UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the Quarter ended September 30, 2007

Commission File Number 001-16139

WIPRO LIMITED

(Exact name of Registrant as specified in its charter)

     Indicate by check mark if registrant files or will file annual reports under cover Form 20-F or Form 40-F.

                Form 20-F þ       Form 40-F o

          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 12g - 3-2(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 12g 3-2(b)

       Not applicable.

 

 

Currency of Presentation and Certain Defined Terms

In this Quarterly Report references to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to U.K. are to the United Kingdom. Reference to “$” or “US$” or “dollars” or “U.S. dollars” are to the legal currency of the United States, references to “£” or “Pound Sterling” are to the legal currency of the United Kingdom and references to “Rs.” or “Rupees” or “Indian rupees” are to the legal currency of India. All amounts are in Rs. or in U.S. dollars unless stated otherwise. Our financial statements are presented in Indian rupees and translated into U.S. dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). References to “Indian GAAP” are to Indian Generally Accepted Accounting Principles. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

All references to “we”, “us”, “our”, “Wipro” or the “Company” shall mean Wipro Limited and, unless specifically indicated otherwise or the context indicates otherwise, our consolidated subsidiaries. “Wipro” is a registered trademark of Wipro Limited in the United States and India. All other trademarks or trade names used in this Quarterly Report on Form 6K are the property of the respective owners.

Except as otherwise stated in this Quarterly Report, all translations from Indian rupees to U.S. dollars are based on the noon buying rate in the City of New York on September 28, 2007, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York which was Rs. 39.75 per $1.00. 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 any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Information contained in our website, www.wipro.com, is not part of this Quarterly Report.

Forward-Looking Statements May Prove Inaccurate

IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS CERTAIN 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 CERTAIN 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 SECTIONS ENTITLED “RISK FACTORS” AND “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS” AND ELSEWHERE IN THIS REPORT. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT’S ANALYSIS ONLY AS OF THE DATE HEREOF. IN ADDITION, READERS SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS QUARTERLY REPORT AND IN THE COMPANY’S PERIODIC REPORTS AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) FROM TIME TO TIME.

PART I – FINANCIAL INFORMATION

     Item 1. Financial Statements

WIPRO LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)

		As of September 30,												As of March 31,
		2006				2007				2007				2007
										Convenience
										translation into
										US$
		(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Note 4)		Rs.	4,144			Rs.	20,266			$	510			Rs.	12,412
Restricted cash (Note 16)			—				33				1				7,238
Investments in liquid and short-term mutual funds (Note 8)			33,018				23,060				580				32,410
Accounts receivable, net of allowances (Note 5)			24,498				32,130				808				28,083
Costs and earnings in excess of billings on contracts in progress			5,439				7,800				196				5,096
Inventories (Note 6)			2,426				6,296				158				4,150
Deferred income taxes			220				506				12				382
Other current assets (Note 7)			10,002				13,797				348				11,479
Total current assets			79,747				103,888				2,613				101,250
Property, plant and equipment, net (Note 9)			21,195				33,626				846				26,541
Investments in affiliates (Note 13)			1,200				1,379				35				1,242
Investment securities			28				358				9				357
Deferred income taxes			56				230				6				49
Intangible assets, net (Note 10)			2,386				12,296				309				2,663
Goodwill (Note 3,10)			11,445				37,589				946				12,706
Other assets (Note 7)			1,528				5,591				141				1,959
Total assets		Rs.	117,585			Rs.	194,957			$	4,905			Rs.	146,767
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings from banks (Note 15)		Rs.	807			Rs.	24,762			$	623			Rs.	2,893
Current portion of long-term debt (Note 15)			90				981				25				328
Current portion of obligations under capital leases			—				320				8				—
Accounts payable			5,438				14,226				358				10,202
Accrued expenses			7,711				8,786				221				5,139
Accrued employee costs			4,885				4,611				116				5,187
Advances from customers			1,158				1,620				41				1,315
Billings in excess of costs and earnings on contracts in progress			1,054				2,485				63				1,818
Other current liabilities (Note 11)			8,286				14,391				362				16,623
Total current liabilities			29,429				72,182				1,817				43,505
Long-term debt, excluding current portion(Note 15)			106				2,335				59				560
Obligations under capital leases, excluding current portion			—				806				20				—
Deferred income taxes			468				1,843				46				464
Other liabilities			461				2,290				58				770
Total liabilities			30,464				79,456				2,000				45,299
Minority interest			—				97				2				—
Stockholders’ equity:
Equity shares at Rs. 2 par value: 1,650,000,000 shares authorized; Issued and outstanding: 1,458,999,650, 1,434,563,895 and 1,459,261,169 shares as of March 31, 2007, September 30, 2006 and 2007 (Note 16)			2,869				2,919				73				2,918
Additional paid-in capital (Note 21)			17,533				25,223				635				24,508
Accumulated other comprehensive income			578				(237	)			(6	)			94
Retained earnings (Note 17)			66,141				87,499				2,201				73,948
Equity shares held by a controlled Trust: 7,961,760, 7,869,060 and 7,961,760 shares as of March 31, 2007, September 30, 2006 and 2007 (Note 21)			—				—				—				—
Total stockholders’ equity			87,121				115,404				2,903				101,468
Total liabilities and stockholders’ equity		Rs.	117,585			Rs.	194,957			$	4,905			Rs.	146,767

See accompanying notes to the unaudited consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except share data)

		Three months ended September 30,												Six months ended September 30,
		2006				2007				2007				2006				2007				2007
										Convenience												Convenience
										translation												translation into
										into US$												US$
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
Global IT Services and Products
IT Services			24,876				29,482				742				47,289				56,942				1,433
BPO Services			2,303				2,803				71				4,402				5,373				135
India and AsiaPac IT Services and Products
Services			2,077				2,901				73				3,685				5,387				136
Products			2,922				5,863				147				5,670				9,951				250
Consumer Care and Lighting			1,871				3,561				90				3,521				5,782				145
Others			1,089				2,671				67				1,883				5,678				143
Total			35,138				47,281				1,189				66,450				89,113				2,242
Cost of revenues:
Global IT Services and Products
IT Services			16,467				20,084				505				31,085				38,372				965
BPO Services			1,499				1,851				47				2,992				3,503				88
India and AsiaPac IT Services and Product
Services			1,191				1,648				41				2,083				3,163				80
Products			2,643				5,227				131				5,131				8,792				221
Consumer Care and Lighting			1,243				2,067				52				2,299				3,539				89
Others			798				2,132				54				1,433				4,736				119
Total			23,841				33,009				830				45,023				62,105				1,562
Gross profit			11,297				14,271				359				21,427				27,008				679
Operating expenses:
Selling and marketing expenses			(2,160	)			(3,288	)			(83	)			(4,197	)			(6,049	)			(152	)
General and administrative expenses			(1,794	)			(2,655	)			(67	)			(3,272	)			(4,715	)			(119	)
Research and development expenses			(71	)			(157	)			(4	)			(128	)			(330	)			(8	)
Amortization of intangible assets (Note 10)			(88	)			(99	)			(2	)			(142	)			(204	)			(5	)
Foreign exchange gains/(losses), net			2				58				1				(16	)			(794	)			(20	)
Others, net			282				32				1				305				112				3
Operating income			7,468				8,163				205				13,978				15,028				378
Other income, net (Note 18)			471				743				19				979				1,734				44
Equity in earnings/(losses) of affiliates (Note 13)			92				84				2				157				171				4
Income before income taxes, minority interest and cumulative effect of change in accounting principle			8,031				8,990				226				15,114				16,933				426
Income taxes (Note 20)			(1,068	)			(865	)			(22	)			(2,047	)			(1,704	)			(43	)
Minority interest			—				(3	)			—				—				(3	)			—
Income before cumulative effect of change in accounting principle			6,963				8,121				204				13,066				15,226				383
Cumulative effect of change in accounting principle			—				—				—				39				—				—
Net income			6,963				8,121				204				13,105				15,226				383
Earnings per equity share: (Note 22)
Basic
Income before cumulative effect of change in accounting principle			4.89				5.60				0.14				9.19				10.50				0.26
Cumulative effect of change in accounting principle			—				—				—				0.03				—				—
Net income			4.89				5.60				0.14				9.22				10.50				0.26
Diluted
Income before cumulative effect of change in accounting principle			4.83				5.57				0.14				9.08				10.45				0.26
Cumulative effect of change in accounting principle			—				—				—				0.03				—				—
Net income			4.83				5.57				0.14				9.10				10.45				0.26
Weighted average number of equity shares used in computing earnings per equity share:
Basic			1,424,691,434				1,450,036,475								1,422,047,916				1,449,964,665
Diluted			1,442,389,536				1,457,139,183								1,439,517,160				1,457,512,260

See accompanying notes to the unaudited consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(in millions, except share data)

																						Accumulated
										Additional												Other								Equity Shares held by a								Total
		Equity Shares								Paid in				Deferred Stock				Comprehensive				Comprehensive				Retained				Controlled Trust								Stockholders’
		No. of Shares				Amount				Capital				Compensation				Income				Income/(loss)				Earnings				No. of Shares				Amount				Equity
Balance as of March 31, 2006			1,425,754,267				2,852				16,521				(2,202	)							434				61,161				(7,869,060	)			(0	)			78,764
Elimination of deferred stock compensation balance on adoption of SFAS 123 No. ( R ) (unaudited) (Note 2)											(2,202	)			2,202																								—
Cumulative effect of change in accounting principle (unaudited) (Note 2)											(39	)																											(39	)
Cash dividend (unaudited)																											(8,125	)											(8,125	)
Issuance of equity shares on exercise of options (unaudited)			8,809,628				18				2,706																												2,723
Compensation cost related to employee stock incentive plan (unaudited) (Note 21)											548																												548
Comprehensive Income
Net income (unaudited)																			13,105								13,105												13,105
Other comprehensive income/(loss)																																							—
Translation adjustments (unaudited)																			89																				—
Unrealised gain/(loss) on investment securities, net (net of tax effect of Rs. 48) (unaudited)																			89																				—
Unrealised gain/(loss) on cash flow hedging derivatives, net (unaudited)																			(34	)																			—
Total other comprehensive income/(loss) (unaudited)																			144				144																144
Comprehensive income (unaudited)																			13,245.80
Balance as of September 30, 2006 (unaudited)			1,434,563,895				2,869				17,533				—								578				66,141				(7,869,060	)			(0	)			87,121
Balance as of March 31, 2007			1,458,999,650			Rs.	2,918			Rs.	24,508				—							Rs.	94			Rs.	73,948				(7,961,760	)		Rs.	(0	)		Rs.	101,468
Cash dividend (unaudited)																											(1,675	)											(1,675	)
Issuance of equity shares on exercise of options (unaudited)			2,61,519				1				91																												92
Compensation cost related to employee stock incentive plan (unaudited) (Note 21)											624																												624
Comprehensive income
Net income (unaudited)																			15,226								15,226												15,226
Other comprehensive income / (loss)
Translation adjustments (unaudited)																			(777	)
Unrecognized actuarial gain/(loss) (net of tax effect of Rs. (0.08)) (unaudited)																			5
Unrealized gain/(loss) on investment securities, net (net of tax effect of Rs. 81) (unaudited)																			(161	)
Unrealized gain/(loss) on cash flow hedging derivatives, net (unaudited)																			602
Total other comprehensive income / (loss) (unaudited)																			(331	)			(331	)															(331	)
Comprehensive income (unaudited)																			14,895
Balance as of September 30, 2007 (unaudited)			1,459,261,169				2,919				25,223				—								(237	)			87,499				(7,961,760	)			0				115,404
Balance as of September 30, 2007 (unaudited) ($)						$	73			$	635											$	(6	)		$	2,201							$	0			$	2,903

See accompanying notes to the unaudited consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

		Six months ended September 30,
		2006				2007				2007
										Convenience
										translation into
										US$
		(Unaudited)				(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income		Rs.	13,105			Rs.	15,226			$	383
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of property, plant and equipment			(5	)			(165	)			(4	)
Cumulative effect of change in accounting principle			(39	)			—				—
Depreciation and amortization			2,044				2,646				67
Deferred tax charge/(benefit)			(16	)			(56	)			(1	)
Unrealised exchange (gain)/loss			354				(1,128	)			(28	)
(Gain)/loss on sale of investment securities			(175	)			(550	)			(14	)
Stock based compensation			548				624				16
Equity in earnings of affiliates			(157	)			(171	)			(4	)
Changes in operating assets and liabilities:
Accounts receivable			(3,387	)			(1,560	)			(39	)
Costs and earnings in excess of billings on contracts in progress			(1,103	)			(2,703	)			(68	)
Inventories			(301	)			(1,186	)			(30	)
Other assets			(658	)			(3,107	)			(79	)
Accounts payable			49				3,571				89
Accrued expenses and employee costs			1,446				(1,628	)			(41	)
Advances from customers			596				949				24
Other liabilities			1,073				1,463				37
Net cash provided by operating activities			13,374				12,225				308
Cash flows from investing activities:
Expenditure on property, plant and equipment			(5,083	)			(6,315	)			(159	)
Proceeds from sale of property, plant and equipment			183				323				8
Purchase of investments			(46,959	)			(99,845	)			(2,512	)
Proceeds from sale of investments			44,569				109,536				2,756
Investment in inter-corporate deposits			—				50				1
Payment for acquisitions, net of cash acquired			(5,345	)			(26,421	)			(664	)
Net cash used in investing activities			(12,635	)			(22,672	)			(570	)
Cash flows from financing activities:
Proceeds from issuance of equity shares			2,723				92				2
Proceeds from issuance of equity shares by a subsidiary			—				55				1
Proceeds/(repayment) from/of short-term borrowings from banks			(254	)			19,860				501
Proceed from long-term debt			196				1,441				36
Repayment of long-term debt			—				(1,186	)			(30	)
Payment of cash dividends			(8,125	)			(1,945	)			(49	)
Net cash provided / (used) in financing activities			(5,459	)			18,317				461
Net decrease in cash and cash equivalents during the period			(4,721	)			7,870				198
Effect of exchange rate changes on cash			7				(16	)			(0	)
Cash and cash equivalents at the beginning of the period			8,858				12,412				312
Cash and cash equivalents at the end of the period		Rs.	4,144			Rs.	20,266			$	510
Supplementary information:
Cash paid for interest			36				305				8
Cash paid for taxes			1,760				2,674				67

See accompanying notes to the unaudited consolidated financial statements.

WIPRO LIMITED AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share data and where otherwise stated)

1. Overview

     Wipro Limited (Wipro), together with its subsidiaries (collectively, the Company) is a leading India based provider of IT Services and Products, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as India and AsiaPac IT Services and Products and Consumer Care and Lighting. Wipro is headquartered in Bangalore, India.

2. Significant Accounting Policies

     The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

     Basis of preparation of financial statements. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP.

     Interim information presented in the consolidated financial statements has been prepared by the management without audit and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair presentation of the financial position, results of operations and cash flows for the periods shown, and is in accordance with U.S. 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.

     Functional currency and exchange rate translation. The functional currency of Wipro and its domestic subsidiaries is the Indian rupees, the national currency of India. The functional currency of Wipro’s foreign subsidiaries is determined based on an evaluation of the individual and collective economic factors as discussed in Statement of Financial Accounting Standard (SFAS) No. 52, Foreign Currency Translation. The assets and liabilities of subsidiaries that have local functional currency are translated into Indian rupees at the exchange rate in effect at the balance sheet date. Revenue and expense accounts are translated at monthly weighted-average exchange rate for the respective periods. The gains or losses resulting from such translation are reported as a separate component of stockholders’ equity.

     Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing on the date of respective transactions. Monetary assets and liabilities in foreign currency are translated into functional currency at the exchange rates prevailing on the balance sheet date. The resulting exchange gains/losses are included in the statement of income.

     Convenience translation. The accompanying consolidated financial statements have been reported in Indian rupees, the national currency of India. Solely for the convenience of the readers, the financial statements as of and for the six months ended September 30, 2007, have been translated into US dollars at the noon buying rate in New York City on September 28, 2007, for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York of $1 = Rs.  39.75. 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 any other rate.

     Principles of consolidation. The consolidated financial statements include the financial statements of Wipro and all of its subsidiaries, which are more than 50% owned and controlled. All inter-company accounts and transactions are eliminated on consolidation. The Company accounts for investments by the equity method where its investment in the voting stock gives it the ability to exercise significant influence over the investee.

     Cash equivalents. The Company considers investments in highly liquid instruments with remaining maturities, at the date of purchase/investment, of three months or less to be cash equivalents.

     Revenue recognition. Revenue from services, as rendered, are recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectibility is reasonably assured. Revenues from software development services comprise revenues from time-and-material and fixed-price contracts. Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from fixed-price, fixed-time frame contracts is recognized in accordance with the percentage of completion method. Guidance has been drawn from the Accounting Standards Executive Committee’s conclusion in paragraph 95 of Statement of Position (SOP) 97-2, Software Revenue Recognition, to account for revenue from fixed price arrangements for software development and related services in conformity with SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. The input (cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses on contracts-in-progress are recorded in the period in which such losses become probable based on the current contract estimates. Maintenance revenue is deferred and recognized ratably over the term of the agreement. Revenue from customer training, support and other services is recognized as the related service is performed. Costs that are incurred for a specific anticipated contract and that will result in no future benefits unless the contract is obtained are not included in contract costs. However, such costs are deferred only if the cost can be directly associated with a specific anticipated contract and the recoverability from that contract are deemed to be probable.

     Revenue from sale of products is recognized when persuasive evidence of an arrangement exists, the product has been delivered in accordance with sales contract, the sales price is fixed or determinable and collectibility is reasonably assured.

     The Company has elected to adopt the guidance in EITF Issue No. 00-21 for all revenue arrangements with multiple deliverables.

     Based on this guidance, the Company recognizes revenues on the delivered products or services only if:

	•		The revenue recognition criteria applicable to the unit of accounting is met;
	•		The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis;
	•		There is objective and reliable evidence of the fair value of the undelivered item(s); and
	•		If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company.

     The arrangement consideration is allocated to the units of accounting based on their fair values. The revenue recognized for the delivered items is limited to the amount that is not contingent upon the delivery or performance of the undelivered items.

     In certain cases, the application of the contingent revenue provisions of EITF Issue No. 00-21 could result in recognizing a loss on the delivered element. In such cases, the cost recognized is limited to the amount of non-contingent revenues recognized and the balance costs are recorded as an asset and are reviewed for impairment based on the estimated net cash flows to be received for future deliverables under the contract. These costs are subsequently recognized on recognition of the revenue allocable to the balance deliverables.

     Revenues from BPO Services are derived from both time-based and unit-priced contracts. Revenue is recognized as the related services are performed, in accordance with the specific terms of the contract with the customers.

     Revenues are shown net of excise duty, sales tax, value added tax, service tax and applicable discounts and allowances

     When the Company receives advance payments from customers for sale of products or provision of services, such payments are reported as advances from customers until all conditions for revenue recognition are met.

     Volume discount. The Company accounts for volume discounts and pricing incentives to customers using the guidance in EITF Issue 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). The discount terms in the Company’s arrangements with customers generally entitle the customer to discounts, if the customer completes a specified level of revenue transactions. In some arrangements, the level of discount varies with increases in the levels of revenue transactions. The Company recognizes discount obligations as a reduction of revenue based on the ratable allocation of the discount to each of the underlying revenue transactions that result in progress by the customer toward earning the discount. The Company recognizes the liability based on its estimate of the customer’s future purchases. If the Company cannot reasonably estimate the customer’s future purchases, then the liability is recorded based on the maximum potential level of discount. The Company recognizes changes in the estimated amount of obligations for discounts using a cumulative catch-up adjustment.

     Warranty costs. The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Company’s historical experience of material usage and service delivery costs.

     Shipping and handling costs. Shipping and handling costs are included in selling and marketing expenses.

     Inventories. Inventories are stated at the lower of cost and market value. Cost is determined using the weighted-average method for all categories of inventories.

     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.

     Investments in affiliates. The Company’s equity in the earnings/(losses) of affiliates is included in the statement of income and the Company’s share of net assets of affiliates is included in the balance sheet.

     Shares issued by subsidiary/affiliate. The issuance of stock by a subsidiary/affiliate to third parties reduces the proportionate ownership interest in the investee. Unless the issuance of such stock is part of a broader corporate reorganization or unless realization is not assured, the Company recognizes a gain or loss, equal to the difference between the issuance price per share and the Company’s carrying amount per share. Such gain or loss is recognized in the statement of income when the transaction occurs.

     Property, plant and equipment. Property, plant and equipment are stated at cost. The Company depreciates property, plant and equipment over the estimated useful life using the straight-line method. Assets under capital lease and leasehold improvements are amortized over the shorter of estimated useful life and the related lease term. The estimated useful lives of assets are as follows:

Buildings		30 to 60 years
Plant and machinery		2 to 21 years
Computer equipment		2 to 3 years
Furniture, fixtures and equipment		3 to 10 years
Vehicles		4 years
Computer software		2 to 3 years

     Software for internal use is primarily acquired from third-party vendors and is in ready to use condition. Costs for acquiring this software are capitalized and subsequent costs are charged to the statement of income. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software.

     Deposits paid towards the acquisition of property, plant and equipment outstanding as of each balance sheet date and the cost of property, plant and equipment not ready for use before such date are disclosed under capital work-in-progress. The interest cost incurred for funding an asset during its construction period is capitalized based on the actual investment in the asset and the average cost of funds. The capitalized interest is included in the cost of the relevant asset and is depreciated over the estimated useful life of the asset.

     Business combinations, goodwill and intangible assets. In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, the Company uses the purchase method of accounting for all business combinations consummated after June 30, 2001. Intangible assets acquired in a business combination are recognized and reported apart from goodwill if they meet the criteria specified in SFAS No. 141. Any purchase price allocated to an assembled workforce is not accounted separately.

     In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, all assets and liabilities of the acquired business including goodwill are assigned to the reporting units. The Company does not amortize goodwill but instead tests goodwill for impairment at least annually, using a two step impairment process.

     The fair value of the reporting unit is first compared to its carrying value. The fair value of reporting units is determined using the income approach. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the implied fair value of the reporting unit’s goodwill is compared with the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded.

     The Company amortizes intangible assets over their estimated useful lives unless such lives are determined to be indefinite. Amortizable intangible assets are amortized over their estimated useful lives in proportion to the economic benefits consumed in each period unless that pattern cannot be reliably determined, in which case a straight line amortization method is used. Intangible assets with indefinite lives are tested annually for impairment and written down to the fair value as required. The estimated useful lives of the amortizable intangible assets are as follows:

Customer-related intangibles		2 to 5 years
Marketing-related intangibles		2 to 30 years
Technology-based intangibles		5 years

     Start-up costs. Cost of start-up activities including organization costs are expensed as incurred.

     Research and development. Revenue expenditure on research and development is expensed as incurred. Capital expenditure incurred on equipment and facilities that are acquired or constructed for research and development activities and having alternative future uses is capitalized as tangible assets when acquired or constructed. Software product development costs are expensed as incurred until technological feasibility is achieved.

     Impairment or disposal of long-lived assets. Long-lived assets, including certain identifiable intangible assets, to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such assets are considered to be impaired if the carrying amount of the assets is higher than the future undiscounted net cash flows expected to be generated from the assets. The impairment amount to be recognized is measured by the amount by which the carrying value of the assets exceeds its fair value.

     The Company measures long-lived assets held-for-sale, at the lower of carrying amount or fair value, less costs to sell.

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

     Income taxes. Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The deferred tax asset is reduced by a valuation allowance if it is more likely than not that some portion or all of the asset will not be realized. Excess income tax benefit on exercise of employee stock options is credited to additional paid-in capital.

     The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48) on April 1, 2007. FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This 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. The Company recognizes penalties and interest related to unrecognized tax benefits as a component of other income, net. Refer note 20 for additional information relating to impact of adoption of FIN 48.

     The income tax provision for the interim periods is based on the best estimate of the effective tax rate expected to be applicable for the full fiscal year. Changes in interim periods to tax provisions, for changes in judgments or settlements relating to tax exposure items of earlier years, are recorded as discrete items in the interim period of change.

     Stock-based compensation. Effective April 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123 (R)), which requires the measurement and recognition of compensation expense for all stock-based payment awards based on the grant-date fair value of those awards and recognition on straight line basis over the requisite service period. The Company includes a forfeitures estimate in the amount of compensation expense being recognized. The Company adopted SFAS No.123(R) using the modified prospective application method. Under this approach, the Company has recognized compensation expense for share-based payment awards granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123.

     SFAS No. 123(R) requires that deferred stock-based compensation previously recorded under APB Opinion No. 25 and outstanding on the date of adoption be eliminated against additional paid-in capital. Accordingly, the deferred compensation balance of Rs. 2,202 was eliminated against additional paid-in capital on April 1, 2006.

     Under APB Opinion No. 25, the Company had a policy of recognizing the effect of forfeitures only as they occurred. Accordingly, as required by SFAS No. 123 (R), on April 1, 2006, the Company estimated the number of outstanding instruments, which are not expected to vest and recognized a gain of Rs. 39 representing the reversal of compensation cost for such instruments previously recognized in income as cumulative effect of changes in accounting principle.

     Derivatives and hedge accounting. The Company purchases forward foreign exchange contracts/option contracts (derivatives) to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. The strategy also includes purchase of series of short term forward foreign exchange contracts which are replaced with successive new contracts up to the period in which the forecasted transactions are expected to occur (roll-over hedging). The Company also designates zero-cost collars, which qualify as net purchased options, to hedge the exposure to variability in expected future foreign currency cash inflows due to exchange rate movements beyond a defined range.

     In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, the Company recognizes all derivatives as assets or liabilities measured at their fair value, regardless of the purpose or intent of holding them. In respect of derivatives designated and effective as cash flow hedges, gains or losses resulting from changes in the fair value are deferred and recorded as a component of accumulated other comprehensive income within stockholder’s equity until the hedged transaction occurs and are then recognized in the consolidated statements of income along with the hedged item. The Company assesses hedge effectiveness based on the overall change in fair value of the derivative instrument. However, for derivatives acquired pursuant to roll-over hedging strategies, the forward premium/discount points are excluded from assessing hedge effectiveness.

     Changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments are recognized in consolidated statements of income of each period and are reported within foreign exchange gains/ (losses), net under operating expenses.

     In respect of derivatives designated as hedges, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also formally assesses both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company, prospectively, discontinues hedge accounting with respect to that derivative.

     Reclassifications. Certain amounts in the consolidated financial statements and notes have been reclassified to conform to the current period’s presentation.

     Recent accounting pronouncement

          SFAS No. 157. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). 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.

3. Acquisition of Ownership Interest in a Subsidiary

During the years ended March 31, 2006 and 2007, the Company completed a number of acquisitions. These acquisitions have been accounted for under the purchase method and have been included in the Company’s consolidated financial statements from the date of the acquisition. The developments during the current period are as follows:

Unza Holdings Limited

     On July 30, 2007, the Company acquired 100% of the equity of Unza Holdings Limited (‘Unza’). Unza is an independent manufacturer and marketer of personal care products in South East Asia. Unza markets a wide portfolio of personal care and detergent brands in several countries. The consideration (including direct acquisition costs) included a cash payment of Rs. 9,273 and a deferred payment of Rs. 981.

     The Company believes that this acquisition would strengthen the Company’s brand portfolio and market presence in South East Asia and provide synergy in terms of access to common vendors, formulation and brands.

     The majority of marketing-related intangibles relate to brands. The Company has made a preliminary assessment to identify brands, which have an indefinite life, and those, which have finite life based on a number of factors, including the competitive environment, market share, brand history and macro economic environment of the countries in which the brands are sold.

     The purchase price has been preliminary allocated to the acquired assets and liabilities as follows:

Description		Fair value
Tangible assets		Rs.	4,204
Liabilities			(4,718	)
Marketing-related intangibles			7,691
Deferred tax liabilities			(1,407	)
Goodwill			4,484
Total		Rs.	10,254

Infocrossing Inc.

     On September 20, 2007, the Company acquired 97.5% of the equity shares of Infocrossing Inc. and subsidiaries (‘Infocrossing’). The acquisition was conducted by means of a tender offer for all the outstanding shares of Infocrossing. Pursuant to the terms of the tender offer, the remaining untendered shares have been cancelled and a consideration of US$ 18.70 per share has been paid subsequent to the balance sheet date. Infocrossing is a U.S.-based IT infrastructure management, enterprise application and business process outsourcing services provider. The total consideration (including direct acquisition costs) amounted to Rs. 17,640.

     The Company believes that acquisition of Infocrossing broadens the data center and mainframe capabilities and strengthens its competitive positioning in the remote infrastructure management sector.

     As of the date of acquisition, Infocrossing has net operating losses, which are available for carry- forward and set-off against taxable profits in the future. The Company believes that it is more likely than not that approximately US$ 72 of net operating losses will be available for carry-forward and set-off against the taxable income of Infocrossing in the future. Accordingly, in the preliminary purchase price allocation, the Company has recorded deferred tax assets of US$ 30 representing the tax benefits that can be availed.

     In addition, pursuant to the terms of indenture agreement, the convertible debt in Infocrossing has been cancelled. Liabilities assumed upon acquisition include Rs. 4,278 payable to the holders of convertible debt. Further, pursuant to the terms of the stock option plan, all the outstanding stock options of Infocrossing have been cancelled. Liabilities assumed upon acquisition include Rs. 823 payable to the stock option holders.

     Infocrossing has tax deductible goodwill of approximately US$ 90 arising from its earlier acquisitions. The goodwill is deductible for tax purposes over 15 years.

     The purchase price has been preliminary allocated to the acquired assets and liabilities as follows:

Description		Fair value
Tangible assets		Rs.	4,800
Liabilities			(10,501	)
Customer-related intangibles			2,425
Deferred tax assets, net			194
Goodwill			20,722
Total		Rs.	17,640

     The purchase consideration has been allocated on a preliminary basis based on management’s estimates. The Company is in the process of making a final determination of the fair value of assets and liabilities and useful lives of certain marketing-related intangibles. Finalization of the purchase price allocation based on an independent third party appraisal may result in certain adjustments to the above allocation.

Unaudited Pro-forma Financial Information

     The following table provides pro forma results of operations for the three and six months ended September 30, 2006 and 2007 as if Unza and Infocrossing had been acquired as of the beginning of each of the periods presented. The proforma results include certain purchase accounting adjustments such as the estimated changes in depreciation and amortization expense on acquired tangible and intangible assets. The pro-forma results include interest cost on debt attributable to acquisitions of Rs. 125 and Rs. 109 for the three months ended September 30, 2006 and 2007 respectively and Rs. 124 and Rs. 110 for the six months ended September 30, 2006 and 2007 respectively. The pro-forma results exclude effects of certain material nonrecurring charges of Rs. 1,717 incurred solely in connection with the transaction like acceleration of vesting of unvested options, transaction costs, restructuring of employment contracts of key employees and write-off of unamortized discount on convertible debt extinguished. Such amounts are not necessarily indicative of the results that would have occurred if the acquisition had occurred on dates indicated or that may result in the future.

		Three months ended								Six months ended
		September 30,								September 30,
		2006				2007				2006				2007
		(in millions)								(in millions)
Revenue		Rs.	39,607			Rs.	49,833			Rs.	75,117			Rs.	95,964
Net income			7,087				7,938				13,285				15,129
Basic net income per share			4.97				5.47				9.34				10.43
Diluted net income per share			4.91				5.45				9.23				10.38

Others

     During the period ended September 30, 2007, the Company has paid Rs. 266 towards earn-out determined on achievement of specific financial metrics for RetailBox B.V and Saraware Oy.

     The Company has also finalized the purchase price allocation for the acquisitions of RetailBox BV (Enabler), Saraware Oy, cMango Inc. during the period ended September 30, 2007. The Company has not recorded any significant adjustment to the preliminary purchase price allocation.

4. Cash and Cash Equivalents

     Cash and cash equivalents comprise cash, cash on deposit with banks and highly liquid investments.

5. Accounts Receivable

     Accounts receivable are stated net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts based on financial condition of its customers and aging of the accounts

receivable. Accounts receivable are generally not collateralized. The activity in the allowance for doubtful accounts receivable is given below:

										Year ended
		Six months ended September 30,								March 31,
		2006				2007				2007
		((Unaudited))				(Unaudited)
Balance at the beginning of the period		Rs.	1,258			Rs.	1,388			Rs.	1,258
Additional provision during the period, net of collections			140				371				280
Bad debts charged to provision			—				(442	)			(150	)
Balance at the end of the period		Rs.	1,398			Rs.	1,317			Rs.	1,388

6. Inventories

     Inventories consist of the following:

		As of September 30,								As of March 31,
		2006				2007				2007
		(Unaudited)				(Unaudited)
Stores and spare parts		Rs.	230			Rs.	336			Rs.	298
Raw materials and components			667				2,868				1,584
Work-in-process			373				646				491
Finished goods			1,156				2,446				1,777
		Rs.	2,426			Rs.	6,296			Rs.	4,150

7. Other Assets

     Other assets consist of the following:

		As of September 30,								As of March 31,
		2006				2007				2007
		(Unaudited)				(Unaudited)
Prepaid expenses		Rs.	2,044			Rs.	3,718			Rs.	2,426
Prepaid rentals for leasehold land			117				647				597
Due from officers and employees			998				1,337				884
Advances to suppliers			494				1,176				712
Balances with statutory authorities			109				407				207
Deposits			1,539				1,708				1,591
Interest bearing deposits with corporates			500				600				650
Advance income taxes			3,596				6,063				4,844
Deferred contract costs			471				788				397
Derivative asset			385				1,599				379
Others			1,277				1,345				751
			11,530				19,388				13,438
Less: Current assets			(10,002	)			(13,797	)			(11,479	)
		Rs.	1,528			Rs.	5,591			Rs.	1,959

8. Investment Securities

     Investment securities consist of the following:

As of September 30, 2006

As of September 30, 2007

(Unaudited)

(Unaudited)

Gross

Unrealized

Gross Unrealized

Carrying Value

Holding Gains

Fair Value

Carrying Value

Holding Gains

Fair Value

Available-for-sale:

Investments in liquid and short-term mutual funds

Rs.

32,382

Rs.

636

Rs.

33,018

Rs.

22,733

Rs.

327

Rs.

23,060

As of March 31, 2007

Gross Unrealized

Carrying Value

Holding Gains

Fair Value

Available-for-sale:

Investments in liquid and short-term mutual funds

Rs.

31,842

Rs.

568

Rs.

32,410

     Dividends from available-for-sale securities during the year ended March 31, 2007 and six months ended September 30, 2006 and 2007 were Rs. 1,689, Rs. 695 and Rs. 791 respectively and are included in other income.

9. Property, Plant and Equipment

     Property, plant and equipment consist of the following:

		As of September 30,								As of March 31,
		2006				2007				2007
		(Unaudited)				(Unaudited)
Land		Rs.	1,261			Rs.	2,109			Rs.	1,571
Buildings			5,107				8,623				6,096
Plant and machinery			6,187				7,991				6,644
Computer Equipments			8,760				12,861				9,959
Furniture, fixtures and equipment			4,212				4,706				3,934
Vehicles			1,504				2,241				1,821
Computer software for internal use			2,246				3,276				2,831
Capital work-in-progress			7,409				10,818				10,189
			36,686				52,265				43,045
Accumulated depreciation and amortization			(15,491	)			(18,639	)			(16,504	)
		Rs.	21,195			Rs.	33,626			Rs.	26,541

     Depreciation expense for the year ended March 31, 2007 and six months ended September 30, 2006 and 2007 is Rs. 3931, Rs. 1,857 and Rs. 2,392 respectively. This includes Rs. 400, Rs. 163 and Rs. 355 as amortization of capitalized internal use software, during the year ended March 31, 2007 and six months ended September 30, 2006 and 2007 respectively.

10. Goodwill and Intangible Assets

     Information regarding the Company’s intangible assets acquired either individually or in a business combination consists of the following:

		As of September 30,
						2006												2007
						(Unaudited)												(Unaudited)
		Gross carrying				Accumulated								Gross carrying				Accumulated
		amount				amortization				Net				amount				Amortization				Net
Technology-based intangibles		Rs.	130			Rs.	60			Rs.	70			Rs.	130			Rs.	90			Rs.	40
Customer-related intangibles			1,661				729				933				4,522				1,132				3,390
Marketing-related intangibles			1,480				107				1,373				9,172				119				9,053
Effect of translation adjustments			10				—				10				(187	)			—				(187	)
		Rs.	3,281			Rs.	896			Rs.	2,386			Rs.	13,637			Rs.	1,341			Rs.	12,296