

Equity in losses of associated companies, net of taxes. Equity in losses of associated companies was $239 thousand during the six months ended September 30, 2004 as compared to $2.4 million during the six months ended September 30, 2003.

Net income. Our net income was $77.6 million for the six months ended September 30, 2004, representing an increase of 41.9% over net income of $54.7 million for the six months ended September 30, 2003. As a percentage of total revenues, net income decreased to 21.4% for the six months ended September 30, 2004 from 21.6% for the six months ended September 30, 2003. This decrease was primarily due to (i) decrease in interest income to $10.5 million or 2.9% of revenue during the six months ended September 30, 2004 from $9.6 million during the six months ended September 30, 2003, (ii) decrease in the operating income by 0.9% during the six months ended September 30, 2004 from 22.9% during the six months ended September 30, 2003 to 22.0% during the six months ended September 30, 2004 and (iii) loss on forward exchange contracts of $5.2 million or 1.4% of revenues compared to gain of $1.7 million or 0.7% of revenue. The decrease was partially offset by gain on account of foreign exchange transactions of $6.0 million or 1.7% of revenue during the six months ended September 30, 2004 as compared to loss on $4.0 million during the six months ended September 30, 2003.

BPO

On June 05, 2002, we formed Nipuna Services Limited or Nipuna, a wholly owned subsidiary in Secunderabad, Andhra Pradesh, India to provide various services connected with business process outsourcing, or BPO. As at September 30, 2004, we had invested $4.0 million in Nipuna.

Our revenues from BPO services increased to $4.0 million during the six months ended September 30, 2004 from $733 thousand during the six months ended September 30, 2003. At present, Nipuna is offering support in the areas of production back office, health care insurance, IT help desk, finance and accounts, customer contact and data management. Nipuna has a total employee base of 1,277 as at September 30, 2004 as against 228 as at September 30, 2003. The cost of revenues increased to $3.0 million or 76.3% of revenues during the six months ended September 30, 2004 from $1.3 million or 181.6% of revenues during the six months ended September 30, 2003. The net loss during the six months ended September 30, 2004 was $3.9 million or 99.3% of revenues as against net loss of $1.6 million or 217.3% of revenues during the six months ended September 30, 2003.

Nipuna issued 45,669,999 and 45,340,000 0.05% convertible redeemable cumulative preference shares of par value Rs.10 ($0.22) per share in October 2003 and June 2004 respectively to the investors at an issue price of Rs.10 ($0.22) per share, in exchange for an aggregate consideration of $20 million. These preference shares are to be mandatorily converted / redeemed into such number of equity shares by June 2007 based on certain provisions in the agreement relating to Nipuna’s revenues and profits earned up to March 31, 2006. If not converted or early converted at the option of the investors based on certain triggering events, these convertible preference shares are redeemable on maturity in June 2007 at a redemption premium, which could range in between 7.5% to 13.5% p.a.

The Investors are entitled to receive dividends at the rate of 0.05% per cent per annum, on the face value of Rs. 10 ($0.22) from the date of issuance of such Preference Shares. The dividends shall be fully cumulative, accumulate and payable in cash at the rate indicated above, whether or not they have been declared and whether or not there are profits, surplus or other funds of Nipuna legally available for the payment of dividends. These preference shares rank senior to all classes of Nipuna’s currently existing capital stock or established hereafter with respect to dividend distributions and repayment of capital and premium upon a bankruptcy event or change in control with respect to Nipuna, unless the terms and conditions of such class expressly provide that such class will rank senior to or on parity with the convertible redeemable cumulative preference shares. The dividend on the preference shares for the period ended September 30, 2004 is payable.

Software products

Revenues from software products to date have been immaterial.

Results of Operations for the three months ended September 30, 2004 and 2003

The following tables set forth selected operating data as value of revenues by segment (including inter-segment revenues) for the periods indicated:

The following tables set forth selected operating data as a percentage of revenues by segment (including inter-segment revenues) for the periods indicated:

During the three months ended September 30, 2004, revenues from engineering design services, which offer a spectrum of engineering services in CAD, CAM, CAE, PDM and customization to various industries, has grown by 217.9% followed by revenues from packaged software integration services which grew by 66.8%. In absolute terms, revenues from packaged software integration has shown significant growth of $21.5 million or 66.8%, revenues from software development has increased by $17.7 million or 28.0% followed by engineering design services and system maintenance services which, grew by $8.5 million and $7.9 million representing growth of 217.9% and 24.6% respectively. We expect these trends to continue in the near future.

Revenues by contract type

The following table gives the composition of IT services revenues (excluding inter-segment revenues) by type of contract (in millions, except percentages).