10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001
                         Commission File Number 0-22903

                                  SYNTEL, INC.
             (Exact name of Registrant as specified in its charter)

                   Michigan                                    38-2312018
         (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                    Identification No.)

    525 E, Big Beaver Road, Suite 300, Troy, Michigan              48083
        (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (248) 619-2800

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
has been required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes   X          No
                               -----           -----

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

         The aggregate market value of the Common Stock held by non-affiliates
of the Registrant as of March 11, 2002, based on the last sale price of $14.68
per share for the Common Stock on the NASDAQ National Market on such date, was
approximately $81,153,785.

         As of March 11, 2002, the Registrant had 38,623,575 shares of Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for the 2002 Annual Meeting of
Shareholders to be held on or about May 17, 2002 are incorporated by reference
into Part III hereof.


                                        1


                                     PART I

ITEM 1.  BUSINESS.

References herein to the "Company" or "Syntel" refer to Syntel, Inc. and its
wholly owned subsidiaries in India, the UK, and Singapore, and Germany on a
consolidated basis.

OVERVIEW

         Syntel is a worldwide provider of information technology services to
Fortune 1000 companies, as well as to government entities, incorporated under
Michigan law on April 15, 1980. The Company's service offerings are grouped into
three segments, e-Business, Applications Outsourcing, and Teamsourcing(sm).
E-Business consists of practice areas in Web Solutions, Customer Relationship
Management (CRM), Data Warehousing/Business Intelligence, and Enterprise
Applications Outsourcing (EAI) services. Applications Outsourcing consists of
outsourcing services for ongoing management, development and maintenance of
business Applications. TeamSourcing(sm) consists of professional IT consulting
services. Syntel believes that its service offerings are distinguished by its
Global Delivery Service, a corporate culture focused on customer service and
responsiveness and its own internally developed "intellectual capital" based on
a proven set of methodologies, practices and tools for managing the IT functions
of its customers.

         Through its e-Business practices, Syntel helps its customers harness
advanced technologies to improve their businesses. Web Solutions involves
services in the areas of web architecture, web-enabling legacy Applications, as
well as the creation of web portals. CRM involves customizing and implementing
CRM software packages to enhance a customer's interaction with its customers.
Data Warehousing/Business Intelligence involves gathering and analyzing key
business data to make better real-time decisions through "data mining."
Enterprise Applications Outsourcing involves consulting and Applications
Outsourcing services designed to better integrate Front Office and Back Office
Applications. Additionally, the Company has entered into several partnerships to
provide installation services with leading software firms including BroadVision,
Corillian, Kana Communications, Tibco, Selectica Software, Vianetta and
Vigilance. These partnerships will provide the Company with increased
opportunities for market penetration.

         Through Applications Outsourcing, Syntel provides higher-value
Applications management services for ongoing management, development and


                                       2



maintenance of customers' business Applications. Syntel assumes responsibility
for and manages selected Applications support functions of the customer.
Utilizing its developed methodologies, processes and tools, known as
IntelliTransfer(R), the Company is able to assimilate the business process
knowledge of its customers to develop and deliver services specifically tailored
for that customer. In 2001 and 2000, e-Business and Applications Outsourcing
services combined accounted for approximately 87% and 80% of total consolidated
revenues, respectively.

         Through TeamSourcing, Syntel provides professional IT consulting
services directly to customers. TeamSourcing services include systems
specification, design, development, implementation and maintenance of complex IT
Applications involving diverse computer hardware, software, data and networking
technologies and practices. TeamSourcing services are provided by individual
professionals and teams of professionals dedicated to assisting customer IT
departments with systems projects and ongoing functions. TeamSourcing accounted
for approximately 13% and 20% of revenues, for the years ended December 31, 2001
and 2000, respectively.

         The Company's Global Delivery Service provides Syntel with flexibility
to deliver to each customer a unique mix of services on-site at the customer's
location, off-site at its U.S. locations and offshore at Global Development
Centers in Mumbai and Chennai, India. The benefits to the customer from this
customized service approach include responsive delivery based on an in-depth
understanding of the specific processes and needs of the customer, quick
turnaround, access to the most knowledgeable personnel and best practices,
resource depth, 24-hour support seven days a week and cost-effectiveness. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers
around the world largely unconstrained by geographies, time zones and cultures.

         Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. Its
five largest customers during 2001, based on revenues, were American Express
Corp., Target Corporation, American International Group, Inc., Humana Inc. and
Daimler-Chrysler Corp. The Company has been chosen as a preferred vendor by
several of its customers and has been recognized for its quality and
responsiveness. The Company has a focused sales effort that includes a strategy
of migrating existing TeamSourcing customers to higher-value e-Business and
Applications Outsourcing services. During recent years the Company has


                                       3



focused on increasing its resources in the development, marketing and sales of
its e-Business and Applications Outsourcing services.

         The Company believes its human resources are its most valuable asset
and invests significantly in programs to recruit, train and retain IT
professionals. The Company recruits globally through its worldwide recruiting
network and maintains a broad package of employee support programs. Syntel
believes that its management structure and human resources organization is
designed to maximize the Company's ability to efficiently expand its IT
professional staff in response to customer needs. As of December 31, 2001,
Syntel's worldwide billable headcount consisted of 1,544 IT consultants
providing professional services to Syntel's customers.

FORWARD LOOKING STATEMENTS / RISK FACTORS

         Certain statements contained in this Report are forward looking
statements within the meaning of the Securities Exchange Act of 1934. In
addition, the Company from time to time may publish other forward looking
statements. Such forward looking statements are based on management's estimates,
assumptions and projections and are subject to risks and uncertainties that
could cause actual results to differ materially from those discussed in the
forward looking statements. Factors which could affect the forward looking
statements include those listed below. The Company does not intend to update
these forward looking statements.

RECRUITMENT AND RETENTION OF IT PROFESSIONALS. The Company's business of
delivering professional IT services is labor intensive, and, accordingly, its
success depends upon its ability to attract, develop, motivate, retain and
effectively utilize highly-skilled IT professionals. The Company believes that
both in the United States and in India there is a growing shortage of, and
significant competition for, IT professionals who possess the technical skills
and experience necessary to deliver the Company's services, and that such IT
professionals are likely to remain a limited resource for the foreseeable
future. The Company believes that, as a result of these factors, it operates
within an industry that experiences a significant rate of annual turnover of IT
personnel. The Company's business plans are based on hiring and training a
significant number of additional IT professionals each year to meet anticipated
turnover and increased staffing needs. The Company's ability to maintain and
renew existing engagements and to obtain new business depends, in large part, on
its ability to hire and retain qualified IT professionals. The Company


                                       4



performs a significant portion of its employee recruiting in foreign countries,
particularly in India. Any perception among the Company's recruits or foreign IT
professionals, whether or not well-founded, that the Company's ability to assist
them in obtaining permanent residency status in the United States has been
diminished could result in increased recruiting and personnel costs or lead to
significant employee attrition or both. There can be no assurance that the
Company will be able to recruit and train a sufficient number of qualified IT
professionals or that the Company will be successful in retaining current or
future employees. Failure to hire and train or retain qualified IT professionals
in sufficient numbers could have a material adverse effect on the Company's
business, results of operations and financial condition.

GOVERNMENT REGULATION OF IMMIGRATION. The Company recruits its IT professionals
on a global basis and, therefore, must comply with the immigration laws in the
countries in which it operates, particularly the United States. As of December
31, 2001, approximately 49% of Syntel's U.S. workforce (21% of Syntel's
worldwide workforce) worked under H-1B visas (permitting temporary residence
while employed in the U.S.) and another 12% of the Company's U.S. workforce (5%
of the Company's worldwide workforce) worked under L-1 visas (permitting
inter-company transfers of employees that have been employed with a foreign
subsidiary for at least 6 months). Pursuant to United States federal law, the
Department of Immigration and Naturalization Services (the "INS") limits the
number of new H-1B visas to be approved in any government fiscal year. In years
in which this limit is reached, the Company may be unable to obtain enough H-1B
visas to bring a sufficient number of foreign employees to the U.S. If the
Company were unable to obtain sufficient H-1B employees, the Company's business,
results of operations and financial condition could be materially and adversely
affected. Furthermore, Congress and administrative agencies have periodically
expressed concerns over the levels of legal immigration into the U.S. These
concerns have often resulted in proposed legislation, rules and regulations
aimed at reducing the number of work visas, including L-1 and H-1B visas, that
may be issued.

VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company has experienced and
expects to continue to experience fluctuations in revenues and operating results
from quarter to quarter due to a number of factors, including: the timing,
number and scope of customer engagements commenced and completed during the
quarter; progress on fixed-price engagements; timing and cost associated with
expansion of the Company's facilities; changes in IT professional wage rates;
the accuracy of


                                       5



estimates of resources and time frames required to complete pending assignments;
the number of working days in a quarter; employee hiring, attrition and
utilization rates; the mix of services performed on-site, off-site and offshore;
termination of engagements; start-up expenses for new engagements; longer sales
cycles for Applications Outsourcing engagements; customers' budget cycles; and
investment time for training. Because a significant percentage of the Company's
selling, general and administrative expenses are relatively fixed, variations in
revenues may cause significant variations in operating results. As fixed price
engagements grow in revenue and percent of total revenue, operating results may
be adversely affected in the future if there are cost overruns on fixed-price
engagements. In addition, it is possible that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected. No assurance can be given that
quarterly results will not fluctuate causing an adverse effect on the Company's
financial condition at the time.

CUSTOMER CONCENTRATION; RISK OF TERMINATION. The Company has in the past
derived, and believes it will continue to derive, a significant portion of its
revenues from a limited number of large, corporate customers. The Company's ten
largest customers represented approximately 68%, 62%, and 68% of revenues for
the years ended December 31, 2001, 2000 and 1999, respectively. For the year
ended December 31, 2001 there were three customers who contributed revenues in
excess of 10% of total consolidated revenues however in 2000 only one customer
contributed revenues in excess of 10% of total consolidated revenues. The
Company's largest customer for 2001 was American Express Inc. whereas for 2000
it was American Home Assurance Company and certain other subsidiaries of
American International Group Inc. (collectively, "AIG"). American Express
accounted for approximately 18% and 9% of revenues for the years ended December
31, 2001 and 2000, respectively whereas AIG accounted for approximately 11% and
19% of revenues for the years ended December 31, 2001 and 2000, respectively.

The volume of work performed for specific customers is likely to vary from year
to year, and a significant customer in one year may not provide the same level
of revenues in any subsequent year. Because many of its engagements involve
functions that are critical to the operations of its customer's businesses, any
failure by Syntel to meet a customer's expectations could result in cancellation
or non renewal of the engagement and could damage Syntel's reputation and
adversely affect its ability to attract new business. Many of the Company's
contracts are


                                       6



terminable by the customer with limited notice and without penalty. An
unanticipated termination of a significant engagement could result in the loss
of substantial anticipated revenues and could require the Company to either
maintain or terminate a significant number of unassigned IT professionals. The
loss of any significant customer or engagement could have a material adverse
effect on the Company's business, results of operations and financial condition.
The contract with AIG expires December 31, 2002.

EXPOSURE TO REGULATORY AND GENERAL ECONOMIC CONDITIONS IN INDIA. A significant
element of the Company's business strategy is to continue to develop and expand
offshore Global Development Centers in India. As of December 31, 2001, the
Company had approximately 27% of its billable workforce in India, and
anticipates that this percentage will increase over time. While wage costs in
India are significantly lower than in the U.S. and other industrialized
countries for comparably skilled IT professionals, wages in India are increasing
at a faster rate than in the U.S., and could result in the Company incurring
increased costs for IT professionals. In the past, India has experienced
significant inflation and shortages of foreign exchange, and has been subject to
civil unrest. No assurance can be given that the Company will not be adversely
affected by changes in inflation, exchange rate fluctuations, interest rates,
taxation, social stability or other political, economic or diplomatic
developments in or affecting India in the future. In addition, the Indian
government is significantly involved in and exerts significant influence over
its economy. In the recent past, the Indian government has provided significant
tax incentives and relaxed certain regulatory restrictions in order to encourage
foreign investment in certain sectors of the economy, including the technology
industry. Certain of these benefits that directly benefited the Company
included, among others, tax holidays, liberalized import and export duties and
preferential rules on foreign investment. The Company treats any earnings from
its operations in India as permanently invested in India. If the Company decides
to repatriate any of such earnings, it will incur a "border" tax, currently 15%,
under Indian tax law and be required to pay U.S. corporate income taxes on such
earnings. Changes in the business or regulatory climate of India could have a
material adverse effect on the Company's business, results of operations and
financial condition.

INTENSE COMPETITION. The IT services industry is intensely competitive, highly
fragmented and subject to rapid change and evolving industry standards. The
Company competes with a variety of other companies, depending on the IT services
it offers. The Company's primary


                                       7



competitors for professional IT staffing engagements include participants from a
variety of market segments, including "Big Five" accounting firms, systems
consulting and implementation firms, Applications software development and
maintenance firms, service groups of computer equipment companies and temporary
staffing firms. In Applications Outsourcing and e-business services, the Company
competes primarily with companies in the domestic and global arena. In the
domestic area, Syntel competes against Keane, IBM Global Solutions, EDS, and
Computer Sciences Corporation. In the global arena, Syntel is increasingly
competing successfully against a number of India based companies including TCS,
Infosys, and Wipro. Many of the Company's competitors have substantially greater
financial, technical and marketing resources and greater name recognition than
the Company. As a result, they may be able to compete more aggressively on
pricing, respond more quickly to new or emerging technologies and changes in
customer requirements, or devote greater resources to the development and
promotion of IT services than the Company. India based Companies also present
significant price competition due to their competitive cost structures and tax
advantages. In addition, there are relatively few barriers to entry into the
Company's markets and the Company has faced, and expects to continue to face,
additional competition from new IT service providers. Further, there is a risk
that the Company's customers may elect to increase their internal resources to
satisfy their IT services needs as opposed to relying on a third-party vendor
such as the Company. The IT services industry is also undergoing consolidation
which may result in increased competition in the Company's target markets.
Increased competition could result in price reductions, reduced operating
margins and loss of market share, any of which could have a material adverse
effect on the Company. The Company also faces significant competition in
recruiting and retaining IT professionals which could result in higher labor
costs or shortages. There can be no assurance that the Company will compete
successfully with existing or new competitors or that competitive pressures
faced by the Company will not materially adversely affect its business, results
of operations or financial condition.

ABILITY TO MANAGE GROWTH. While the Company has experienced flat revenues over
the past three years, it has historically experienced rapid growth that has
placed significant demands on the Company's managerial, administrative and
operational resources. Additionally, ongoing changes in the delivery mix from
onsite to offshore staffing has placed additional operational and structural
demands. Revenues have increased from $45.3 million in 1993 to $170.8 million in
2001, and the number of worldwide billable employees has increased from 689 as
of


                                       8



December 31, 1993 to 1,544 as of December 31, 2001. The Company established
sales offices in London, England in 1996, Hongkong in 2001, opened sales and
service offices in Singapore in May 1997, Munich, Germany in 2001 and has
expanded its Global Development Centers in Mumbai and Chennai, India and expects
to begin construction of a new development and training center in Pune, India
during the second quarter of 2002. The Company's future growth depends on
recruiting, hiring and training IT professionals, increasing its international
operations, expanding its U.S. and offshore capabilities, adding effective sales
and management staff and adding service offerings. Effective management of these
and other growth initiatives will require the Company to continue to improve its
operational, financial and other management processes and systems. Failure to
manage growth effectively could have a material adverse effect on the quality of
the Company's services and engagements, its ability to attract and retain IT
professionals, its business prospects, and its results of operations and
financial condition. The Company has historically derived most of its revenues
from professional IT staffing services (TeamSourcing). However, in recent years
the Company has realigned existing personnel and resources, and has invested
incrementally in the development of its Applications Outsourcing business, with
increased focus on outsourcing services for ongoing Applications management,
development, and maintenance. Additionally, the Company has invested in the
development of its emerging and rapidly growing e-business practice. A key
factor in the Company's growth strategy is to increase outsourcing service
engagements and e-business with new and existing customers. This strategy was
evidenced by a shift in the revenue mix from TeamSourcing to Applications
Outsourcing and e-business in recent years, as well as the improvement in the
Company's direct margins. However, Applications Outsourcing services generally
require a longer sales cycle (up to 12 months) and generally require approval by
more senior levels of management within the customers organization, as compared
with traditional IT staffing services. Additionally, while the sales cycle for
many e-business engagements tend to be shorter (1 -- 6 months), many engagement
duration are short (3 to 6 months), requiring increased sales and marketing.
While the Company has strengthened its experience and strength in marketing,
developing, and performing such services, there can be no assurance that the
Company's increased focus on outsourcing services and e-business will continue
to be successful, and any failure of such strategy could have a material adverse
effect on the Company's business, results of operations, and financial
condition.

FIXED-PRICE ENGAGEMENTS. The Company undertakes, from time to time, certain
engagements billed on a fixed-price basis, as distinguished from


                                       9



the Company's principal method of billing on a time-and-materials basis and has
a strategy to increase its percentage of revenue from fixed-price outsourcing.
The Company's failure to estimate accurately the resources and time required for
an engagement or its failure to complete fixed-price engagements within budget,
on time and to the required quality levels would expose the Company to risks
associated with cost overruns and, in certain cases, penalties, any of which
could have a material adverse effect on the Company's business, operating
results and financial condition. Fixed price revenues represented approximately
36%, 25%, and 22% of total revenues for the years ended December 31, 2001, 2000,
and 1999, respectively.

POTENTIAL LIABILITY TO CUSTOMERS. Many of the Company's engagements involve IT
services that are critical to the operations of its customers' businesses. The
Company's failure or inability to meet a customer's expectations in the
performance of its services could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. Although the Company attempts to limit contractually its liability for
damages arising from negligent acts, errors, mistakes or omissions in rendering
its IT services, there can be no assurance the limitations of liability set
forth in its service contracts will be enforceable in all instances or would
otherwise protect the Company from liability for damages. Although the Company
maintains general liability insurance coverage, including coverage for errors
and omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim. The successful assertion of one or more large claims
against the Company that are uninsured, exceed available insurance coverage or
result in changes to the Company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could adversely affect the Company's business, results of operations and
financial condition.

DEPENDENCE ON PRINCIPAL. The success of the Company is highly dependent on the
efforts and abilities of Bharat Desai, the Company's co-founder, Chairman,
President, Chief Executive Officer and Director. The loss of the services of
this key executive for any reason could have a material adverse effect on the
Company's business, operating results and financial condition. The Company does
not maintain key man life insurance on Mr. Desai.





                                       10



RISKS RELATED TO POSSIBLE ACQUISITIONS. The Company has, and may continue to
expand its operations through the acquisition of additional businesses.
Financing of any future acquisition could require the incurrence of
indebtedness, the issuance of equity (common or preferred) or a combination
thereof. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate any
acquired businesses into the Company without substantial expense, delays or
other operational or financial risks and problems. Furthermore, acquisitions may
involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
legal liabilities and amortization of acquired intangible assets, any of which
could have a material adverse effect on the Company's business, results of
operations and financial condition. Customer satisfaction or performance
problems within an acquired firm could have a material adverse impact on the
reputation of the Company as a whole. In addition, there can be no assurance
that acquired businesses, if any, will achieve anticipated revenues and
earnings. The failure of the Company to manage its acquisition strategy
successfully could have a material adverse effect on the Company's business,
results of operations and financial condition. During the year ended December
31, 2000, management determined that the goodwill associated with the 1999
acquisition of Metier was impaired, resulting in a $21.6 million write-off
(before tax benefits) of goodwill and associated restructuring costs. During the
year ended December 31, 2001 the management determined it was appropriate to
write off the value of certain impaired investments and software development
costs related to the Company's incubator investments, resulting in a one-time,
non-cash charge of $4.1 million (net of tax).

LIMITED INTELLECTUAL PROPERTY PROTECTION. The Company's success depends in part
upon certain methodologies, practices, tools and technical expertise it utilizes
in designing, developing, implementing and maintaining applications and other
proprietary intellectual property rights. In order to protect its proprietary
rights in these various intellectual properties, the Company relies upon a
combination of nondisclosure and other contractual arrangements and trade
secret, copyright and trademark laws which afford only limited protection. The
Company also generally enters into confidentiality agreements with its
employees, consultants, customers and potential customers and limits access to
and distribution of its proprietary information. India is a member of the Berne
Convention, an international treaty, and has agreed to recognize protections on
intellectual property rights conferred under the laws of foreign countries,
including the laws of the U.S. The



                                       11



Company believes that laws, rules, regulations and treaties in effect in the
U.S. and India are adequate to protect it from misappropriation or unauthorized
use of its intellectual property. However, there can be no assurance that such
laws will not change and, in particular, that the laws of India will not change
in ways that may prevent or restrict the transfer of software components,
libraries and toolsets from India to the U.S. There can be no assurance that the
steps taken by the Company will be adequate to deter misappropriation of its
intellectual property, or that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its rights. Although the Company
believes that its intellectual property rights do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against the Company in the future or what impact any
such claim, would have on the Company's business, results of operation or
financial condition. The Company presently holds no patents or registered
copyrights, trademarks or servicemarks other than Syntel(R), Consider IT
Done(R), Method 2000(R), IntelliSourcing(R), IntelliTransfer(R), Syntel Y2K
Consultant Online(R), TeamSourcing(R), Architects of e (SM), Digital
Blueprinting-Build-Optimize (SM), Digital Ecosystems (SM), e-sanity (SM), and
Integrating the Global Community (SM) and IntelliCapture (SM). The Company has
submitted federal trademark Applications to register certain names for its
service offerings. There can be no assurance, however, that the Company will be
successful in obtaining federal trademarks for these trade names.

INDUSTRY BACKGROUND

         Increasing globalization, rapid adoption of the Internet as a business
tool and technological innovation are creating an increasingly competitive
business environment that is requiring companies to fundamentally change their
business processes. This change is driven by increasing demand from customers
for increased quality, lower costs, faster turnaround, and highly responsive and
personalized service. To effect these changes and adequately address these
needs, companies are focusing on their core competencies and cost-effectively
utilizing IT solutions to improve productivity, lower costs and manage
operations more effectively.

         Designing, developing, and implementing advanced technology solutions
is a key priority for the majority of corporations. In addition, the development
and maintenance of new information technology (IT) Applications continues to be
a high priority. This type of work requires highly skilled individuals trained
in diverse technologies. However, there is a growing shortage of these
individuals and many



                                       12



companies are reluctant to expand their IT departments through additional
staffing, particularly at a time when they are attempting to minimize their
fixed costs and reduce workforces. The Company believes that many organizations
are concluding that using outside specialists to address their advanced
technology and ongoing IT requirements enables them to develop better solutions
in shorter time frames and to reduce implementation risks and ongoing
maintenance costs. Those outside specialists best positioned to benefit from
these trends have access to a pool of skilled technical professionals, have
demonstrated the ability to manage IT resources effectively, have low-cost
offshore software development facilities, and can efficiently expand operations
to meet customer demands.

         Demand for IT services has grown significantly as companies seek ways
to outsource not only specific projects for the design, development and
integration of new technologies, but also ongoing management, development and
maintenance of existing IT systems.

         The Company believes that outsourcing the ongoing management,
development and maintenance of IT Applications is becoming increasingly critical
to business enterprises. The difficulties of IT planning, budgeting and
execution in the face of technological innovations and uncertainties, the focus
on cost cutting, and a growing shortage of skilled personnel are driving senior
corporate management to strategically pursue outsourcing of critical internal IT
functions. Organizations are seeking an experienced IT services outsourcing
provider that not only has the expertise and knowledge to address the
complexities of rapidly changing technologies, but also possesses the capability
to understand and automate the business processes and knowledge base of the
organization. In addition, the IT provider must be able to develop customized
solutions to problems unique to the organization. This involves maintaining
on-site professionals who know the customer's IT processes, providing access to
a wide range of expertise and best practices, providing responsiveness and
accountability to allow internal IT departments to meet organization goals, and
providing low cost, value-added services to stay within the organization's IT
budget constraints.

         In this environment, large organizations are increasingly finding that
full facilities management outsourcing providers who own and manage an
organization's entire IT function do not permit the organization to retain
control over, or permit flexible reallocation of, its IT resources.



                                       13



SYNTEL SOLUTION

         Syntel provides e-Business solutions in the areas of Web Solutions,
Customer Relationship Management (CRM), Data Warehousing/Business Intelligence,
and Enterprise Applications Outsourcing (EAI). The Company's approach involves
taking an enterprisewide view of the customer's technology and business
environment to ensure comprehensive solution integration. This view is termed
the Digital Ecosystem (SM). Syntel's methodology for implementing its e-Business
services involves Digital Blueprinting/Build/Optimize. In the Digital
Blueprinting phase, Syntel's teams analyze the customers current technology
environment, their business objectives, and begins architecting the e-Business
solution to meet these objectives. In the Build phase, Syntel actually
constructs the technology Applications and integrates the necessary package
Applications for the customer. In the Optimize phase, Syntel provides ongoing,
cost effective maintenance and enhancement services for the newly created
Applications. Additionally, the Company has entered into several partnerships to
provide installation services with leading software firms including Broadvision,
Corillian, Kana Communications, Tibco, Selectica Software, and Vigilance. These
partnerships will provide the Company with increased opportunities for market
penetration.

         Syntel provides comprehensive Applications Outsourcing services
consisting of Applications management services for ongoing management,
development and maintenance of business Applications, as well as TeamSourcing
services consisting of professional IT consulting services. The Company believes
that its Applications Outsourcing approach to IT services outsourcing, which
involves assuming responsibility for management of selected Applications rather
than taking over an entire IT department or providing facilities management,
provides significant differentiation from its competitors in the IT services
market. Syntel believes that its e-Business and Applications Outsourcing service
offerings are distinguished by its Global Delivery Service, a corporate culture
focused on customer service and responsiveness and its internally developed
"intellectual capital," comprised of a proven set of methodologies, practices
and tools for managing the IT functions of its customers.

GLOBAL DELIVERY SERVICE. Syntel performs its services on-site at the customer's
location, off-site at Syntel's U.S. locations and offshore at its Indian
locations. By linking each of its service locations together through a dedicated
data and voice network, Syntel provides a seamless



                                       14



service capability to its customers around the world, largely unconstrained by
geographies, time zones and cultures. This Global Delivery Service gives the
Company the flexibility to deliver to each customer a unique mix of on-site,
off-site and offshore services to meet varying customer needs for direct
interaction with Syntel personnel, access to technical expertise, resource
availability and cost-effective delivery. The benefits to the customer from this
customized service include responsive delivery based on an in-depth
understanding of the specific processes and needs of the customer, quick
turnaround, access to the most knowledgeable personnel and best practices,
resource depth, 24-hour support seven days a week, and cost-effectiveness. To
support its Global Delivery Service, the Company currently has three Global
Development Centers located in Cary, North Carolina; Mumbai, India; and Chennai,
India.

In January 2001, the Company acquired 41 acres of land at the cost of
approximately $1.0 million for construction of a state-of-the-art development
and training Campus in Pune, India. Construction of the center is expected to
begin during the second quarter of 2002. When fully completed in approximately
four years, the facility will cover over 1 million square feet and will
accommodate 9000 employees. It will be both a customer and employee focused
facility, including such amenities as a cafeteria and a fitness center. The
facility will be developed in stages, with a corporate and development center
opening in approximately one year with the capacity for about 1800 persons.

FOCUS ON CUSTOMER SERVICE. The Syntel corporate culture reflects a "customer for
life" philosophy which emphasizes flexibility, responsiveness,
cost-consciousness and a tradition of excellence. The Company recognizes that
its best source for new business opportunities comes from existing customers and
believes its customer service is a significant factor in Syntel's high rate of
repeat business. At engagement initiation, Syntel's services are typically based
on expertise in the software life-cycle and underlying technologies. Over time,
however, as Syntel develops an in-depth knowledge of a customer's business
processes, IT Applications and industry, Syntel gains a competitive advantage to
perform additional higher-value IT services for that customer.

PROVEN INTELLECTUAL CAPITAL. Over its 22-year history, Syntel has developed a
proven set of methodologies, practices, tools and technical expertise for the
development and management of its customers' information systems. This
"intellectual capital" of Syntel includes methodologies for the selection of
appropriate customer IT functions for



                                       15



management by Syntel, tools for the transfer to Syntel of the systems knowledge
of the customer, and techniques for providing systems support improvements to
the customer. Syntel also offers to its customers well-trained personnel backed
by a proven, extensive employee training and continuing development program. The
Company believes its intellectual capital enhances its ability to understand
customer needs, design customized solutions and provide quality services on a
timely and cost-effective basis.

SYNTEL STRATEGY

         The Company's objective is to become a strategic partner with its
customers in the development of e-Business solutions as well as the ongoing
management, development and maintenance of their IT systems by utilizing its
Global Delivery Service, intellectual capital and customer service orientation.
The Company plans to continue to pursue the following strategies to achieve this
objective:

LEVERAGE GLOBAL DELIVERY SERVICE. The ability to deliver a seamless service
capability virtually anywhere in the world from its domestic and offshore
facilities gives the Company an effective ability to meet customer needs for
technical expertise, best practice IT solutions, resource availability,
responsive turnaround and cost-effective delivery. The Company strives to
leverage this capability to provide reliable and cost-effective services to its
existing customers, expand services to existing customers and to attract new
customers. Moreover, the flexibility and capacity of the Global Delivery Service
and the Company's worldwide recruitment and training programs enhance the
ability of the Company to expand its business as the number of customers grows
and their IT demands increase. The Company intends to expand the capacity of its
Global Development Centers worldwide.

AGGRESSIVELY BUILD E-BUSINESS COMPETENCIES. Through its comprehensive suite of
e-Business services, the Company provides a key strategic role in helping
customers rapidly and cost-effectively build advanced technology solutions.
Through large-scale retraining programs, strategic acquisitions and
partnerships, the Company has quickly built a strong competency in the area of
e-Business services.

CONTINUE TO GROW APPLICATIONS OUTSOURCING SERVICES. Through Applications
Outsourcing, the Company markets its higher value Applications management
services for ongoing Applications management, development, maintenance. In
recent years, the Company has significantly increased its investment in
Applications Outsourcing services and realigned its


                                       16



resources to focus on the development, marketing and sales of its Applications
Outsourcing and e-business services, including the hiring of additional
salespeople and senior managers, redirecting personnel experienced in the sale
of higher value contracts, developing proprietary methodologies, increasing
marketing efforts, and redirecting organizational support in the areas of
finance and administration, human resources and legal.

EXPAND CUSTOMER BASE AND ROLE WITH CURRENT CUSTOMERS. The Company's sales
efforts include migrating existing TeamSourcing customers to higher value
e-business and Applications Outsourcing services. The Company's emphasis on
customer service and long-term relationships has enabled the Company to generate
recurring revenues from existing customers. The Company also seeks to expand its
customer base by leveraging its expertise in providing services to the financial
services, manufacturing, retail, transportation, and information/ communications
industries, as well as to government entities. With the expansion of the
Company's Indian operations, the Company is increasing its marketing efforts in
other parts of the world, particularly in the UK.

ENHANCE PROPRIETARY KNOWLEDGE BASE AND EXPERTISE. The Company believes that its
"intellectual capital" of methodologies, practices, tools and technical
expertise is an important part of its competitive advantage. The Company strives
to continually enhance this knowledge base by creating competencies in emerging
technical fields such as Internet/intranet Applications, client/server
Applications, object-oriented software, E-commerce, and data warehousing
technology. The Company continually develops new methodologies and toolsets,
building skills in e-Business, and acquiring a broad knowledge and expertise in
the IT functions of specific industries. Through these efforts, the Company
becomes more valuable to the customer, is often able to expand the scope of its
work to existing customers, and is able to offer industry-specific expertise.

ATTRACT AND RETAIN HIGHLY SKILLED IT PROFESSIONALS. The Company believes that
its human resources are its most valuable asset. Accordingly, its success
depends in large part upon its ability to attract, develop, motivate, retain and
effectively utilize highly skilled IT professionals. Over the years, the Company
has developed a worldwide recruiting network, logistical expertise to relocate
its personnel, and programs for human resource retention and development. The
Company (i) employs professional recruiters who recruit qualified professionals
throughout the U.S. and India, (ii) trains employees and new recruits


                                       17



through both computer based training and its three training centers, one of
which is located in the U.S. and two of which are located in India, and (iii)
maintains a broad range of employee support programs, including relocation
assistance, a comprehensive benefits package, career planning, a qualified stock
purchase program, and incentive plans. The Company believes that its management
structure and human resources organization is designed to maximize the Company's
ability to efficiently expand its professional IT staff in response to customer
needs.

PURSUE SELECTIVE PARTNERSHIP OPPORTUNITIES. During the year ended December 31,
2001 the Company developed and maintained partnership alliances with several
software development firms, including TIBCO, Selectica, Motive, Aspect,
Vianetta, Commerce One, Vigilance, Oracle, BroadVision, Corillian and Kana
Communications. The alliances provide a strong software implementation strategy
for the customer, combining the partner's software with Syntel's extensive
implementation and delivery capabilities. Before entering into a partnership
alliance, the Company considers a number of criteria, including: (i) technology
employed; (ii) projected product lifecycles; (iii) size of the potential market;
(iv) software integration requirements of the product; (v) the reputation of the
potential partner. These alliances provided approximately $10.2 million in new
business revenues during the year ended December 31, 2001.

SERVICES
         Syntel provides a broad range of IT services through its e-Business,
Applications Outsourcing and TeamSourcing service offerings. Through its
e-Business practices, the Company provides advanced technology services in the
areas of Web Solutions, Customer Relationship Management, Data
Warehousing/Business Intelligence, and Enterprise Applications Outsourcing.
Through Applications Outsourcing, the Company provides Applications management
services for ongoing management, development and maintenance of customer
Applications. Through TeamSourcing, the Company provides professional IT
consulting services. During the past year the Company has increased the
personnel and resources dedicated to the development, marketing and sales of its
Applications Outsourcing and e-business services. TeamSourcing, e-Business, and
Applications Outsourcing services are based on Syntel's methodologies and
technical expertise, which the Company continues to develop on an ongoing basis
in order to further enhance the value of its services to customers. For the
years ended December 31, 2001 and December 31, 2000, e-Business and Applications
Outsourcing accounted for approximately 87% and 80%, respectively, of the
Company's revenues and


                                       18



TeamSourcing represented approximately 13% and 20%, respectively, of the
Company's revenues.

         Syntel's focus on customer service is evidenced by the high level of
repeat business from existing customers and the quality awards its customers
have bestowed on Syntel. In the fourth quarter of 2001, more than 84% of
Syntel's revenue came from clients the company has worked with for at least one
year. Syntel has earned a host of quality awards, including the Q-1 rating from
Ford Motor Company as well as "Preferred Supplier" status with Daimler-Chrysler
Corporation receiving the highest rating in each customer service category. The
company has also been recognised by the Target Corporation as a "Best Business
Partner award". Syntel's centers in India earned the highest possible quality
rating of the Software Engineering Institute (SEI) Capability Maturity Model
(CMM) Level 5, making it one of less than 30 American organizations at this
premier level. During 1998, the Company received ISO 9001 Certification. In
2001, Syntel was ranked by Forbes magazine as one of the "Best 200 small
companies in America", for the second time as well as recognition as one of the
VARBusiness 500. The Company is also a Microsoft Certified Solution Provider.

E-BUSINESS SERVICES

         Syntel provides strategic advanced technology services for the design,
development, implementation and maintenance of solutions to enable customers to
be more competitive. Many of today's advanced technology solutions are built
around utilization of the web, which has transformed many businesses. The
Company provides customized technology services in the areas of web solutions,
including web architecture, web-enablement of legacy Applications, and portal
development. The Company also provides Customer Relationship Management
services, which involve software solutions to put customers in closer touch with
their own customers. Syntel helps customers select appropriate package software
options, then customize and implement the solutions. In the area of Data
Warehousing/Business Intelligence, Syntel helps customers make more strategic
use of information within their businesses through the development and
implementation of data warehouses and data mining tools. In the area of
Enterprise Applications Outsourcing, Syntel takes an enterprise wide view of its
customers' environment to implement package software solutions to create better
integration, and therefore better information utilization, between front office
and back office Applications. Additionally, the Company has entered into several
partnerships to provide installation services with leading software firms
including Motive, Corillian, Kana Communications, Tibco, Selectica


                                       19



Software, Aspect, Vianetta, Commerce One, Oracle, BroadVision and Vigilance.
These partnerships will provide the Company with increased opportunities for
market penetration.

APPLICATIONS OUTSOURCING
         Syntel provides higher-value Applications management services for
ongoing management, development and maintenance of business Applications.
Through Applications Outsourcing, the Company assumes responsibility for, and
manages selected Applications support functions of the customers. The Global
Delivery Service is central to Syntel's delivery of Applications Outsourcing
services. It enables the Company to respond to customers' needs for ongoing
service and flexibility and has provided the capability to become productive
quickly on a cost-effective basis to meet timing and resource demands for
mission critical Applications.

         Syntel has developed methodologies, processes and tools to effectively
integrate and execute Applications Outsourcing engagements. Referred to as
"IntelliTransfer," this methodology is implemented in three stages of planning,
transition and launch. Syntel first focuses on the customer's personnel,
processes, technology and culture to develop a plan to effectively assimilate
the business process knowledge of the customer. Syntel then begins to learn the
business processes of the customer, and, finally, seeks to assume responsibility
for performance of a particular customer Applications system or systems. As the
Company develops an in-depth knowledge of the customer's personnel, processes,
technology and culture, Syntel acquires a competitive advantage to pursue more
value-added services. The Company believes its approach to providing these
services results in a long-term customer relationship involving a key Syntel
role in the business processes and Applications of the customer.

         Because providing both e-Business and Applications Outsourcing services
typically involves close participation in the IT strategy of a customer's
organization, Syntel adjusts the manner in which it delivers these services to
meet the specific needs of each customer. For example, if the customer's
business requires fast delivery of a mission-critical Applications update,
Syntel will combine its on-site professionals, who have knowledge of the
customer's business processes and Applications, together with its global
infrastructure to deliver around-the-clock resources. If the customer's need is
for cost reduction, Syntel may increase the portion of work performed at its
offshore Global Development Center, which has significantly lower costs. The
Company believes that its ability to provide flexible service delivery and

                                       20



access to resources permits responsiveness to customer needs and are important
factors that distinguish its e-Business and Applications Outsourcing services
from other IT service firms.

TEAMSOURCING(sm)

         Syntel offers professional IT consulting services directly to its
customers and, to a lesser degree, in partnership with other service providers.
The professional IT consulting services include individual professionals and
teams of professionals dedicated to assisting customer systems projects and
ongoing IT functions. This service responds to the demand from internal IT
departments for additional expertise, technical skills and personnel. The
Company's wide range of TeamSourcing services include IT Applications systems
specification, design, development, implementation and maintenance, which
involve diverse computer hardware, software, data and networking technologies
and practices.

TECHNICAL SERVICES GROUP

         The Company seeks to gain a competitive advantage through its
methodologies, tools and technical expertise. The Company employs a team of
professionals in its Technical Services Group whose mission is to develop and
formalize Syntel's "intellectual capital" for use by the entire Syntel
organization. The Technical Services Group focuses on monitoring industry
trends, creating competencies in emerging technical fields, developing new
methodologies, techniques and tools such as IntelliTransfer(sm) and
IntelliCapture, creating reusable software components through its Innovate
methodology to enhance quality and value on customer assignments, and educating
Syntel's personnel to improve marketing, sales and delivery effectiveness. The
Technical Services Group consists of senior technical personnel located in both
the U.S. and India.

CUSTOMERS

         Syntel provides its services to a broad range of Fortune 1000 companies
principally in the financial services, manufacturing, retail, transportation and
information/communications industries, as well as to government entities. During
2001, the Company provided services to over 163 customers, principally in the
U.S. The Company also provides services to customers in Europe and Southeast
Asia, many of whom are subsidiaries or affiliates of its U.S. customers.
Representative customers of the Company, each of which provided revenue of at
least $100,000 during 2001, include:



                                       21



                                                                 
FINANCIAL SERVICES                  MANUFACTURING                      RETAIL
- ------------------                  -------------                      ------
World Bank                          Cummins Engine Co                  Borders
American Express                    Daimler-Chrysler Corp              Dayton Hudson Co.
American Int'l Group, Inc.          Dell Computer                      Ascendant Solutions
Cable & wireless                    Eaton Corp
Blue Cross/Blue Shield              Ford Motor Co.
JP Morgan Chase                     General Motors Corp                INSURANCE
Bank One                            Hewlett-Packard Corp.              ----------
Deloitte & Touche                   Honeywell                          American Int'l Group Inc.
Humana                              New Venture Gear                   Kemper Insurance
Kemper Insurance                    Nike                               CNA Commercial Lines
Kent Bank                           State of FL                        Nekema
Prudential Insurance                Comview Visual Systems             Encompass
VISA                                Special Metals Corp                IBM
Wells Fargo                         Delta System
Conseco                             Forest Express                     HEALTH CARE
Corillian Corporation               TekTronix                          -----------
                                    Union Carbide                      Humana
                                    BPAD-i                             HCA
                                    Xerox Corp.                        Anderson Consulting
                                    MSXI Inc                           Glaxo Wellcome Inc.

                                    INFORMATION/
TRANSPORTATION/Aviation             COMMUNICATIONS                     GOVERNMENT
- --------------                      --------------                     ----------
Allied Van Lines                    Carlson Marketing                  New Mexico
Airtours International              Texyard.com                        West Virginia
Norfolk Southern Co.                GTE (Verizon)
CFI                                 Interpath Communications
United Airlines                     Avaya
Going Places                        Ericsson
                                    Time Customer Services
UTILITIES                           Motive Communications Inc.
- ---------                           TIBCO Software Inc
Detroit Edison                      Datanomics
Pacific Corp
Portland Gen. Elc. Co.







                                       22


         For the years ended December 31, 2001, 2000, and 1999, the Company's
top ten customers accounted for approximately 68%, 62%, and 68% of the Company's
revenues, respectively. For the year ended December 31, 2001 three customers
contributed revenues in excess of 10% of total consolidated revenues. The
Company's three largest customers in 2001 were American Express Corp., Target
Corporation (formerly Dayton Hudson Group) and American International Group Inc.
contributing approximately 18%, 11% and 11% respectively, of total consolidated
revenues. For the years ended December 31, 2000 and 1999 only one customer
contributed revenues in excess of 10% of total consolidated revenues. The
Company's largest customer for both 2000 and 1999 was American Home Assurance
Company and certain other subsidiaries of American International Group Inc.
(collectively, "AIG"). AIG accounted for approximately 19% and 21% of revenues
for the years ended December 31, 2000 and 1999, respectively.

         AMERICAN EXPRESS. The Company's largest customer is American Express.
In 1999, Syntel was selected as one of four Global Information Systems
outsourcing providers for a global financial services corporation in three of
its four global regions. This contract award was the result of several
competitive proposal rounds.

This company required an approach to providing Global Systems Development
Subcontracting and Production Support Services Outsourcing. Specifically, Syntel
was challenged with efficiently delivering:

- -        Application management and outsourcing services for PREDOMINANTLY
         MAINFRAME LEGACY SYSTEMS

- -        Project management and application development services for NEW SYSTEMS
         DEVELOPMENT

- -        ACCESS TO LEADING-EDGE TECHNOLOGY TALENT either within its existing
         legacy environments or emerging technology areas such as client/server
         and web-based technologies

Syntel's approach to building an enduring relationship with this customer was to
offer a flexible relationship to enable us to evaluate the best fit for
technical solutions. As an expert in developing and delivering world-class IT
solutions, Syntel is collaborating with this customer to ensure that critical
milestones are met and the project and support assignments are completed on time
and on budget. We ensure this by applying:



                                       23






- -        A best-in-class Global Delivery Service that optimally deploys
         scaleable on-site, off-site and offshore resources to the solution mix

- -        Best-fit consultants delivered by our Global Recruiting Model

- -        State-of-the-art project management, methodologies, tools, and quality
         programs

- -        Proven experience in executing similar engagements

To jump start the relationship, Syntel participated in a series of "road shows"
to introduce Syntel and the other outsourcing vendors to the company IT managers
across the globe. Syntel's demonstrated quality and commitment during these road
shows was ranked the highest of the participants.

GLOBAL DELIVERY SERVICE

         Syntel's Global Delivery Service gives the Company the flexibility and
resources to perform services on-site at the customer's location, off-site at
the Company's U.S. locations and offshore at the Company's Indian locations. By
linking each of its service locations together through a dedicated data and
voice network, Syntel provides a seamless service capability to its customers.
The Global Delivery Service gives the Company the flexibility to deliver to each
customer a customized mix of integrated on-site, off-site and offshore services
to meet varying customer needs for direct interaction with Syntel personnel,
access to technical expertise and best practices, resource availability and
cost-effective delivery.

         Through on-site service delivery at the customer's location, the
Company is able to gain comprehensive knowledge concerning the customer's
personnel, processes, technology and culture, and maintain direct customer
contact to facilitate project management, problem solving and integration of
Syntel services. Off-site service delivery at the Company's U.S. locations
provides the customer with access to the diverse skill base and technical
expertise resident at different regional centers, availability of resources, and
cost-effective delivery due to the savings in transportation, facilities and
relocation costs associated with on-site work. Offshore service delivery at the
Company's Indian locations provides the customer with the capacity to receive
around the clock attention to Applications maintenance and project development
for faster turnaround, greater availability of resources, expertise resident in
India and more cost-effective delivery than the Company's off-site services.





                                       24






The Company has developed global recruiting and training programs which have
efficiently provided skilled IT professionals to meet customer needs. In
addition, the Company's sales, solutions and delivery functions are closely
integrated in the Global Delivery Service so that appropriate resources can be
provided to the customer at the right time and at the most advantageous
location. Each customer is tracked and serviced through a multi-stage customer
care process. Regular meetings are held with key project management, sales,
technical, legal and finance personnel to monitor progress, identify issues and
discuss solutions. As engagements evolve and customer needs change, the Company
can reallocate resources responsively from among these locations as necessary.


         The Company's three Global Development Centers located in Cary, North
Carolina; Mumbai, India; and Chennai, India; support the Company's Global
Delivery Service.

         The Cary, North Carolina Global Development Center, which employed over
104 persons at December 31, 2001, serves as the hub for the Company's
telecommunications, project management, technical training and professional
development programs. Its support functions include administration of a
dedicated data and voice network, a 24-hour customer assistance center which
coordinates problem resolution worldwide, and a development center for the
sharing of knowledge and expertise among IT professionals. Moreover, due to its
proximity to a large number of major universities, the Cary, North Carolina
Global Development Center has access to a relatively large talent pool.

         The Mumbai, India Global Development Center, which employed
approximately 1,112 persons as of December 31, 2001, serves as the hub of the
Company's Indian operations. This Global Development Center provides substantial
resource depth to meet customer needs around the world, low-cost service
delivery, a 24-hour customer assistance center and development of technical
solutions and expertise. Mumbai also serves as the principal recruiting and
training center for the Company. The Mumbai Center has been in operation for
over eight years and has a capacity of approximately 1,150 people.

         The Chennai Training and Global Development Center employed
approximately 489 persons as of December 31, 2001. The Chennai facility has a
capacity of over 600 persons and has been in operation for approximately four
years.




                                       25





In January 2001, the Company acquired 41 acres of land for construction of a
state-of-the-art development and training Campus in Pune, India. Construction of
the center is expected to begin during the second quarter of 2002. When fully
completed in approximately four years, the facility will cover over 1 million
square feet and will accommodate 9000 employees. It will be both a customer and
employee focused facility, including such amenities as a cafeteria and a fitness
center. The facility will be developed in stages, with a corporate and
development center opening in approximately one year with the capacity for about
1800 persons.

The Company believes that space availability in Mumbai and Chennai will
accommodate short term facility requirements and the new Campus in Pune will
enable the Company to meet offshore growth requirements for the next several
years.

SALES AND MARKETING

         The Company markets and sells its services directly through its
professional salespeople and senior management operating principally from the
Company's offices in Costa Mesa, California, Phoenix, Arizona; Portland, Oregon;
Chicago, Illinois; Dallas, Texas; Minneapolis, Minnesota; New York, New York;
Troy, Michigan; San Ramon, California; Santa Fe, New Mexico; Boston,
Massachusetts; Nashville, Tennessee; London, England; Hongkong; Munich, Germany
and Singapore. The sales staff is aligned into geographic regions, with each
sales person provided the authority to pursue Application Outsourcing,
e-business, and to a much lessor degree, TeamSourcing opportunities. The sales
team is supported, as required, by technical expertise and subject matter
experts from the Company's delivery teams.

         During recent years the Company has focused it's sales efforts in
e-Business and Applications Outsourcing both by dedicating internal sales
professionals to these service offerings and through outside hiring of
professionals experienced in selling e-business and outsourcing engagements.

         The sales cycle for Applications Outsourcing engagements ranges from 6
to 9 months depending on the complexity of the engagement. Due to this longer
sales cycle, Applications Outsourcing sales executives follow an integrated
sales process for the development of engagement proposals and solutions, and
receive ongoing input from the Company's technical services, delivery, finance
and legal departments throughout the sales process. The Applications Outsourcing
sales process also typically involves a greater number of customer personnel at
more senior levels of management than the TeamSourcing sales process.


                                       26





         The sales cycle for e-Business engagements, from initial contact to
execution of an agreement, varies by type of service and account size, but
typically ranges from 1 to 6 months, depending on the complexity of the
engagement. The sales cycle for large, fixed price e-business engagements is
similar to that of Applications Outsourcing engagements. The sales cycle for
partnership software installations is generally 1 to 2 months. The associated
software installation engagements are also generally short, lasting 1 to 3
months.

         The sales cycle for TeamSourcing engagements, from initial contact to
execution of an agreement, varies by type of service and account size, but is
typically completed within 30 days. TeamSourcing engagements are essentially
developed from existing customers as the Company focuses it's attention on
growing the e-business and Applications Outsourcing segments.

         Syntel's marketing organization seeks to build and support the Syntel
brand as well as generate awareness and leads for the Company's e-business and
Applications Outsourcing solutions. The Company's current marketing initiatives
include online advertising, webcasts, direct mail campaigns, case studies, and
public relations aimed at CEOs, CIOs, and CFOs of Global 2000 companies. In
addition, Syntel's marketing team maintains ongoing relationships with leading
industry analysts such as Gartner Group, IDC, Forrester Research, and Yankee
Group, to ensure analysts have a good understanding of Syntel's offerings and
positioning. Syntel's marketing group also supports the Company's investor
relations efforts, proposals development, research, and sales support efforts.

HUMAN RESOURCES

         The Company believes that its human resources are its most valuable
asset. Accordingly, the Company's success depends in large part upon its ability
to attract, develop, motivate, retain and effectively utilize highly skilled IT
professionals. The Company has developed a number of processes, methodologies,
technologies and tools for the recruitment, training, development and retention
of its employees. As of December 31, 2001 the Company had 2,691 full time
employees. Of this total, the U.S. operations employed 1,162 persons, including
1,010 IT professionals; the Indian operation employed 1,377 persons, including
1,227 IT professionals; and the Company employed an additional 152 persons in
various remote locations, principally the U.K. and Singapore.

         A majority of the Company's professional employees have a Bachelor of
Science degree or its equivalent, or higher degrees in computer science,
engineering disciplines, management, finance and other areas. Their experience
level ranges from entry-level programmers to engagement managers




                                       27





and senior consultants with over 20 years of IT experience. The Company has
personnel who are experienced in mainframe, client/server and open systems
technologies, and proficient in a variety of computer programming languages,
software tools, database management systems, networks, processes, methodologies,
techniques and standards.

         The Company has implemented a management structure and human resources
organization intended to maximize the Company's ability to efficiently expand
its professional staff. Although the Company believes that it has the capability
to meet its anticipated future needs for IT professionals through its
established recruiting and training programs, there can be no assurance that the
Company will be able to hire, train or retain qualified IT professionals in
sufficient numbers to meet anticipated staffing needs.

RECRUITING. The Company has developed a recruiting methodology and organization
which is a core competency. The Company has significantly expanded it's
international-based recruiting team, with recruiters in Mumbai, Chennai,
Hyderabad, Delhi, Banglore, Pune, and Calcutta, India, to recruit for the
Company's global requirements. The Company also has a recruiting team based in
the U.S., which recruits primarily across the U.S. The Company uses a
standardized global selection process that includes written tests, interviews,
and reference checks.

         Among the Company's other recruiting techniques are the placement of
advertisements on its own web site and popular job boards, in newspapers and
trade magazines, providing bonuses to its employees who refer qualified
applicants, participating in job fairs and recruiting on university campuses. In
addition, the Company has developed a proprietary database of talent hosted on
the internet, which is an automated tool for managing all phases of recruiting.
This system enhances the ability of the Company's recruiters to select
appropriate candidates and can distribute resumes directly to the recruiters.

TRAINING. The Company uses a number of established training delivery mechanisms
in its efforts to provide a consistent and reliable source for qualified IT
professionals.

         Syntel also maintains an Internet-based global Computer-Based Training
(CBT) program with over 200 training courses from which Syntel employees can
select to enhance and develop their skills. The CBT topics cover the latest
Client/Server topics including Object Oriented Programming, local-area and
wide-area networking, E-Commerce, various Microsoft products, and Web-based
solutions in addition to management and related developmental areas.

                                       28






         The Company re-skilled a significant percentage of the consulting base
during the past two years in the latest advanced software platforms, including
JAVA, HTML, Object Oriented, C++, RMI Cobra, JDBC, Cold Fusion, and Oracle.

         During 1998 the Company implemented a Project Manager Training program.
The objective of the program is to develop certified project managers to ensure
consistent and quality delivery of the Company's engagements on a worldwide
basis. The 12 to 18 month program consists of lecture style classroom work,
computer based training, and on the job apprenticeships. The program trains
students on industry "best practices" as well as Syntel specific methods and
processes. Program participants must receive certification from the Project
Management Institute ("PMI") before receiving Syntel branded certification.

         The Company has been accepted as a Microsoft Certified Solution Partner
and sponsors the Microsoft Certification Program in its Cary, North Carolina,
Global Development Center and provides opportunities for cross-training of its
professionals in emerging technologies.

SUPPORT AND RETENTION. The Company seeks to provide meaningful support to its
employees which the Company believes leads to improved employee retention and
better quality services to its customers. A significant percentage of the
Company's employees have been recruited from outside the U.S. and relocated to
the U.S. This has resulted in the need to provide a higher level of initial
support to its employees than is common for U.S.-based employees. As a result of
these activities, Syntel has developed a significant knowledge base in making
foreign professionals comfortable and quickly productive in the U.S. and Europe.
The Company also conducts regular career planning sessions with its employees,
and seeks to meet their career goals over a long-term planning horizon. As part
of its retention strategy, the Company strives to provide a competitive
compensation and benefits package, including relocation reimbursement and
support, health insurance, 24-hour on-call nurse consulting, a 401(K) plan, life
insurance, dental options, a vision eye-care program, long-term disability
coverage, short-term disability options, tuition subsidy plan, PC purchase plan,
a health club reimbursement program, and an employee referral plan. Upon
consummation of its initial public offering in 1997 the company offered a stock
option program, and in 1998 a qualified stock purchase program, providing all
eligible employees the opportunity to purchase the Company's Common Stock at a
15% discount to fair market value.





                                       29





COMPETITION

         The IT services industry is intensely competitive, highly fragmented
and subject to rapid change and evolving industry standards. The Company
competes with a variety of other companies, depending on the IT services it
offers. The Company's primary competitors for professional IT staffing
engagements include participants from a variety of market segments, including
"Big Five" accounting firms, systems consulting and implementation firms,
Applications software development and maintenance firms, service groups of
computer equipment companies and temporary staffing firms. In Applications
outsourcing and e-business services, the Company competes primarily with IBM
Global Solutions, Keane, Andersen Consulting (now named Accenture), and Computer
Sciences Corporation, as well as Indian based companies such as TCS, Infosys,and
Wipro.



                                       30






EXECUTIVE OFFICERS OF THE REGISTRANT

         The executive officers of the Registrant, their ages, and the position
or office held by each, are as follows:




              NAME                  AGE                 POSITION
              ----                  ---                 --------
Bharat Desai................         49        Chairman, President and
                                               Chief Executive Officer
Neerja Sethi................         47        Vice President, Corporate
                                               Affairs  and Director
Atul Kunwar.................         38        Chief Operating Officer
Prakash "Ken" Kenjale.......         52        Chief Technology Officer
Daniel M. Moore.............         47        Chief Administrative Officer
                                               and Secretary
Sanjay Raizada..............         37        General Manager, North West
                                               Division
Rajiv Tandon ...............         43        Senior Vice President, North
                                               American Operations
Marlin Mackey ..............         51        Senior Vice President,
                                               Global Relationships
Baru Rao ...................         41        Chief Operating Officer, Asian
                                               Pacific Operations

- ------------------------------------------------------------------------------

         Bharat Desai is a co-founder of the Company and has served as its
President and Chief Executive Officer and as a Director since its formation in
1980. Mr. Desai became Chairman of the Board in February 1999. Mr. Desai is
spouse of Ms. Sethi.

         Neerja Sethi is a co-founder of the Company and has served as a Vice
President, Corporate Affairs and as a Director since its formation in 1980. Ms.
Sethi is the spouse of Mr. Desai.

         Atul Kunwar joined the Company in July, 2001 as Chief Operating
Officer. Prior to joining Syntel, Mr. Kunwar served as President and Chief
Executive Officer of Bharat BT Internet Ltd., a joint venture involving British
Telecom, from May 2000 to July, 2001. Before joining Bharat BT Internet, Mr.
Kunwar was Managing Director of 3Com India, from October 1998 to May 2000. Prior
to 3Com, Mr. Kunwar held various assignments at the HCL Group of Companies from
September 1996 to September 1998.

         Prakash "Ken" Kenjale has served the Company as Chief Technology
Officer since July 1995.

         Daniel M. Moore has served the Company as Chief Administrative Officer
and Secretary since August 1998. From March 1996 through August 1998, Mr. Moore
served as General Counsel and Secretary and also served as Vice President,
Benefits and Policy Administration from July 1997 through August 1998. From June
1996 to June 1997, Mr. Moore served as the Company's acting Vice President,
Human Resources.


                                       31


         Sanjay Raizada joined the Company in September 1999 as part of the
acquisition of img,Inc. He has served as General Manager, img Division from Sept
1999 to April 2001 and General Manager, Northwest Division from April 2001 to
the present. Prior to joining Syntel, Mr. Raizada served as President of img
from July 1998 until September 1999, and from February 1995 until July 1998 he
worked for PricewaterhouseCoopers as a practice manager for the MCS and STT
practices.

         Rajiv Tandon joined Syntel in January 1992, and has served as Senior
Vice President, North American Operations since April 2001. He was promoted to
Senior Vice President, Global Delivery in January, 2001. From January 1999 until
December 2000 he served the Company as Vice President, Global Delivery East &
Enterprise Solutions. From April 1998 through January 1999, Mr. Tandon was
Assistant Vice President, Global Delivery Services and, from November 1996
through April 1998, Mr. Tandon was Director of Operations for the AIG account.

         Marlin Mackey has served the Company as Senior Vice President, Global
Relationships since April 2001. He was promoted to Senior Vice President,
Strategic Initiatives in January, 2001. From January 1999 until December 2000 he
served the Company as Vice President, Global Delivery West and Information
Services. From April 1998 through January 1999, Mr. Mackey was Assistant Vice
President, Global Delivery Services and, from November 1995 through April 1998,
Mr. Mackey was a Deputy Engagement Manager, both with the Company.

         Baru Rao has served the Company as Chief Operating Office, Asian
Pacific Division since April 2001. He has also served as Chief Executive
Officer, Syntel (India) Limited since joining the Company in 1997.


                                       32




ITEM 2.  PROPERTIES.

         The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately 14,597
square feet of leased space in Troy, Michigan. The Company occupies these
premises under a lease expiring in May, 2007. The Company's primary training and
development center is located in approximately 50,240 square feet of leased
space in Cary, North Carolina, under a lease which expires March 31, 2004. The
Company also leases regional office facilities in Dallas, Texas; San Ramon,
California; Oakbrook, Illinois; Minneapolis, Minnesota; Santa Fe, New Mexico;
Jacksonville, Florida; New York, New York; Beaverton, Oregon; Fort Lauderdale,
Florida; Costa Mesa, California; Phoenix, Arizona; London, England; and
Singapore.

         Syntel leases approximately 46,044 square feet of office space in
Mumbai, India, under six leases expiring on various dates from October 13, 2002
to October 7, 2006. This facility houses IT professionals, as well as its senior
management, administrative personnel, human resources, recruiting, and sales and
marketing functions. Additionally, Syntel has leased substantially all of an
office building in Chennai, India consisting of approximately 32,812 square
feet. The lease terms expire May 2003, subject to the Company's option to renew
for an additional period of three years.

In January 2001, the Company acquired 41 acres of land at a cost of
approximately $1.0 million for construction of a state-of-the-art development
and training Campus in Pune, India. Construction of the center is expected to
begin during the second quarter of 2002. When fully completed in approximately
four years, the facility will cover over 1 million square feet and will
accommodate 9000 employees. It will be both a customer and employee focused
facility, including such amenities as a cafeteria and a fitness center. The
facility will be developed in stages, with a corporate and development center
opening in approximately one year with the capacity for about 1800 persons.

         The Company believes that the existing facilities and planned
development in Pune are adequate for its currently anticipated future needs.

ITEM 3.  LEGAL PROCEEDINGS:

         The Company is not currently a party to any material legal proceedings
or governmental investigation.



                                       33





ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the year ended December 31, 2001.






                                       34





                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

         (a) The Registrant's common stock is traded on the NASDAQ National
Market under the symbol "SYNT." The following table sets forth, for the periods
indicated, the range of high and low bid information per share of the Company's
common stock as reported on NASDAQ for each full quarterly period in 1998 to
2001. All prices give effect to a 3:2 stock split effective April 22, 1998.

          Period                           High                Low
- ------------------------------------------------------------------------------
          First Quarter, 1998            $ 27.333           $  9.875
          Second Quarter, 1998             37.333             21.375
          Third Quarter, 1998              31.500             11.500
          Fourth Quarter, 1998             20.625             10.438
          First Quarter, 1999              13.500              8.000
          Second Quarter, 1999             12.063              7.125
          Third Quarter, 1999              12.500              8.500
          Fourth Quarter, 1999             18.547              8.063
          First Quarter, 2000              20.375             12.000
          Second Quarter, 2000             14.063              9.375
          Third Quarter, 2000              11.563              7.750
          Fourth Quarter, 2000              9.688              5.750
          First Quarter, 2001               7.813              5.000
          Second Quarter, 2001              9.480              6.875
          Third Quarter, 2001              11.000              8.200
          Fourth Quarter, 2001             13.810              8.670

         (b) There were approximately 272 shareholders of record and 4,600
beneficial holders on March 21, 2002.

         (c) The Company did not pay any cash dividends during the years ended
December 31, 2001, 2000 and 1999. The Company does not intend to declare or pay
cash dividends in the foreseeable future. Management anticipates that all
earnings and other cash resources of the Company, if any, will be retained by
the Company for investment in its business.



                                       35







ITEM 6.  SELECTED FINANCIAL DATA.
SYNTEL, INC. & Subsidiaries

FIVE-YEAR HIGHLIGHTS (UNAUDITED)
(In thousands, except per share amounts)

The following tables set fourth selected consolidated financial data and other
data concerning Syntel, Inc. for each of the last five years. The pro forma
weighted average shares outstanding for all periods shown give effect to a 3:2
stock split effective April 22, 1998.



                                                                     YEAR ENDED DECEMBER 31,
                                                     2001         2000         1999         1998        1997
                                                     ----         ----         ----         ----        ----
                                                              (in thousands, except per share data)
                                                                                         
STATEMENT OF INCOME DATA
       Revenues                                       $170,777    $164,808     $162,117     $167,975    $124,338
       Cost of revenues                                105,437     104,602       99,300      104,971      87,584
       Gross Profit                                     65,340      60,206       62,817       63,004      36,754

       Selling, general and administrative
         expenses                                       34,522      34,424       32,814       28,026      23,547
       Capitalized development cost impairment           1,624           -            -            -           -
       Goodwill impairment and related charges               -      21,650            -            -           -

       Income from operations                           29,194       4,132       30,003       34,978      13,207

       Other income                                      3,780       3,412        2,024        2,077         730
       Income before income taxes                       32,974       7,544       32,027       37,055      13,937

       Income tax provision (benefit) (1)                8,636       (967)       10,573       12,424       3,517
       Net income before loss from equity
         Investments                                    24,338       8,511       21,454       24,631      10,420

       Loss from equity investments  (net of             3,893         526            -            -           -
       tax)

       Net income                                      $20,445      $7,985      $21,454      $24,631     $10,420
       Net income per share, diluted                     $0.52       $0.20        $0.55        $0.63       $0.27

       Pro forma net income (2)                                                                          $10,196
       Pro Forma net income per share                                                                      $0.26
                                                                                                           =====

       Weighted average shares outstanding,
         Diluted                                        39,016      39,480       39,049       39,294
                                                 ====================================================

       Pro forma weighted average shares
         Outstanding, diluted                                                                             39,083
                                                                                                         =======


(1)      For all periods shown through August 12, 1997, the Company elected to
         be treated as an S corporation and, as a result, the income of the
         Company has been taxed for federal and state purposes (with exceptions
         under certain state income tax laws) directly to the Company's
         shareholders rather than to the Company.

                                       36



(2)      Pro forma data reflect income tax provisions for the periods presented
         for federal and additional state income taxes as if the Company had
         been taxed as a C corporation.




- ----------------------------------------------------------------------------------------------------------
                                                           YEAR ENDED DECEMBER 31,
                                        2001          2000          1999          1998          1997
                                        ----          ----          ----          ----          ----
                                                                                   
BALANCE SHEET DATA
        Working capital                  $108,240       $77,894       $64,893       $58,862       $35,346
        Total assets                      152,399       132,898       122,468       104,235        65,232
        Long-term debt                          -             -             -             -             -
        Total shareholders' equity        116,996        96,683        90,361        64,147        39,585

OTHER DATA
        Billable headcount in U.S.            987           994         1,114         1,135         1,260
        Billable headcount in India           419           511           225           413           478
        Billable headcount at
          other locations                     138           118            28            33             8
                                    ----------------------------------------------------------------------
        Total billable headcount            1,544         1,623         1,367         1,581         1,746
                                    ======================================================================


==========================================================================================================





                                       37



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

         Syntel is a worldwide provider of professional IT consulting and
Applications management services to Global 2000 companies, as well as to
government entities. The Company's service offerings include Applications
Outsourcing, consisting of application management services for ongoing
management, development and maintenance of business applications; e-business,
consisting of the integration and development of advanced technology
applications including E-commerce, Web development, Data Warehousing, CRM,
Oracle, and SAP; as well as partnerships with leading software companies to
provide installation services, including Tibco, Selectica Software, Corillian,
Kana Communications, and Vigilance; and TeamSourcing, consisting of professional
IT consulting services. For the year ended December 31, 1999 the Company
provided Year 2000 remediation services as a component of the Applications
Outsourcing segment. All Year 2000 remediation engagements were completed before
December 31, 1999.

         The Company's revenues are generated from professional services fees
provided through three segments, Applications Outsourcing, e-business, and
TeamSourcing. The Company has invested significantly in developing its ability
to sell and deliver Applications Outsourcing and e-business services, and has
shifted a larger portion of its business to engagements within these two
segments, which the Company believes have higher growth and gross margin
potential. The following table outlines the revenue mix for the years ended
December 31, 2001, 2000, and 1999:



                               Percent of Total Revenues
                                             2001     2000     1999
                                             ----     ----     ----
                                                       
         Applications Outsourcing             63%      54%      54%
         E-business                           24       26       21
         TeamSourcing                         13       20       25
                                              --       --       --
                                             100%     100%     100%


On Applications Outsourcing engagements, the Company typically assumes
responsibility for engagement management and generally is able to allocate
certain portions of the engagement to on-site, off-site and offshore personnel.
Syntel may bill the customer on either a time-and-materials or fixed-price
basis. While a significant portion of Applications Outsourcing engagements have
been historically on a time-and-materials basis, a significant share of the
Applications Outsourcing engagements started during 2001, 2000 and 1999 have
been on a fixed-price basis. For the years ended December 31, 2001, 2000 and
1999, fixed-price revenues comprised


                                       38





approximately 47%, 32% and 37% of total Applications Outsourcing revenues,
respectively. Syntel recognizes revenues from fixed-price engagements on the
percentage of completion method.

         The Company reskilled a very significant percentage of the consulting
base during 1999, 2000 and 2001 in the latest advanced software platforms,
including JAVA, HTML, Object Oriented, C++, RMI Cobra, JDBC, Cold Fusion, and
Oracle. The Company has focused training efforts on consultants assigned to
TeamSourcing engagements, and as a result, has successfully migrated such
consultants to the growing e-business segment.

         Historically, most e-business engagements were billed on a time and
materials basis under the direct supervision of the customer (similar to
TeamSourcing engagements); however, as the Company expanded its expertise in
delivering e-commerce engagements, Syntel has assumed the project management
role for a significant number of new engagements starting in 1999 and 2000 and
2001. For the years ended December 31, 1999, 2000 and 2001, fixed price revenues
comprised approximately 17% 30% and 26% of total e-business revenues,
respectively. Syntel recognizes revenues from fixed-price engagements on the
percentage of completion method.

         On TeamSourcing engagements, Syntel's professional services typically
are provided at the customer's site and under the direct supervision of the
customer. TeamSourcing revenues generally are recognized on a time-and-materials
basis as services are performed. As indicated in the above table, the Company's
dependence on TeamSourcing engagements has decreased significantly and is
expected to continue to decrease as a percent of the total revenue base as the
Company consciously refocuses its sales efforts and migrates resources to
e-business and Applications Outsourcing engagements.

         The Company's most significant cost is personnel cost, which consists
of compensation, benefits, recruiting, relocation and other related costs for
its IT professionals. The Company strives to maintain its gross margin by
migrating more revenue toward Applications Outsourcing and e-business,
controlling engagement costs, and offsetting increases in salaries and benefits
with increases in billing rates. The Company has established a human resource
allocation team whose purpose is to staff IT professionals on engagements that
efficiently utilize their technical skills and allow for optimal billing rates.
Syntel India derives essentially all of its revenues from software development
services provided to the Company from Mumbai and Chennai, India, where salaries
of IT professionals are comparatively lower than in the U.S.


                                       39



         The Company has performed a significant portion of its employee
recruiting in other countries. As of December 31, 2001, approximately 49% of
Syntel's U.S. workforce (21% of Syntel's worldwide workforce) worked under H-1B
temporary work visas in the U.S. and another 12% of the Company's U.S. workforce
(5% of Syntel's worldwide workforce) worked under L-1 visas (permitting
intercompany transfers of employees that have been employed with a foreign
subsidiary for at least 6 months prior to being transferred to the U.S.).

         The Company has made substantial investments in infrastructure in
recent years, including: (i) expanding the Mumbai, India facility; (ii)
establishing a Global Development Center in Chennai, India; (iii) increasing
Applications Outsourcing sales and delivery capabilities through significant
expansion of the sales force and the Technical Services Group, which develops
and formalizes proprietary methodologies, practices and tools for the entire
Syntel organization; (iv) hiring additional experienced senior management; and
(v) expanding global recruiting and training capabilities, and replacement of
informal systems with highly integrated, Y2K compliant, Human Resource and
Financial Information Systems. Additionally, in January 2001, the Company
acquired 41 acres of land for construction of a state-of-the-art development and
training Campus in Pune, India. Construction of the center is expected to begin
during the second quarter of 2002. When fully completed in approximately four
years, the facility will cover over 1 million square feet and will accommodate
9000 employees. It will be both a customer and employee focused facility,
including such amenities as a cafeteria and a fitness center. The facility will
be developed in stages, with a corporate and development center opening in
approximately one year with the capacity for about 1800 persons.

         Through its strong relationships with customers, the Company has been
able to generate recurring revenues from repeat business. These strong
relationships also have resulted in the Company generating a significant
percentage of revenues from key customers. The Company's top ten customers
accounted for approximately 68%, 62%, and 68% of revenues for the years ended
December 31, 2001, 2000, and 1999,. The Company does not believe there is any
material collectibility exposure among its top ten customers.

         For the year ended December 31, 2001 three customers contributed
revenues in excess of 10% of total consolidated revenues. The three largest
customers for 2001 were American Express Corporation, Target Corporation
(formerly Dayton Hudson Group ) and American International Group Inc.
(Collectively, "AIG") contributing approximately 18%, 11% and 11%, respectively,
of total consolidated revenues. For the years ended



                                       40


December 31, 2000 and 1999 only one customer contributed revenues in excess of
10% of total consolidated revenues. The Company's largest customer for both 2000
and 1999 was American Home Assurance Company and certain other subsidiaries of
American International Group Inc. (collectively, "AIG"). AIG accounted for
approximately 19% and 21% of revenues for the years ended December 31, 2000 and
1999, respectively. Although the Company does not currently foresee a credit
risk associated with accounts receivable from these customers, credit risk is
affected by conditions or occurrences within the economy and the specific
industries in which these customers operate.

INCOME TAX MATTERS

Syntel India is eligible for certain favorable tax provisions provided under
Indian tax law including: (i) an exemption from payment of corporate income
taxes for the first ten years of operation (the "Tax Holiday"); or (ii) an
exemption from income taxes on the profits derived from exporting computer
software services from India (the "Export Exemption"). During 1999, the Indian
government amended the Tax Holiday regulations, extending the effective period
to ten years, from the previous regulation which permitted a tax Holiday of five
consecutive years within the first eight years of operation. Under the new
regulations, the Company's Tax Holidays will expire no earlier than March 31,
2003. During February 2002, the Indian government made certain changes in tax
regulations which will restrict the said exemption to the extent of 90% of
export profits generated by Syntel India, beginning April 2002. The Company
treats most of Syntel India earnings as permanently invested in India and does
not anticipate repatriating any of these earnings to the U.S. If the Company
decides to repatriate any earnings of Syntel India, it will incur a "border"
tax, currently 15% under the recent changes made by Indian government, under
Indian tax laws and will be required to pay U.S. corporate income taxes on such
earnings.


                                       41





RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated selected
income statement data as a percentage of the Company's total revenues.

                             PERCENTAGE OF REVENUES
                     -----------------------------------------


                                                    YEAR ENDED DECEMBER 31,
                                           -----------------------------------------
                                                  2001         2000       1999
                                                  -----        -----        -----
                                                                   
Revenues ................................         100.0%       100.0%       100.0%
Cost of revenues ........................          61.7         63.5         61.3
                                                  -----        -----        -----
Gross profit ............................          38.3         36.5         38.7
Selling, general and
  administrative expenses ...............          20.2         20.9         20.2
Goodwill impairment and
  related charges .......................             -         13.1            -
Capitalized development
  cost impairment .......................           1.0            -            -
                                                  -----        -----        -----
Income from operations ..................          17.1%         2.5%        18.5%



Following is selected segment financial data for the years ended December 31,
2001, 2000, and 1999. The Company does not allocate assets to specific segments.



                                                      2001            2000               1999
                                                      ----            ----               ----
                                                                  (In Thousands)
                                                                                    
Revenues
       Applications Outsourcing                        $107,890           $89,873            $87,311
       e-business                                        40,375            42,608             33,402
       TeamSourcing                                      22,512            32,327             41,404
                                                 ----------------------------------------------------
                                                       $170,777          $164,808           $162,117

Gross Margin
       Applications Outsourcing                         $46,225           $38,783            $40,324
       e-business                                        14,276            13,622             10,789
       TeamSourcing                                       4,839             7,801             11,704
                                                 ----------------------------------------------------
                                                        $65,340           $60,206            $62,817
Gross Margin %
       Applications Outsourcing                           42.8%             43.2%              46.2%
       e-business                                         35.4%             32.0%              32.3%
       TeamSourcing                                       21.5%             24.1%              28.3%
                                                          -----             -----              -----
                                                          38.3%             36.5%              38.7%

Sales, general and administrative expenses              $34,522           $34,424            $32,814
Goodwill impairment and related charges                 $    --           $21,650            $    --


Capitalized development cost impairment                 $ 1,624           $    --            $    --
Operating margin                                        $29,194           $ 4,132            $30,003

                                                 ====================================================




                                       42



The Applications Outsourcing segment included Year 2000 remediation engagements
for the year ended December 31, 1999. All Year 2000 engagements were completed
before December 31, 1999. Excluding the impact of Year 2000 remediation
engagements, Applications Outsourcing revenues for the year ended December 31,
1999 would have been $74.2 million and gross margins would have been $31.5
million

COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND 2000

REVENUES. Total consolidated revenues increased from $164.8 million in 2000 to
$170.8 million in 2001, representing a 3.6% increase. The Company's total
revenues were more dependent upon its largest customers in 2001 as compared to
2000. The top five customers accounted for, 53% of the total revenues in 2001 up
from 47% of the total revenues in 2000. Additionally, the top 10 customers
accounted for 68% of the revenues in 2001 as compared to 62% in 2000. The
worldwide billable headcount decreased to 1,544 as of December 31, 2001 compared
to 1,623 as of December 31, 2000. The decreased headcount was due principally to
decreased staffing in e-business engagements and Applications Outsourcing
engagements, along with the managed rampdowns of the TeamSourcing segment.

APPLICATIONS OUTSOURCING REVENUES. Applications Outsourcing revenues increased
from $89.9 million, or 54% of total revenues in 2000, to $107.9 million, or 63%
of total revenues in 2001. The $18 million increase is attributable principally
due to net growth in new engagements, contributing approximately $33.4 million;
partially offset by $15.4 million in lost revenues as a result of project
completions.

COST OF REVENUES. Cost of revenues consist of costs directly associated with
billable consultants in both the US and offshore, including salaries, payroll
taxes, benefits, relocation costs, immigration costs, finders fees, trainee
compensation, and warranty reserves. Applications Outsourcing cost of revenues
increased to 57.2% of Applications Outsourcing revenues in 2001, from 56.8% in
2000. The 0.4% increase in cost of revenues as a percent of revenues was
attributable primarily to a decrease in utilization levels and release of
warranty reserves in 2000, no longer deemed necessary, associated with Y2K
remediation engagements, with no material corresponding release in 2001,
contributing approximately 3.5% and 0.1%, respectively, to the increase in
direct costs as a percentage of revenue. These increased costs were largely
offset by an increase in the higher margin offshore component of the overall
services contributing approximately 3.2%.


                                       43




E-BUSINESS REVENUES. e-Business revenues decreased to $40.4 million in 2001, or
24% of total consolidated revenues, from $42.6 million in 2000, or 26% of total
consolidated revenues. The $2.2 million decrease was attributable principally to
loss of revenue from completed engagements and discontinued Metier Division
contributing approximately $13.6 million and $5.9 million respectively; largely
offset by new business revenues of approximately $17.3 million.


COST OF REVENUES. e-business cost of revenues consist of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finders fees, and trainee
compensation. e-business cost of revenues decreased slightly to 64.6% of
e-business revenues in 2001, from 68.0% in 2000. The 3.4% decrease in cost of
revenues as a percent of revenues was attributable principally to improved
average billing rates in comparison to average compensation rates.

TEAMSOURCING REVENUES. TeamSourcing revenues decreased from $32.3 million, or
20% of total consolidated revenues in 2000, to $22.5 million, or 13% of total
consolidated revenues in 2001. The $9.8 million decrease in TeamSourcing
revenues was attributable principally to a decrease in U.S. based billable
consultants on various engagements, as a result of conscious decision by the
management to reduce organizational focus away from this segment.

COST OF REVENUES. TeamSourcing cost of revenues consist of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finders fees, and trainee
compensation. TeamSourcing cost of revenues increased to 78.5% of TeamSourcing
revenues in 2001, from 75.9% in 2000. The 2.6% increase in cost of revenues as a
percent of revenues was attributable principally to lower utilization due to the
softness in the economy.


SALES, GENERAL, AND ADMINISTRATIVE COSTS. Selling, general, and administrative
expenses consist primarily of salaries, payroll taxes and benefits for sales,
finance, human resources, administrative, and corporate staff, travel,
communications, business promotions, marketing, and various facility costs for
the Company's Global Development Centers. For the year ended December 31, 2001,
sales, general, and administrative expenses increased to $34.5 million, or 20.2%
of revenues, from $34.4 million, or 20.9% of revenues for the year ended
December 31, 2000. The $0.1 million increase was attributable principally to
increased professional fees and an allowance for doubtful accounts in the US of
approximately $0.7 million and $1.2 million, respectively; increased allowance
for doubtful debts in UK and Singapore of approximately $0.2 million and $0.1
million



                                       44





respectively, as well as increased facility costs of approximately $0.3 million
in Germany. This increase was largely offset by the savings in discontinued
Metier Division administrative costs and Metier Division goodwill amortization,
contributing approximately $1.8 million and $0.6 million to the decrease in
selling, general, and administrative costs, respectively.

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

REVENUES. Total consolidated revenues increased from $162.1 million in 1999 to
$164.8 million in 2000, representing a 2% increase. The Company's total revenues
were less dependent upon its largest customers in 2000 as compared to 1999. The
top five customers accounted for 47% of the total revenues in 2000, down from
50% of total revenues in 1999. Additionally, the top 10 customers accounted for
62% of the revenues in 2000 as compared to 68% in 1999. The worldwide billable
headcount increased to 1,623 as of December 31, 2000 compared to 1,367 as of
December 31, 1999. The increased headcount was due principally to increased
staffing in e-business engagements and Applications Outsourcing engagements,
partially offset by managed rampdowns of the TeamSourcing segment.

APPLICATIONS OUTSOURCING REVENUES. Applications Outsourcing revenues increased
from $87.3 million, or 54% of total revenues in 1999, to $89.9 million, or 54%
of total revenues in 2000. The $2.6 million increase is due principally to new
business engagements in the U.S. and U.K. of approximately $18.9 million and
growth in the base of approximately $2.2 million; largely offset by the loss of
revenues from completed engagements of $18.5 million. The completed engagements
included $13.1 million of Y2K remediation revenues in the year ended December
31, 1999.

COST OF REVENUES. Cost of revenues consist of costs directly associated with
billable consultants in both the US and offshore, including salaries, payroll
taxes, benefits, relocation costs, immigration costs, finders fees, trainee
compensation, and warranty reserves. Applications Outsourcing cost of revenues
increased to 56.8% of Applications Outsourcing revenues in 2000, from 53.8% in
1999. The 3.0% increase in cost of revenues as a percent of revenues was
attributable principally to the completion of Y2K remediation engagements in
1999 and a decrease in billing utilization levels, contributing approximately
5.5% and 3.2%, respectively, to the increase in direct costs as a percent of
revenue. These increased costs were largely offset by the impact of increased
offshore utilization net of global compensation increases and the release of
unused warranty reserves in 2000, contributing approximately 4.4% and 1.3%,
respectively.



                                       45







E-BUSINESS REVENUES. e-Business revenues increased to $42.6 million in 2000, or
26% of total consolidated revenues, from $33.4 million in 1999, or 21% of total
consolidated revenues. The $9.2 million increase was attributable principally to
growth in practice partnerships, a full year of revenues and growth in IMG, and
growth in existing engagements as well as new engagements, contributing
approximately $7.5 million, $3.7 million, and $4.1 million, respectively;
partially offset by decreased Metier revenues of $6.1 million.

COST OF REVENUES. e-business cost of revenues consist of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finders fees, and trainee
compensation. e-business cost of revenues increased slightly to 68.0% of
e-business revenues in 2000, from 67.7% in 1999. The .3% increase in cost of
revenues as a percent of revenues was attributable primarily to reduced
consultant utilization levels due to softness in the Oracle marketplace and
increased training activities, contributing approximately 7.0% to the increase
in direct costs as a percent of e-business revenues. This was largely offset by
improved average billing rates in comparison to average compensation rates,
contributing approximately 6.7% to the direct margins.

TEAMSOURCING REVENUES. TeamSourcing revenues decreased from $41.4 million, or
25% of total consolidated revenues in 1999, to $32.3 million, or 20% of total
consolidated revenues in 2000. The $9.1 million decrease in TeamSourcing
revenues was attributable principally to a decrease in average billable
consultants, resulting in decreased revenues of $10.5 million, partially offset
by an increase in average bill rates of $1.4 million. End of year average bill
rates increased to $58.14 per hour as of December 31, 2000, from $54.73 as of
December 31, 1999.

COST OF REVENUES. TeamSourcing cost of revenues consist of costs directly
associated with billable consultants, including salaries, payroll taxes,
benefits, relocation costs, immigration costs, finders fees, and trainee
compensation. TeamSourcing cost of revenues increased to 75.9% of TeamSourcing
revenues in 2000, from 71.7% in 1999. The 4.2% increase in cost of revenues as a
percent of revenues was attributable principally to increased compensation
levels and benefits and a decrease in utilization rates, contributing
approximately 6.3% and 2.4%, respectively, to the increase in direct costs as a
percent of TeamSourcing revenues; partially offset by increased average bill
rates of approximately 4.5%.

SALES, GENERAL, AND ADMINISTRATIVE COSTS. Selling, general, and administrative
expenses consist primarily of salaries, payroll taxes and benefits for sales,
finance, human resources, administrative, and corporate staff, travel,
communications, business promotions, marketing, and various


                                       46





facility costs for the Company's Global Development Centers. For the year ended
December 31, 2000, sales, general, and administrative expenses increased to
$34.4 million, or 20.9% of revenue, from $32.8 million, or 20.2% of revenues for
the year ended December 31, 1999. The $1.6 million increase in sales, general,
and administrative costs was attributable principally to an increase in
management bonuses of about $1.5 million and approximately $0.3 million increase
in both depreciation and marketing costs in the U.S. as well as approximately
$0.3 million in staffing, facilities, and travel in both the U.K. and India.
These increased costs were partially offset by staffing savings in the U.S. of
approximately $1.1 million (net of compensation increases) attributable
primarily to savings in Metier, recruiting, and sales.

QUARTERLY RESULTS OF OPERATIONS

         Note 16 of the consolidated financial statements appearing elsewhere in
this document sets forth certain quarterly income statement data for each of the
eight quarters beginning January 1, 2000 and ended December 31, 2001. In the
opinion of management, this information has been presented on the same basis as
the Company's Financial Statements appearing elsewhere in this document and all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in order to present fairly the unaudited quarterly results. The
results of operations for any quarter are not necessarily indicative of the
results for any future period.

         The Company's quarterly revenues and results of operations have not
fluctuated significantly from quarter to quarter in the past but could fluctuate
in the future. Various factors causing such fluctuations include: the timing,
number and scope of customer engagements commenced and completed during the
quarter; fluctuation in the revenue mix by segments; progress on fixed-price
engagements; acquisitions; timing and cost associated with expansion of the
Company's facilities; changes in IT professional wage rates; the accuracy of
estimates of resources and time frames required to complete pending assignments;
the number of working days in a quarter; employee hiring and training, attrition
and utilization rates; the mix of services performed on-site, off-site and
offshore; termination of engagements; start-up expenses for new engagements;
longer sales cycles for Applications Outsourcing engagements; customers' budget
cycles and investment time for training.



                                       47









LIQUIDITY AND CAPITAL RESOURCES

         The Company generally has financed its working capital needs through
operations. Both the Mumbai and Chennai expansion programs, as well as the 1999
acquisitions of Metier, Inc. and IMG, Inc. were financed from internally
generated funds. Additionally, construction of the development center in Pune,
India will also be financed through internally generated funds.

         The Company's cash and cash equivalents consist primarily of
certificates of deposit, corporate bonds and treasury notes. A large majority
of such amounts are held by Bank One for which a triple A rated letter of
credit has been provided. Remaining amounts are held by various banking
institutions including other U.S.-based and local India-based banks.

         Net cash provided by operating activities was $34.6 million, $19.2
million, $17.2 million for the years ended December 31, 2001, 2000 and 1999
respectively. The number of days sales outstanding in accounts receivable was
approximately 65 days 68 days, and 52 days, as of December 31, 2001, 2000 and
1999, respectively.

         Net cash used in investing activities was $20.7 million, $7.5 million
and $18.2 million for the years ended December 31, 2001, 2000 and 1999
respectively.

         Net cash used in investing activities in 2001 of $20.7 million included
$32.9 million for purchase of available-for-sale securities, $2.0 million for
capital expenditures, consisting principally of PC's, capitalized development
costs, and communications equipment; and $1.4 million in equity and other
investments, including $1.0 million in Nekema, $0.1 million in New2USA.com, $0.2
million in utilitiesmart.com and $0.1 million in Convergent Applications,
partially offset by $15.6 million from the proceeds from sale of available for
sale securities.

         Net cash used in investing activities in 2000 of $7.5 million included
$3.8 million for capital expenditures, consisting principally of PC's,
capitalized development costs, and communications equipment; and $3.7 million in
equity and other investments, including $2.2 million in Textiles Online
Marketplaces, $1.0 million in New2USA.com, and $0.5 million in Vianetta
Communications.

         Net cash used in investing activities in 1999 of $18.2 million included
$15.7 million for the acquisitions of Metier, Inc. and IMG, Inc., $1.7 million
for capitalized development costs, and $0.8 million for computer equipment. The
$1.7 million for capitalized development costs consists of $0.9 million for
implementation of internal PeopleSoft financial systems and $0.8 million for new
product development.

         Net cash provided by financing activities was $0.5 million in 2001, due
principally to the proceeds from the issuance of stock options and shares issued
from the stock purchase plan of $2.6 million, offset by repurchase of 218,700
shares of common stock for $2.1 million


                                       48




         Net cash used in financing activities was $1.4 million in 2000, due
principally to the repurchase of 329,000 shares of common stock for $3.1
million, offset by proceeds from the issuance of stock options and shares issued
from the stock purchase plan of $1.7 million. Net cash used in financing
activities was $0.1 million in 1999, due principally to the repurchase of
129,000 shares of common stock for $1.1 million, offset by proceeds from shares
issued from the Company's first stock purchase plan of $1.0 million.

         The Company had a line of credit with Bank One, which provided for
borrowings up to $40.0 million. The above line of credit expired on August 31,
2001. Before the expiration of the line of credit, in view of the adequacy of
the liquid cash available, the Company has extended the line of credit providing
for borrowings only up to $20.0 million. The line of Credit expires on August
31, 2002. The line of credit contains covenants restricting the Company from,
among other things, incurring additional debt, issuing guarantees and creating
liens on the Company's property, without the prior consent of the bank. The line
of credit also requires the Company to maintain certain tangible net worth
levels and leverage ratios. At December 31, 2001, there was no indebtedness
outstanding under the line of credit. The letters of credit bear 1% fee of the
face value payable annually in advance. Borrowings under the line of credit bear
interest 1) a formula approximating the bank's Eurodollar rate plus applicable
margin of 1.25% or 2) the bank's prime rate plus 1.25%.

         In addition to the bank line of credit, the Company had a $20.0 million
facility with Bank One to finance acquisitions which also expired on August 31,
2001. The Company had not borrowed any amounts under this facility. In view of
the adequacy of the liquid cash the company has not extended the above line of
credit.

         The Company believes that the combination of present cash balances and
future operating cash flows will be sufficient to meet the Company's currently
anticipated cash requirements for at least the next 12 months.

FORWARD LOOKING STATEMENTS/RISK FACTORS

         Certain statements contained in this Report are forward looking
statements within the meaning of the Securities Exchange Act of 1934. In
addition, the Company from time to time may publish other forward looking
statements. Such forward looking statements are based on management's estimates,
assumptions and projections and are subject to risks and uncertainties that
could cause actual results to differ materially from those discussed in the
forward looking statements. Factors which could affect the forward looking
statements include those listed below. The Company does not intend to update
these forward looking statements.

         -   Recruitment and Retention of IT Professionals
         -   Government Regulation of Immigration
         -   Variability of Quarterly Operating Results
         -   Customer Concentration; Risk of Termination
         -   Exposure to Regulatory and General Economic Conditions in India
         -   Intense Competition
         -   Ability to Manage Growth
         -   Fixed-Price Engagements
         -   Potential Liability to Customers
         -   Dependence on Principal
         -   Risks Related to Possible Acquisitions
         -   Limited Intellectual Property Protection





                                       49








CRITICAL ACCOUNTING POLICIES

Revenue recognition is the most significant accounting policy for the Company.
The Company recognizes revenue from time and material contracts as services are
rendered and costs are incurred. Revenue on fixed deliverable projects is
measured by the percentage of cost incurred to date to the estimated total cost
at completion. Revenue from fixed-price, application management and support
engagements is recognized as earned. The cumulative impact of any change in
estimates of the percentage complete or losses on contracts is reflected in the
period in which the changes become known.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets".
SFAS 141 replaces Accounting Principles Board Opinion 16, "Business
Combinations" and requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. SFAS 142 replaces APB
17, "Intangible Assets". In accordance with SFAS No. 141 and 142, effective for
the Company's year ended December 31, 2002, as a replacement to amortization of
goodwill and intangible assets with indefinite lives, the Company will evaluate
goodwill and intangible assets for impairment annually. The Company will adopt
the standards as of January 1,2002. As of December 31, 2001, net goodwill was
approximately $906000. Adoption of the standard is not expected to have a
material effect on the financial statements.

In February 2002, the Emerging Issues Task Force issued Topic D-103, "Income
Statement Characterization of Reimbursements Received for "Out-of-Pocket"
Expenses", which requires reimbursements of out-of-Pocket expenses to be
presented as revenues and the associated costs to be presented as expenses. The
statement will likely result in increased revenues and corresponding expenses
for the Company, however, the Company is currently reviewing the statement to
determine the full impact.


ITEM 7A.  MARKET RISKS

The Company is primarily exposed to the effects of changes in foreign currency.
Foreign currency exchange risk exists as costs are paid in local currency and
receipts are provided in U.S. dollars. The risk is partially mitigated as the
Company has sufficient resources in the local currency to meet immediate
requirements. The Company's holdings and positions in market sensitive
instruments do not subject the Company to material risk. These exposures are
monitored and managed by the Company.




                                       50


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements and schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page F-1
of the separate financial section which follows page 58 of this Report and are
incorporated herein by reference.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         Not applicable.






                                       51






                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information set forth in the section entitled "Election of
Directors" in the Registrant's Proxy Statement for the Annual Shareholders'
Meeting to be held on or about May 17, 2002 (the "Proxy Statement) is
incorporated herein by reference. The information set forth under the caption
"Compliance with Section 16(a) of The Exchange Act" in the section entitled
"Additional Information" in the Registrant's Proxy Statement is incorporated
herein by reference. The information set forth in the section entitled
"Executive Officers of the Registrant" in Item 1 of this report is incorporated
herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         The information set forth under the section entitled "Executive
Compensation" in the Registrant's Proxy Statement is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCK HOLDER MATTERS.

         The information set forth under the captions "Principal Shareholders"
and "Security Ownership of Management" in the section entitled "Additional
Information" in the Registrant's Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Not applicable.



                                       52




                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a) & (d) The financial statements, supplementary financial
information, and financial statement schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page F-1
of the separate financial section which follows page 56 of this Report, which is
incorporated herein by reference.

         (b) No report on form 8-K was filed during the fourth quarter of the
year ended December 31, 2001.

         (c) The following exhibits are filed as part of this Report. Those
exhibits with an asterisk(*) designate the Registrant's management contracts or
compensation plans or arrangements for its executive officers.

Exhibit No.                   Description

         3.1               Restated Articles of Incorporation of the registrant
                           filed as an exhibit to the Registrant's Statement on
                           Form S-1 dated June 6, 1997, and incorporated herein
                           by reference.

         3.2               Amendment to Articles of Incorporation of the
                           Registrant dated September 21, 1998 filed as an
                           Exhibit to the Registrant's Annual Report on Form
                           10-K for the year ended December 31, 1998 and
                           incorporated herein by reference.

         3.3               Bylaws of the Registrant filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.1              Line of Credit Agreement, dated August 31, 2001,
                           between the Registrant and Bank One, Michigan.

         10.2              Lease, dated August 22, 1996, between WRC Properties,
                           Inc. and the Registrant, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.3              Lease Agreement, dated November 30, 1994, between the
                           Registrant and NationsBank of North Carolina, NA., as
                           Trustee for the Public Employees Retirement System of
                           Ohio, filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.


                                       53





         10.4              First Amendment, dated October 19, 1998, between the
                           Registrant and Corning Road, L.L.C. (successor to
                           First Union National Bank of North Carolina as
                           Trustee, successor to NationsBank), to the Lease
                           Agreement, dated November 30, 1994, between the
                           Registrant and NationsBank, filed as an Exhibit to
                           the Registrant's Annual Report on Form 10-K for the
                           year ended December 31, 1998 and incorporated herein
                           by reference.

         10.5              Indentures of Lease entered into between the
                           President of India and Syntel (India) Ltd. (formerly
                           known as Syntel Software Pvt. Ltd.) on various dates
                           in 1992 and 1993 for the Mumbai Global Development
                           Center and filed as an Exhibit to the Registrant's
                           Registration Statement on Form S-1 dated June 6,
                           1997, and incorporated herein by reference.

         10.6              Rental Agreement, dated February 24, 1997, between
                           Syntel India Ltd. (formerly known as Syntel Software
                           Pvt. Ltd.) and the Landlords for the Chennai Global
                           Development Center, filed as an Exhibit to the
                           Registrant's Registration Statement on Form S-1 dated
                           June 6, 1997, and incorporated herein by reference.

         10.7*             1997 Stock Option and Incentive Plan, (Amended and
                           Restated).

         10.8*             Employee Stock Purchase Plan, filed as an Exhibit to
                           the Registrant's Registration Statement on Form S-1
                           dated June 6, 1997, and incorporated herein by
                           reference.




                                       54






         21                SUBSIDIARIES OF THE REGISTRANT.

         99                Proxy Statement for the Registrant's 2002 Annual
                           Meeting of Shareholders, filed by the Registrant
                           pursuant to Regulation 14A and incorporated herein by
                           reference.






                                       55



                                  SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                              SYNTEL, INC.

                              By: /s/Bharat Desai
                                  ---------------

                                     Bharat Desai
Dated:   March 25,2002               President
                                     and Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

   Signature                         Title                      Date


                          President and Chief Executive Officer
- ----------------------    (Principal Executive Officer)           March 25,2002
Bharat Desai

                          Interim Chief Financial Officer         March 25,2002
- ----------------------    (Principal Financial and Accounting Officer)
Sanjay Chheda


                          Director and Vice President,            March 25,2002
- ----------------------    Corporate Affairs
Neerja Sethi


                          Director                                March 25,2002
- ----------------------
Paritosh K. Choksi


                          Director                                March 25,2002
- ----------------------
Douglas Van Houweling


                          Director                                March 25,2002
- ----------------------
George R. Mrkonic


                                       56







- --------------------------------------------------------------------------
CONTENTS

                                                                     PAGE(s)

REPORT OF INDEPENDENT ACCOUNTANTS.........................................58


CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets...............................................59

Consolidated Statements of Income.........................................60

Consolidated Statements of Shareholders' Equity...........................61

Consolidated Statements of Cash Flows.....................................62

Notes to Consolidated Financial Statements.............................63-82




                                       57





REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors of
Syntel, Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Syntel,
Inc., and its subsidiaries at December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers

Detroit, Michigan
March 25, 2002







                                       58




CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------



                                                                               DECEMBER 31,      DECEMBER 31,
                                      ASSETS                                       2001              2000
                                                                                 ---------        ---------
                                                                                             
Current assets:
       Cash and cash equivalents                                                  $  88,010        $  73,478
       Investments, marketable securities                                            17,203                -
       Accounts receivable                                                           30,982           31,194
       Advanced billings and other current assets                                     7,448            9,437
                                                                                  ---------        ---------
            Total current assets                                                    143,643          114,109

Property and equipment                                                               19,041           19,183
       Less accumulated depreciation                                                 13,823           12,023
                                                                                  ---------        ---------
            Property and equipment, net                                               5,218            7,160
                                                                                  ---------        ---------

Goodwill, net of amortization                                                           906            1,026
Equity and other investments                                                              -            3,918
Deferred income taxes, non-current                                                    2,632            6,685
                                                                                  ---------        ---------
                                                                                  $ 152,399        $ 132,898
                                                                                  =========        =========
                                    LIABILITIES
Current liabilities:
       Accounts payable                                                           $   4,282        $   4,801
       Accrued payroll and related costs                                             12,984           10,909
       Income taxes payable                                                           3,702            6,105
       Accrued warranty costs                                                           150              150
       Accrued liabilities                                                            4,661            4,948
       Accrued Metier costs                                                           4,173            4,113
       Deferred revenue                                                               5,451            4,948
                                                                                  ---------        ---------
            Total current liabilities                                                35,403           36,215

                               SHAREHOLDERS' EQUITY
Common stock, no par value per share, 100 million shares authorized; 38,689
       million and 38,499 million shares issued and outstanding at
       December 31, 2001 and 2000, respectively                                           1                1
Additional paid-in capital                                                           38,883           38,345
Accumulated other comprehensive loss                                                 (1,577)            (907)
Retained earnings                                                                    79,689           59,244
                                                                                  ---------        ---------
            Total shareholders' equity                                              116,996           96,683
       Total liabilities and shareholders' equity                                 $ 152,399        $ 132,898
                                                                                  =========        =========




The accompanying notes are an integral part of the consolidated financial
statements.



                                       59


CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------



                                                        2001            2000             1999
                                                     ---------        ---------       ---------

                                                                             
Revenues                                             $ 170,777        $ 164,808       $ 162,117
Cost of revenues                                       105,437          104,602          99,300
                                                     ---------        ---------       ---------
Gross profit                                            65,340           60,206          62,817
Selling, general and administrative expenses            34,522           34,424          32,814
Capitalized development cost impairment                  1,624                -               -
Goodwill impairment and related charges                      -           21,650               -
                                                     ---------        ---------       ---------

Income from operations                                  29,194            4,132          30,003

Other income, principally interest                       3,780            3,412           2,024
                                                     ---------        ---------       ---------

       Income before income taxes                       32,974            7,544          32,027

Income tax (provision) benefit                          (8,636)             967         (10,573)
                                                     ---------        ---------       ---------

Net income before loss from equity investments          24,338            8,511          21,454

Loss from equity investments, net of tax of
  $2,000 in 2001                                         3,893              526               -
                                                     ---------        ---------       ---------

       Net income                                    $  20,445        $   7,985       $  21,454
                                                     =========        =========       =========

EARNINGS PER SHARE
       Basic                                         $    0.53        $    0.21       $    0.56
       Diluted                                       $    0.52        $    0.20       $    0.55




The accompanying notes are an integral part of the consolidated financial
statements.



                                       60


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
- --------------------------------------------------------------------------------


                                         COMMON STOCK          ADDITIONAL                           OTHER                  TOTAL
                                     -------------------        PAID-IN       RETAINED           COMPREHENSIVE         SHAREHOLDERS'
                                     SHARES       AMOUNT        CAPITAL       EARNINGS               LOSS                 EQUITY
                                     ------       ------        -------       --------               ----                 ------
                                                                                                           FOREIGN
                                                                                                           CURRENCY
                                                                                             UNREALIZED   TRANSLATION
                                                                                                GAIN       ADJUSTMENT
                                                                                                ----       ----------
                                                                                                      
BALANCE, JANUARY 1, 1999            38,195       $      1       $ 34,784       $ 29,805             -       $   (443)      $ 64,147


Net income                                                                       21,454                                      21,454
Translation adjustments                                                                                         (133)          (133)
                                                                                                                           --------
Total other comprehensive                                                                                                    21,321
income, net of tax
Stock issued to directors               18                           111                                                        111
Common stock repurchases              (129)                       (1,097)                                                    (1,097)
Metier acquisition                     300                         4,738                                                      4,738
Employee stock purchase plan           101                           762                                                        762
Exercised stock options                 71                           274                                                        274
Compensation expense related to
    Stock options                                                    105                                                        105
                                    ------       --------       --------       --------      --------       --------       --------
BALANCE, DECEMBER 31, 1999          38,556       $      1       $ 39,677       $ 51,259             -       $   (576)      $ 90,361


Net income                                                                        7,985                                       7,985
Translation adjustments                                                                                         (331)          (331)
                                                                                                                           --------
Total other comprehensive                                                                                                     7,654
income, net of tax
Common stock repurchases              (329)                       (3,136)                                                    (3,136)
Employee stock purchase plan           169                         1,127                                                      1,127
Exercised stock options                103                           543                                                        543
Compensation expense related to
    Stock options                                                    134                                                        134
                                    ------       --------       --------       --------      --------       --------       --------
BALANCE, DECEMBER 31, 2000          38,499       $      1       $ 38,345       $ 59,244             -       $   (907)      $ 96,683


Net income                                                                       20,445                                      20,445
Unrealized gain on investments,                                                                    33                            33
net of tax
Translation adjustments                                                                                         (703)          (703)
                                                                                                                           --------
Total other comprehensive                                                                                                    19,775
income, net of tax
Common stock repurchases              (219)                       (2,060)                                                    (2,060)
Employee stock purchase plan           175                         1,143                                                      1,143
Exercised stock options                234                         1,414                                                      1,414
Compensation expense related to
    Stock options                                                     41                                                         41
                                    ------       --------       --------       --------      --------       --------       --------
BALANCE, DECEMBER 31, 2001          38,689       $      1       $ 38,883       $ 79,689      $     33       $ (1,610)      $116,996
                                    ======       ========       ========       ========      ========       ========       ========






    The accompanying notes are an integral part of the consolidated financial
statements.

                                       61

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------



                                                                                      TWELVE MONTHS
                                                                                    ENDED DECEMBER 31
                                                                            --------------------------------
                                                                              2001        2000        1999
                                                                              ----        ----        ----
                                                                                           
Cash flows from operating activities:
       Net income                                                           $ 20,445    $  7,985    $ 21,454
                                                                            --------    --------    --------
       Adjustments to reconcile net income to net
             cash provided by operating activities:
            Depreciation                                                       1,800       2,633       2,353
            Goodwill                                                              76         655         662
            Realized losses on sales of available-for-sale                        72           -           -
            securities
            Deferred income taxes                                              4,468      (8,311)      1,078
            Compensation expense related to
               stock options                                                      41         134         105
            Expense related to common stock issued to                              -           -         111
            directors
            Loss on equity investments                                           752         526           -
            Goodwill impairment and related charges                                -      21,650           -
            Changes in assets and liabilities net of effects from
               Purchase of Metier Inc & IMG Inc in 1999:
                 Accounts receivable, net                                       (602)     (7,394)      4,934
                 Advance billing and other assets                              1,574       1,711         (77)
                 Accrued payroll and other liabilities                          (984)     (1,137)     (7,438)
                 Deferred revenues                                               217         728      (5,936)
                 Capitalized development cost impairment                       1,624           -           -
                 Investment impairment                                         5,141           -           -
                                                                            --------    --------    --------
            Net cash provided by operating activities                         34,624      19,180      17,246
                                                                            --------    --------    --------
Cash flows used in investing activities:
            Property and equipment expenditures                               (2,071)     (3,785)     (2,496)
            Equity and other investments                                      (1,386)     (3,730)          -
            Purchase of available-for-sale securities                        (32,952)          -           -
            Proceeds from sales of available-for-sale
            securities                                                        15,677           -           -
            Payments for purchases of Metier, Inc. and IMG, Inc
               Net of cash acquired                                                -           -     (15,738)
                                                                            --------    --------    --------
            Net cash used in investing activities                            (20,732)     (7,515)    (18,234)
                                                                            --------    --------    --------

Cash flows used in financing activities:
            Net proceeds from issuance of stock                                2,557       1,670       1,036
            Common stock repurchases                                          (2,060)     (3,136)     (1,097)
                                                                            --------    --------    --------
            Net cash used in financing activities                                497      (1,466)        (61)
            Effect of foreign currency exchange rate changes
            on cash                                                              143        (332)          -
                                                                            --------    --------    --------
Net increase (decrease) in cash and cash equivalents                          14,532       9,867      (1,049)

Cash and cash equivalents, beginning of period                                73,478      63,611      64,660
                                                                            --------    --------    --------

Cash and cash equivalents, end of period                                    $ 88,010    $ 73,478    $ 63,611
                                                                            ========    ========    ========

Cash paid during the period for income taxes                                $  5,356    $  4,564    $  9,993
                                                                            ========    ========    ========


The accompanying notes are an integral part of the consolidated financial
statements.

- --------------------------------------------------------------------------------


                                       62





SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1.       BUSINESS

         Syntel, Inc. and Subsidiaries (the "Company") provide information
         technology services such as programming, systems integration,
         outsourcing and overall project management. The Company provides
         services to customers primarily in the financial, manufacturing,
         transportation, retail, and information/communication industries, as
         well as to government entities. The Company's reportable operating
         segments consist of Applications Outsourcing, e-business, and
         TeamSourcing.

         Through Applications Outsourcing, the Company provides higher-value
         outsourcing services for ongoing management, development and
         maintenance of customers' business applications. In most Application
         Outsourcing engagements, the Company assumes responsibility for the
         management of customer development and support functions. Application
         Outsourcing engagements are generally supported by multiyear contracts.
         As a percentage of total consolidated revenues, Application Outsourcing
         revenues remained at 63% of total revenues during 2001 and 54% during
         both 2000 and 1999.

         Through e-business, the Company provides development and implementation
         services for a number of emerging and rapidly growing high technology
         applications, including Web development, Data Warehousing, e-commerce,
         CRM, and Oracle, as well as partnership arrangements with leading
         software firms, including Tibco, Motive, Selectica, and Vigilence, to
         provide installation services to their respective customers. These
         services may be provided on either a time-and-material basis or on a
         fixed price basis, in which the Company assumes responsibility for
         management of the engagement. As a percent of total revenues,
         e-business revenues contributed 24%, 26% and 21% of total consolidated
         revenues in 2001, 2000, and 1999, respectively.

         Through TeamSourcing, the Company provides professional information
         technology services directly to the customer. TeamSourcing contracts
         are generally revocable by the customer without penalty.


                                       63

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------



         During the year ended December 31, 2001 three customers contributed
         revenues in excess of 10% of total consolidated revenues. The Company's
         three largest customers in 2001 were American Express Corp., Target
         Corporation (formerly Dayton Hudson Group) and American International
         Group Inc. Revenues from these customers were approximately
         $31,112,400, $18,954,100 and $18,598,500 contributing approximately
         18%, 11% and 11% respectively, of total consolidated revenues during
         2001. At December 31, 2001 approximately 3.4%, 12.3% and 10.8%,
         respectively of accounts receivable, net, were from these customers.
         All revenues from these customers were generated in the Applications
         Outsourcing segment.

         During the years ended December 31, 2000 and 1999, the Company had one
         customer, AIG, that contributed in excess of 10% of the total
         consolidated revenues. Revenues from this customer were approximately
         $31,779,000 and $33,900,000, for the years ended 2000 and 1999,
         respectively; contributing approximately 19%, and 21%, respectively of
         total consolidated revenues. At December 31, 2000 and 1999,
         approximately 2% and 16%, respectively of accounts receivable, net, was
         from this customer. All revenues from this customer were generated in
         the Applications Outsourcing segment.

2.       SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of Syntel,
         Inc. ("Syntel") and its wholly owned subsidiaries Syntel (India)
         Limited ("Syntel India"), an Indian limited liability company, Syntel
         "Singapore" PTE., Ltd., ("Syntel Singapore"), a Singapore limited
         liability company, Syntel Europe, Ltd., ("Syntel U.K."), a United
         Kingdom limited liability company, Syntel Canada Inc., ("Syntel
         Canada") a Canada limited liability company, Syntel Deutschland GmbH,
         ("Syntel Germany") a Germany limited liability Company, Syntel Hong
         Kong Ltd. ("Syntel Hong Kong") a Hong Kong limited liability Company,
         Syntel Mauritius Limited ("Syntel Mauritius") a Mauritius limited
         liability Company and Syntel "Australia" Pty. Limited ("Syntel
         Australia"), an Australian limited liability Company. All intercompany
         balances and transactions have been eliminated.

         REVENUE RECOGNITION
         The Company recognizes revenues from time and material contracts as
         services are rendered and costs are incurred.

         Revenue on fixed-price, fixed deliverable projects is measured by the
         percentage of cost incurred to date to the estimated total cost at
         completion. Revenue from fixed-price



                                       64


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


         application management and support engagements is recognized as earned.
         The cumulative impact of any change in estimates of the percentage
         complete or losses on contracts is reflected in the period in which the
         changes become known.

         CASH AND CASH EQUIVALENTS
         For the purpose of reporting cash and cash equivalents, the Company
         considers all liquid investments purchased with a maturity of three
         months or less to be cash equivalents. At December 31, 2001 and 2000,
         approximately $60,027 and $40,723, respectively, represent corporate
         bonds and treasury notes held by Bank One, for which a triple A rated
         letter of credit has been provided by the bank. The remaining cash and
         cash equivalents are certificates of deposit, corporate bonds, and
         treasury notes held by various banking institutions including other
         U.S.-based and local India-based banks.

         FINANCIAL INSTRUMENTS
         The carrying amount of cash equivalents, trade receivables and trade
         payables approximate fair value because of the short-term nature of
         these instruments.

         INVESTMENTS, MARKETABLE SECURITIES
         The Company's marketable mutual funds have been classified as
         available-for-sale and are carried at estimated fair value. Fair value
         is determined based on quoted market prices. Unrealized gains and
         losses on available-for-sale securities are reported as a separate
         component of shareholders' equity. Net realized gains or losses
         resulting from the sale of these investments and losses resulting from
         decline in fair values of investments that are other than temporary
         declines, are included in other income. The cost of securities sold is
         determined on the weighted average method. Dividend income is
         recognized when earned.

         PROPERTY AND EQUIPMENT
         Property and equipment are stated at cost. Maintenance and repairs are
         charged to expense when incurred. Depreciation is computed primarily
         using the straight-line method over the estimated useful lives as
         follows:


                                                                YEARS

                                                        
       Computer equipment and software                            3
       Furniture and fixtures                                     7
       Telephone equipment                                        5
       Leasehold improvements                              Life of lease
       Capitalized software development costs               See below


         The Company capitalizes certain direct internal and external costs
         associated with upgrading and enhancing its information systems to
         support its information processing needs. Capitalization of such costs
         begins when the preliminary planning stage for each


                                       65

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------




         project is completed and management has formally authorized its funding
         and ends when the project is substantially complete. These costs are
         amortized using the straight-line method over three years.

         The Company considers the future undiscounted cash flows attributable
         to capitalized development costs in evaluating potential impairment of
         the asset.

         Other computer software and hardware maintenance and training costs are
         charged to expenses as incurred.

         Effective January 1, 2000 the Company adopted Emerging Issues Task
         Force (EITF) 00-02, "Accounting for Web Site Development Costs", which
         required that certain costs for development of a web site, including
         costs of developing graphics and content, be capitalized. The Company
         capitalized $0.9 million and $1.0 million of Web site development costs
         during the year ended December 31, 2001 and 2000, respectively. Such
         costs are included in Capitalized Software and Development Costs.

         GOODWILL
         Goodwill originated from the acquisition, in 1999, of two entities, IMG
         and Metier. The IMG goodwill is being amortized on a straight-line
         basis over a 15-year period. The Company determines the recoverability
         of recorded goodwill by the undiscounted expected future cash flow from
         the operations to which the goodwill applies. If the goodwill is
         determined to be impaired as a result of this measurement, the
         impairment recognized is measured by the amount by which the carrying
         amount of the asset exceeds the fair value of the asset, as determined
         on a discounted cash flow basis.

         ESTIMATES
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts including,
         but not limited to warranty costs, valuation of trade accounts
         receivable, amortization and impairment of goodwill, and potential tax
         liabilities. Actual results could differ from those estimates and
         assumptions.

         FOREIGN CURRENCY TRANSLATION
         The financial statements of the Company's foreign operations utilize
         the functional currency of the country in which business is conducted.
         Revenues, costs and expenses of the foreign subsidiaries are translated
         to U. S. dollars at average period exchange rates.


                                       66


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

         Assets and liabilities are translated to U. S. dollars at year-end
         exchange rates with the effects of these translation adjustments being
         reported as a separate component of accumulated other comprehensive
         income in shareholders' equity. The change in the accumulated other
         comprehensive income account results from translation adjustments
         recognized for the respective period.

         PER SHARE DATA
         Basic earnings per share is calculated by dividing net income by the
         weighted average number of shares outstanding during the applicable
         period.

         The Company has stock options, which are considered to be potentially
         dilutive to common stock. Diluted earnings per share is calculated by
         dividing net income by the weighted average number of shares
         outstanding during the applicable period adjusted for these potentially
         dilutive options.

         RECLASSIFICATIONS
         Certain amounts in previously issued financial statements have been
         reclassified to conform with the current year presentation.

3.       ACQUISITIONS
         During 1999, the Company acquired substantially all the business and
         assets of Metier, Inc. The acquisition resulted in goodwill of
         $20,450,000. During the year ended December 31, 2000, the Company
         determined that the Metier goodwill was impaired, and as a result wrote
         off the remaining portion of unamortized goodwill and provided for the
         cost associated with the downsizing of the Metier business.

         During 1999, the Company also acquired the business and assets of IMG,
         Inc. The resulting goodwill of $ 1,122,000 is being amortized on a
         straight-line basis over 15 years.

         The operating results of both Metier and IMG have been included in the
         consolidated results since July 1, 1999, their respective effective
         dates.





                                       67

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


4.      INVESTMENTS, MARKETABLE SECURITIES
        Investment in marketable securities included the following
        at December 31, 2001 (in thousands):

                                                         Total
                                                      Unrealized       Carrying
                                          Cost         Gain, net         Value
                                         --------     ----------       --------

               Mutual Funds              $ 17,170         $ 33          $ 17,203



         The gross realized gains on sale of available-for-sale investments
         approximated $ 69 for the year ended December 31, 2001. The gross
         realized losses on sale of available-for-sale investments approximated
         $141 for the year ended December 31, 2001. The dividend income on
         certain mutual funds approximated $ 767 for the year ended December 31,
         2001.



                                       68

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


5.      INVESTMENTS

         At December 31, 2001, the Company had the following investments:






                                                 Accounting    Investment balance
                 Investment         Ownership      Method      Prior to impairment        Description of Business
                 ----------         ---------    -----------   -------------------        -----------------------
                                                                              
           New2USA                     (1)         Equity          $860,626               Web portal providing
                                                                                          information
                                                                                          and services to assist
                                                                                          immigrants with settling in
                                                                                          the U.S.

           Textiles Online
           Marketplaces Ltd.           10%          Cost         $2,500,000               Business to Business  internet
                                                                                          based online textile exchange.
           Vianetta
           Communications (2)          <5%          Cost           $500,000               Computerized transcriptions of
                                                                                          medical transcripts
                                                                                          eliminating the
                                                                                          need for dictation equipment.

           Utilitysmart.com           6.5%          Cost           $200,000               Business to Business and
                                                                                          Business to consumer e-business

           Nekema.com                 0.7%          Cost         $1,000,000               A web base market place for
                                                                                          providing e-commerce
                                                                                          technology to the business
                                                                                          requirements of Insurance and
                                                                                          Finance companies

           Convergent Corporation      13%          Cost            $62,500               Supplier of Advance Billing
                                                                                          System to Communication
                                                                                          networks



         (1)      Syntel's ownership in New2USA includes 3,500 shares of
                  preferred stock, representing approximately 97% ownership.
                  This ownership percentage does not represent the Company's
                  economic control, which is approximately 20%.

         (2)      The $500,000 investment in Vianetta Communications consists of
                  a convertible note, bearing interest at the lower of (a) the
                  highest permissible rate under applicable law or (b) the rate
                  equal to the minimum rate established pursuant to Section
                  1274(d) of the Internal Revenue Code of 1986. The note was
                  payable on or before the earlier of April 30, 2001 or the
                  closing of qualified financing. During 2001, the note was
                  converted into equity shares.

         For the Year ended December 31, 2001, the Company recorded losses, net
         of taxes of $752,000 on it's equity investments.


         In addition to the Company's investment in Vianetta, the Company's
         president and CEO as well as an outside director have invested $500,000
         and $100,000, respectively, with terms similar to those of the Company.

         The Company signed an agreement in April 2000 to provide development
         services to Textiles Online Marketplaces with a total contract value of
         $3.6 million. During the year ended December 31, 2001 and 2000 the
         Company recorded total revenues of $0.7 million and $1.8 million,
         respectively.

                                       69

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


         In addition to the Company's investment in Utilitismart.com, the
         Company's President and CEO has invested $ 100,000 with terms similar
         to those of the Company.

         The Company signed an agreement in March, 1999 to provide Application
         Development, Maintenance and Technical support services to Nekema.com.
         During the year ended December 31, 2001, the Company recorded total
         revenues of $ 2.5 million.

         The above investments have been deemed to be impaired with any
         remaining investment being written off as of December 31, 2001 and
         reflected within loss from equity investments on the consolidated
         statements of income.

6.       COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS AND DEFERRED
         REVENUE

         The following summarizes activity for uncompleted, fixed price, fixed
         deliverable projects:




                                                                                   2001            2000
                                                                                 --------         ------
                                                                                     (IN THOUSANDS)

                                                                                            
       Direct costs incurred on uncompleted, fixed price, fixed
       deliverable projects                                                      $ 12,799         $6,159
       Direct margins incurred on uncompleted, fixed price, fixed
       deliverable projects                                                        12,067          6,049
                                                                                 --------         ------

       Revenues recognized on uncompleted projects                                 24,866         12,208
          Less -- billings to date                                                 27,508         14,859
                                                                                 --------         ------

       Deferred revenues on fixed price, fixed deliverable projects                 2,642          2,651
       Advanced billings on application management projects                         2,405          1,553
       Other deferred revenues                                                        404          1,030
                                                                                 --------         ------
          Total deferred revenue as reported in the balance sheet                $  5,451         $5,234
                                                                                 ========         ======

       Projects with billings in excess of costs and estimated earnings
       on uncompleted fixed price, fixed deliverable projects                    $  2,885         $2,832
       Projects with costs and estimated earnings in excess of billings
       on uncompleted fixed price, fixed deliverable projects                        (243)          (181)
                                                                                 --------         ------
           Deferred revenues in fixed price, fixed deliverable projects          $  2,642         $2,651
                                                                                 ========         ======



7.      PROPERTY AND EQUIPMENT

        Cost of property and equipment at December 31, 2001 and 2000 is
        summarized as follows (in thousands):




                                                                   2001          2000
                                                                   ----          ----
                                                                         
         Computer equipment and internal software                 $ 11,426     $10,852
         Furniture and equipment                                     5,594       5,447
         Leasehold improvements                                        925       1,047
         Capitalized software and development costs                  1,096       1,837
                                                                  --------     -------
                                                                    19,041      19,183
         Accumulated depreciation and amortization                  13,823      12,023
                                                                  --------     -------
                                                                  $  5,218     $ 7,160
                                                                  ========     =======




                                       70



SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

8.       LINE OF CREDIT

         The Company has a line-of-credit arrangement with a bank, expiring
         August 31, 2002, which provides for borrowings up to $20,000,000.
         Standby letters of credit are available for up to $5,000,000 of this
         amount, at any one time outstanding, expiring not later than February
         2003. The letters of credit bear a 1% fee of the face value payable
         annually in advance. Interest is computed on the basis of the Company's
         option at (i) a formula approximating the Eurodollar rate plus the
         applicable Eurodollar margin of 1.25%, or (ii) the bank's prime rate
         plus 1.25%. No borrowings were outstanding at December 31, 2001 and
         2000.

9.      LEASES

         The Company leases certain facilities and equipment under operating
         leases. Current operating lease obligations are expected to be renewed
         or replaced upon expiration. Future minimum lease payments under all
         non-cancelable leases expiring beyond one year as of December 31, 2001
         are as follows (in thousands):

                      
                2002     $ 2,035
                2003       1,680
                2004         884
                2005         571
                2006         534
                         -------
                         $ 5,704
                         -------





         Total rent expense charged to operations amounted to approximately
         $2,303, $2,359 and $2,221 for the years ended December 31, 2001, 2000,
         and 1999, respectively.

10.      INCOME TAXES

         Income (loss) before income taxes for U. S. and foreign operations was
         as follows (in thousands):



                     2001       2000         1999
                   --------   --------    --------
                                 
         U. S      $ 12,555   $ (5,439)   $ 27,052
         Foreign     20,419     12,983       4,975
                   --------   --------    --------
                   $ 32,974   $  7,544    $ 32,027
                   ========   ========    ========




                                       71


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

         The provision for income taxes is as follows:



                                                                                      2001      2000      1999
                                                                                    -------   -------    -------
                                                                                                
         Current Provision
            Federal                                                                 $   806   $ 6,075    $ 7,965
            State                                                                       640       219      1,190
            Foreign                                                                   2,722     1,050        340
                                                                                    -------   -------    -------
               Total current provision                                                4,168     7,344      9,495
                                                                                    -------    -------   -------

         Deferred
            Federal                                                                   3,220    (7,019)       976
            State                                                                     1,248    (1,292)       102
                                                                                    -------   -------    -------
               Total deferred                                                         4,468    (8,311)     1,078
                                                                                    -------   -------    -------

               Total provision (benefit) for income taxes                           $ 8,636   $  (967)   $10,573
                                                                                    =======   =======    =======



         The components of the net deferred tax asset are as follows (in
         thousands):



                                                                                           2001          2000
                                                                                         -------        -------
                                                                                                  
         Deferred tax assets
             Goodwill impairment and related costs                                       $   956        $ 8,373
              Investments and capitalized development cost impairment                      2,632              -
             Accrued warranty and other expenses                                           3,304          2,516
             Advanced billing receipts                                                       655          1,125
                                                                                         -------        -------
         Net deferred tax asset                                                          $ 7,547        $12,014
                                                                                         =======        =======


         Balance sheet classification of the net deferred tax asset is
         summarized as follows (in thousands) :




                                                                                        2001          2000
                                                                                      -------        -------

                                                                                               
       Deferred tax asset, current                                                    $ 4,915        $ 5,329
       Deferred tax asset, non-current                                                  2,632          6,685
                                                                                      -------        -------
                                                                                      $ 7,547        $12,014
                                                                                      =======        =======


         Current deferred tax assets of $4,915 and $5,329 are included in
         advanced billing and other current assets at December 31, 2001 and 2000
         respectively.

         Under the Indian Income Tax Act of 1961 (the "Act"), Syntel is eligible
         for certain favorable tax provisions including: (i) an exemption from
         payment of corporate income taxes for up to five years of operation
         (the "Tax Holiday"); or (ii) an exemption from income taxes on profits
         derived from exporting computer software services from India (the
         "Export Exemption"). During 1999, the Indian government amended the Tax
         Holiday regulations and under the new regulations, the Company's Tax
         Holidays will expire no earlier than March 31, 2003 and hence deferred
         tax liabilities, if any, have not been computed. During February 2002,
         the Indian government made certain prospective changes in tax
         regulations, which will restrict the exemption under (i) above to the
         extent of 90%, resulting in taxation of the remaining 10% of export
         profits earned by Syntel India, beginning April 2002.





                                       72


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

         For those undistributed earnings of foreign subsidiaries considered to
         be indefinitely reinvested no provision for U. S. federal and state
         income tax or applicable withholding tax has been provided thereon. The
         unrecognized taxes on the undistributed earnings are approximately $
         16.6 million at December 31, 2001.

         The following table accounts for the differences between the actual tax
         provision and the amounts obtained by applying the statutory U. S.
         federal income tax rate of 35% to income before income taxes:




                                                                 2001           2000             1999
                                                               -------          ------         -------
                                                                           (IN THOUSANDS)
                                                                                      
       Statutory provision                                    $ 10,353          $2,640         $11,209
       State taxes, net of federal benefit                       1,887             219           1,190
       Tax-free investment income                                    -            (676)           (531)
       Foreign income not subject to tax                        (5,221)         (4,000)         (1,595)
       Prov. for sub part F--Income of Syntel India                300               -               -
       Other                                                     1,317             850             300
                                                               -------          ------         -------
                                                               $ 8,636          $ (967)        $10,573
                                                               =======          ======         =======



11.     EARNINGS PER SHARE

         The reconciliation of earnings per share computations for the fiscal
         years 2001, 2000, and 1999 were as follows:



                                             2001                         2000                          1999
                                   -------------------------    -------------------------     -------------------------
                                                      Per                          Per                            Per
                                      Shares         Share           Shares       Share           Shares         Share
                                      ------         -----           ------       -----           ------         -----
                                                        (in thousands, except per share earnings)
                                                        -----------------------------------------
                                                                                              
            Basic earnings per           38,690      $ 0.53           38,499       $0.21           38,556        $0.56
            share
            Net dilutive effect
            of stock
            options outstanding             326                          981                          493
                                   ------------     --------         --------     ------------     -------      --------
                                         39,016      $ 0.52           39,480       $0.20           39,049        $0.55
                                   ============     ========         ========     ============     =======       =======




         As of December 31, 2001 and 2000, stock options to purchase 411,397 and
         1,687,313 shares of common stock, respectively, at a weighted average
         price per share of $ 12.57 and $9.69, respectively, were outstanding
         but were not included in the computation of diluted earnings per share.
         The options' exercise price was greater than the average market price
         of the common shares and was antidilutive.



                                       73


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------



12.     STOCK COMPENSATION PLANS

         The Company established a stock option plan in 1997 under which 3
         million shares of common stock were reserved for issuance. The dates on
         which granted options are first exercisable are determined by the
         Compensation Committee of the Board of Directors, but generally vest
         over a four-year period from the date of grant. The term of any option
         may not exceed ten years from the date of grant.

         For certain options granted during 1997, the exercise price was less
         than the fair value of the Company's stock on the date of grant and,
         accordingly, compensation expense is being recognized over the vesting
         period for such difference.

         The Company has elected to measure compensation cost using the
         intrinsic value method, in accordance with APB Opinion No. 25,
         "Accounting for Stock Issued to Employees." Had the fair value of each
         stock option granted been determined consistent with the methodology of
         FASB Statement No. 123, "Accounting for Stock Based Compensation", the
         pro forma impact on the Company's net income and earnings per share
         would have been adjusted to the pro forma amounts listed below:



                                                                YEAR ENDED DECEMBER 31
                                                      2001               2000           1999
                                                      ----               ----           ----
                                                                             
         Net Earnings
         As reported                                $20,445            $7,985         $21,454
         Impact of SFAS No. 123                      (3,505)          ( 2,358)         (1,534)
                                                    --------          --------        --------

         Pro forma                                   16,940             5,627          19,920


         Earnings per share, pro forma
         Basic earnings per share                     $0.44             $0.15           $0.52
         Diluted earnings per share                    0.43              0.14            0.51

         Earnings per share as reported
         Basic earnings per share                     $0.53             $0.21           $0.56
         Diluted earnings per share                    0.52              0.20            0.55





                                       74


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

         Under SFAS No. 123, the fair value of each option grant is estimated on
         the date of grant using the Black-Scholes option-pricing model with the
         following weighted average assumptions for grants in 2001, 2000 and
         1999:


                                            2001          2000           1999
                                            -----         ----           ----
                                                               
         Estimated fair value of option   $    3.83     $   12.41       $    6.26
         granted

         Assumptions
            Risk free interest rate            4.30%         5.00%           6.00%
            Expected life                      5.00          5.00            5.00
            Expected volatility               80.40%        84.09%          68.38%
            Expected dividends            $    0.00     $    0.00       $    0.00








                                       75


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------





         The following table sets forth changes in options outstanding:




                                                                                                Weighted
                                                                       Number                   Average
                                                                     of Shares     Amount        Price
                                                                                      
         Shares under option
                           Outstanding, January 1, 1999              1,427,651   $ 8,123,384   $    5.69

                Activity during 1999
                     Granted, price equals fair value                2,052,259    19,061,738        9.29
                     Exercised                                          71,896       272,805        3.79
                     Forfeited                                         256,807     1,966,161        7.66
                     Expired                                            13,970        73,644        5.27
                                                                     ---------   -----------   ---------
                           Outstanding, December 31, 1999            3,137,237    24,872,512        7.93

                Activity during 2000
                     Granted, price equals fair value                  618,796     8,068,149       13.04
                     Exercised                                         103,214       540,466        5.24
                     Forfeited                                       1,158,436    12,125,921       10.47
                     Expired                                             8,390        53,116        6.33
                                                                     ---------   -----------   ---------
                                  Outstanding, December 31, 2000     2,485,993    20,221,158        8.04
                Activity during 2001
                     Granted, price equals fair value                  788,025     5,045,548        6.40
                     Exercised                                         233,470     1,349,684        5.78
                     Forfeited                                         283,338     2,665,779        9.41
                     Expired                                             8,914        84,323        9.46
                                                                     ---------   -----------   ---------
                           Outstanding, December 31, 2001            2,748,296   $21,166,920   $    7.70
                                                                     =========   ===========   =========

                           Exercisable, December 31, 2001              898,582                 $    6.93
                                                                     =========                 =========



         The following table sets forth details of options outstanding at
         December 31, 2001:





                                                                                 Weighted       Weighted
                                                                                  Average        Average
                                                                  Number        Contractual     Exercise
                        RANGE OF EXERCISE PRICES               Outstanding         Life           Price
                                                               -----------         ----           -----

                                                                                       
                        $1.33                                         70,750          5.25      $ 1.33
                        $4.67 - $8.00                              1,107,501          7.48        5.39
                        $8.0625 - $11.00                           1,155,882          8.11        8.68
                        $11.25 - $16.75                              399,929          7.25       12.23
                        $20.00 - $33.19                               14,234          7.24       22.69
                                                              ----------------------------------------

                        $1.33 - $33.19                             2,748,296          7.65      $ 7.70
                                                              ========================================





                                       76


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

         The Company has an employee stock purchase plan, which provides for
         employees to purchase pre-established amounts as determined by the
         compensation committee. The price at which employees may purchase
         common stock is set by the compensation committee as not less than the
         lesser of 85% of the fair market value of the common stock on the
         NASDAQ National Market on the first day of the purchase period or 85%
         of the fair market value of the common stock on the last day of the
         purchase period. The Company has reserved 1.5 million shares of common
         stock for issuance under the Company's employee stock purchase plan.
         Under the terms of the plan, eligible employees may elect to have up to
         5% of their regular base earnings withheld to purchase company stock,
         with a maximum contribution value, which may not exceed $21,250 for
         each calendar year in which a purchase period occurs. As of December
         31, 2001, the Company has $ 236,007 of employee withholdings, included
         in accrued payroll and related costs in the balance sheet to be used to
         purchase company stock.

 13.    SEGMENT REPORTING

         The Company manages its operations through three segments; Application
         Outsourcing, e-business, and TeamSourcing.

         Through Application Outsourcing, the Company provides higher-value
         applications management services for ongoing management, development
         and maintenance of customers' business applications. The Company
         assumes responsibility for, and manages selected application support
         functions for the customer. Utilizing its developed methodologies,
         processes and tools, the Company is able to assimilate the business
         process knowledge of its customers to develop and deliver services
         specifically tailored for that customer. The Company's Global Service
         Delivery Model provides the flexibility to deliver to each client a
         unique mix of services on-site to the customer's location, off-site at
         its U.S. development centers and offshore at development centers in
         Mumbai and Chennai, India.

         Application Outsourcing engagements are frequently supported by
         long-term contractual agreements which generally provide for


                                       77


SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


         minimum resource commitments, if billed on a time-and-materials basis,
         or a specific set of deliverables for fixed-price engagements.

         Through e-business, the Company provides development and implementation
         services for a number of emerging and rapidly growing high technology
         applications, including Web development, Data Warehousing, e-commerce,
         CRM, Oracle, and SAP; as well as partnership agreements with software
         providers including, but not limited to Selectica, Tibco, and Motive
         communications. These services may be provided on either a
         time-and-material basis on a fixed price basis, in which the Company
         assumes responsibility for management of the engagement.

         Through TeamSourcing, the Company provides professional information
         technology consulting services directly to customers on a staff
         augmentation basis. TeamSourcing services include systems
         specification, design, development, implementation and maintenance of
         complex information technology applications involving diverse computer
         hardware, software, data and networking technologies and practices.
         TeamSourcing consultants, whether working individually or as a team of
         professionals, generally receive direct supervision from the customer's
         management staff. TeamSourcing services are generally invoiced on a
         time and material basis.

         The accounting policies of the segments are the same as those presented
         in Note 2. Management allocates all corporate expenses to the segments.
         No balance sheet/identifiable assets data is presented since the
         Company does not segregate its assets by segment.




                                       78

SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------



                                                                    2001           2000           1999
                                                                    ----           ----           ----
                                                                                       
       Revenues
              Application Outsourcing                            $ 107,890       $ 89,873       $ 87,311
              e-business                                            40,375         42,608         33,402
              TeamSourcing                                          22,512         32,327         41,404
                                                                -----------------------------------------
                                                                   170,777        164,808        162,117

       Gross Profit
              Application Outsourcing                               46,225         38,783         40,324
              e-business                                            14,276         13,622         10,789
              TeamSourcing                                           4,839          7,801         11,704
                                                                -----------------------------------------
                                                                    65,340         60,206         62,817

       Sales, general and administrative expenses                   34,522         34,424         32,814

       Goodwill impairment and related charges                           -         21,650              -
       Capitalized development cost impairment                       1,624              -              -
                                                                -----------------------------------------

       Income from operations                                      $29,194         $4,132       $ 30,003
                                                                =========================================



14.     GEOGRAPHIC INFORMATION

         Total revenues, income before income taxes and identifiable assets by
geographic location were as follows:




                                                                   2001           2000           1999
                                                                   ----           ----           ----
                                                                                       
       Revenues
             United States operations                            $152,315       $154,661        $158,452
             India operations                                      30,487         19,716          10,188
             Europe operations                                     16,731          9,317           3,211
             Singapore operations                                   1,328            794             548
             Intercompany revenue elimination                     (30,084)       (19,680)        (10,282)
                                                            ---------------------------------------------

                   Total revenue                                 $170,777       $164,808        $162,117
                                                            =============================================

       Income (loss) before income taxes
             United States operations                             $12,555       $ (5,439)        $27,052
             India operations                                      18,390         12,580           4,486
             U.K. operations                                        2,294            358             645
             Germany operations                                      (326)             -               -
             Singapore operations                                      61             45            (156)
                                                            ---------------------------------------------

                   Total income before taxes                      $32,974         $7,544         $32,027
                                                            =============================================

       Assets, December 31
             United States operations                            $108,181       $101,100
             India operations                                      37,976         24,170
             Europe operations                                      5,535          7,345
             Singapore operations                                     446            278
             Germany operations                                       256              -
             Canada                                                     5              5
                                                            ----------------------------

                                               Total assets      $152,399       $132,898
                                                            ============================




                                       79





SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


15.      LITIGATION, CLAIMS AND COMMITMENTS

         Legal actions and other claims are pending or may be instituted or
         asserted in the future against the Company. Although the amount of
         liability at December 31, 2001 with respect to these matters cannot be
         ascertained, the Company believes that any resulting liability should
         not materially affect future consolidated financial position or results
         of operations of the Company.









                                       80




SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

16.      SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

         Selected financial data by calendar quarter were as follows:



                                                              First       Second      Third      Fourth      Full Year
                                                              Quarter     Quarter    Quarter     Quarter
                                                                                 (in thousands)
                                                                                             
       2001
       Revenues                                               $ 42,271    $ 42,721   $ 42,825   $ 42,960    $ 170,777

       Cost of revenues                                         26,664      26,105     26,294     26,374      105,437
                                                           -----------------------------------------------------------
                  Gross profit                                  15,607      16,616     16,531     16,586       65,340

       Sales, general and administrative expenses                8,813       8,436      8,622      8,651       34,522
       Capitalized development cost impairment                       -           -          -      1,624        1,624
                                                           -----------------------------------------------------------

                  Income from operations                         6,794       8,180      7,909      6,311       29,194

       Other income, net                                           957         912      1,108        803        3,780
                                                           -----------------------------------------------------------

                  Income before income taxes                     7,751       9,092      9,017      7,114       32,974

       Income tax provision                                      1,865       2,522      2,471      1,778        8,636
                                                           -----------------------------------------------------------

                  Net income before loss from
                  equity investments                             5,886       6,570      6,546      5,336       24,338

       Loss from equity investments                                321         218        213      3,141        3,893
                                                           -----------------------------------------------------------

                  Net income                                   $ 5,565     $ 6,352    $ 6,333    $ 2,195     $ 20,445
                                                           ===========================================================

       Earnings per share, diluted                               $0.14       $0.16      $0.16      $0.06        $0.52
                                                           ===========================================================

       Weighted average shares outstanding, diluted             38,814      38,841     38,826     39,584       39,016
                                                           ===========================================================

       2000

       Revenues                                                $40,506     $42,079    $41,105    $41,118     $164,808

       Cost of revenues                                         25,513      26,872     26,001     26,216      104,602
                                                           -----------------------------------------------------------
                  Gross profit                                  14,993      15,207     15,104     14,902       60,206

       Sales, general and administrative expenses                8,993       8,450      8,348      8,633       34,424
       Goodwill impairment and related charges                       -      21,650          -          -       21,650
                                                           -----------------------------------------------------------

                  Income from operations                         6,000     (14,893)      6,756      6,269        4,132

       Other income, net                                           780         800        829      1,003        3,412
                                                           -----------------------------------------------------------

                  Income before income taxes                     6,780     (14,093)      7,585      7,272        7,544

       Income tax provision (benefit)                            1,628      (6,407)      2,035      1,777        (967)
                                                           -----------------------------------------------------------

                  Net income (loss) before loss from             5,152      (7,686)      5,550      5,495        8,511
                  equity investments
       Loss from equity investments                                  -         119         200        207          526
                                                           -----------------------------------------------------------
                  Net income (loss)                             $5,152    $ (7,805)     $5,350     $5,288       $7,985
                                                           ===========================================================

       Earnings per share, diluted                               $0.13     $ (0.20)      $0.14      $0.14        $0.20
                                                           ===========================================================

       Weighted average shares outstanding, diluted             40,168      39,574      39,255     38,923       39,480
                                                           ===========================================================






                                       81



SYNTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------




         Earnings per share for the quarter are computed independently and may
         not equal the earnings per share computed for the total year. Certain
         amounts in previously issued quarterly financial data have been
         reclassified to conform to the full year presentation.

























                                       82





EXHIBIT INDEX

Exhibit No.          Description

       3.1           Restated Articles of Incorporation of the registrant filed
                     as an exhibit to the Registrant's Statement on Form S-1
                     dated June 6, 1997, and incorporated herein by reference.

       3.2           Amendment to Articles of Incorporation of the Registrant
                     dated September 21, 1998 filed as an Exhibit to the
                     Registrant's Annual Report on Form 10-K for the year ended
                     December 31, 1998 and incorporated herein by reference.

       3.3           Bylaws of the Registrant filed as an Exhibit to the
                     Registrant's Registration Statement on Form S-1 dated June
                     6, 1997, and incorporated herein by reference.

       10.1          Line of Credit Agreement, dated August 31, 2001, between
                     the Registrant and Bank One, Michigan.

       10.2          Lease, dated August 22, 1996, between WRC Properties, Inc.
                     and the Registrant, filed as an Exhibit to the Registrant's
                     Registration Statement on Form S-1 dated June 6, 1997, and
                     incorporated herein by reference.

       10.3          Lease Agreement, dated November 30, 1994, between the
                     Registrant and NationsBank of North Carolina, NA., as
                     Trustee for the Public Employees Retirement System of Ohio,
                     filed as an Exhibit to the Registrant's Registration
                     Statement on Form S-1 dated June 6, 1997, and incorporated
                     herein by reference.

       10.4          First Amendment, dated October 19, 1998, between the
                     Registrant and Corning Road, L.L.C. (successor to First
                     Union National Bank of North Carolina as Trustee, successor
                     to NationsBank), to the Lease Agreement, dated November 30,
                     1994, between the Registrant and NationsBank, filed as an
                     Exhibit to the Registrant's Annual Report on Form 10-K for
                     the year ended December 31, 1998 and incorporated herein by
                     reference.


                                       83




       10.5          Indentures of Lease entered into between the President of
                     India and Syntel (India) Ltd. (formerly known as Syntel
                     Software Pvt. Ltd.) on various dates in 1992 and 1993 for
                     the Mumbai Global Development Center and filed as an
                     Exhibit to the Registrant's Registration Statement on Form
                     S-1 dated June 6, 1997, and incorporated herein by
                     reference.

       10.6          Rental Agreement, dated February 24, 1997, between Syntel
                     India Ltd. (formerly known as Syntel Software Pvt. Ltd.)
                     and the Landlords for the Chennai Global Development
                     Center, filed as an Exhibit to the Registrant's
                     Registration Statement on Form S-1 dated June 6, 1997, and
                     incorporated herein by reference.

       10.7*         1997 Stock Option and Incentive Plan, (Amended and
                     Restated).

       10.8*         Employee Stock Purchase Plan, filed as an Exhibit to the
                     Registrant's Registration Statement on Form S-1 dated June
                     6, 1997, and incorporated herein by reference.


                                       84




       21            SUBSIDIARIES OF THE REGISTRANT.

       99            Proxy Statement for the Registrant's 2002 Annual Meeting of
                     Shareholders, filed by the Registrant pursuant to
                     Regulation 14A and incorporated herein by reference.




                                       85

EX-10.1

EXHIBIT 10.1

Line of Credit Agreement

Bank One, Michigan (the "Bank"), whose address is 611 Woodward Avenue, Detroit,
Michigan 48226-3947, has approved the credit facilities listed below
(collectively, the "Credit Facilities," and, individually, as designated below)
to Syntel, Inc. (the "Borrower"), whose address is 2800 Livernois, Suite 400,
Troy, MI 48083 subject to the terms and conditions set forth in this agreement.

1.0      Credit Facilities.

         1.1  Facility A (Including Letters of Credit). The Bank has approved a
              credit facility to the Borrower in the principal sum not to exceed
              $20,000,000.00 in the aggregate at any one time outstanding
              ("Facility A"). Facility A shall include the issuance of standby
              letters of credit not exceeding $5,000,000.00 in the aggregate at
              any one time outstanding, expiring not later than February 28,
              2003 (the "Letters of Credit"). Each Letter of Credit shall be in
              form acceptable to the Bank and shall bear a fee of 1% per year of
              the face amount payable annually in advance. Credit under Facility
              A shall be in the form of disbursements evidenced by credits to
              the Borrower's account and shall be repayable as set forth in a
              Revolving Business Credit Note executed concurrently (referred to
              in this agreement both singularly and together with any other
              promissory notes referenced in this Section 1 as the "Notes") or
              by issuance of a Letter of Credit upon completion of an
              application acceptable to the Bank. The proceeds of Facility A
              shall be used for the following purpose: working capital. Facility
              A shall expire on August 31, 2002 unless earlier withdrawn.

         1.2  Liabilities. The Term "Liabilities" in this agreement means all
              obligations, indebtedness and liabilities of the Borrower to any
              one or more of the Bank, BANK ONE CORPORATION, and any of their
              subsidiaries, affiliates or successors, now existing or later
              arising, including, without limitation, all loans, advances,
              interests, costs, overdraft indebtedness, credit card
              indebtedness, lease obligations, or obligations relating to any
              Rate Management Transaction, all monetary obligations incurred or
              accrued during the pendency of any bankruptcy, insolvency,
              receivership or other similar proceedings, regardless of whether
              allowed or allowable in such proceeding, and all renewals,
              extensions, modifications, consolidations or substitutions of any
              foregoing, whether the Borrower may be liable jointly with others
              or individually liable as a debtor, maker, co-maker, drawer,
              endorser, guarantor, surety or otherwise, and whether voluntarily
              or involuntarily incurred, due or not due, absolute or contingent,
              direct or indirect, liquidated or unliquidated. The term "Rate
              Management Transaction" in this agreement means any transaction
              (including an agreement with respect thereto) now existing or
              hereafter entered into among the Borrower, the Bank or BANK ONE
              CORPORATION, or any of its subsidiaries or affiliates or their
              successors, which is a rate swap, basis swap, forward rate
              transaction, commodity swap, commodity option, equity or equity
              index swap, equity or equity index option, bond option, interest
              rate option, foreign exchange transaction, cap transaction, floor
              transaction, collar transaction, forward transaction, currency
              swap transaction, cross-currency rate swap transaction, currency
              option or any similar transaction (including any option with
              respect to any of these transactions) or any combination thereof,
              whether linked to one or more interest rates, foreign currencies,
              commodity prices,





                                       86



equity prices or other financial measures.

2.0      Conditions Precedent.

         2.1  Conditions Precedent to Initial Extension of Credit. Before the
              first extension of credit under this agreement, whether by
              disbursement of a loan, issuance of a letter of credit, the
              funding of a Lease or otherwise, the Borrower shall deliver to the
              Bank, in form and substance satisfactory to the Bank:

              A.      Loan Documents. The Notes, and if applicable, the Leases,
                      the letter of credit applications, the security agreement,
                      financing statements, mortgage, guaranties, subordination
                      agreements and any other loan documents which the Bank may
                      reasonably require to give effect to the transactions
                      described by this agreement or to any Liabilities being
                      entered into concurrently;

              B.      Evidence of Due Organization and Good Standing. Evidence
                      satisfactory to the Bank of the due organization and good
                      standing of the Borrower and every other business equity
                      that is a party to this agreement or any other loan
                      document required by this agreement;

              C.      Evidence of Authority to Enter into Loan Documents.
                      Evidence satisfactory to the Bank that (i) each party to
                      this agreement and any other loan document required by
                      this agreement is authorized to enter into the
                      transactions described by this agreement and the other
                      loan documents, and (ii) the person signing on behalf of
                      each party is authorized to do so; and

         2.2  Conditions Precedent to Each Extension of Credit. Before any
              extension of credit under this agreement, whether by disbursement
              of a loan, issuance of a letter of credit, the funding of a Lease
              or otherwise, the following conditions shall have been satisfied;

              A.      Representations. The Representations contained in this
                      agreement shall be true on and as of the date of the
                      extension of credit;

              B.      No Event of Default. No event of default shall have
                      occurred and be continuing or would result from the
                      extension of credit;

              C.      Additional Approvals, Opinions, and Documents. The Bank
                      shall have received such other approvals, opinions and
                      documents as it may reasonably request.

3.0      Fees and Expenses.

         3.1  Out-of-Pocket Expenses. The Borrower shall reimburse the Bank for
              its out-of-pocket expenses, and reasonable attorney's fees
              (including the fees of in-house counsel) allocated to the Credit
              Facilities.

4.0      Security.

         4.1  [Deleted].

         4.2  No forbearance or extension of time granted any subsequent owner
              of the Collateral shall release the Borrower from liability.




                                       87



         4.3  Additional Collateral/Setoff. To further secure payment of the
              borrowings and all other obligations under the Credit Facilities
              and all other Liabilities, the Borrower grants to the Bank a
              continuing security interest in: (i) all securities and other
              property of the Borrower in the custody, possession or control of
              the Bank (other than property held by the Bank solely in a
              fiduciary capacity) and (ii) all balances of deposit accounts of
              the Borrower with the Bank ("deposit account" having the meaning
              given to it in the UCC). The foregoing shall be considered to be
              part of the Collateral for the Credit Facilities and all other
              Liabilities and is included whenever the term "Collateral" is used
              in this agreement. The Bank shall have the right at any time to
              apply its own debt or liability to the Borrower, or to any other
              party liable for payment of the obligations under the Credit
              Facilities or any other Liabilities, in whole or partial payment
              of such obligations or other Liabilities, without any requirement
              of mutual maturity.

         4.4  Cross Lien. Any of the Borrower's other property in which the Bank
              has a security interest to secure payment or performance of any
              other Liabilities, shall also secure payment of and be part of the
              Collateral for the Credit Facilities.

5.0      Affirmative Covenants. The Borrower, and each of its subsidiaries, if
         any, shall:

         5.1  Insurance. Maintain insurance with financially sound and reputable
              insurers covering its properties and business against those
              casualties and contingencies and in the types and amounts as shall
              be in accordance with sound business and industry practices.

         5.2  Existence. Maintain its existence and business operations as
              presently in effect in accordance with all applicable laws and
              regulations, pay its debts and obligations when due under normal
              terms, and pay on or before their due date, all taxes,
              assessments, fees and other governmental monetary obligations,
              except as they may be contested in good faith if they have been
              properly reflected on its book and, at the Bank's request,
              adequate funds or security has been pledged to insure payment.

         5.3  Financial Records. Maintain proper books and records of account,
              in accordance with generally accepted accounting principles where
              applicable, and consistent with financial statements previously
              submitted to the Bank. The Bank retains the right to inspect the
              Collateral and business records related to it at such times and at
              such intervals as the Bank may reasonably require.

         5.4  Notice. Give prompt notice to the Bank of the occurrence of (i)
              any Event of Default, and (ii) any other development, financial or
              otherwise, which would affect the Borrower's business, properties
              or affairs in a materially adverse manner.

         5.5  Financial Reports. Furnish to the Bank whatever information,
              books, and records the Bank may reasonably request, including at a
              minimum: (If the Borrower has subsidiaries, all financial
              statements required will be provided on a consolidated and on a
              separate basis.)

         5.6  Financial Reports. Furnish to the Bank whatever information,
              books, and records the Bank may reasonably request, including at a
              minimum: If the Borrower has subsidiaries, all financial
              statements required will be provided on a consolidated and on a
              separate basis.

                                       88



              A.      Within 45 days after each quarterly period, a balance
                      sheet as of the end of that period and statements of
                      income, cash flows, and retained earnings from the
                      beginning of that fiscal year to the end of that period,
                      certified as correct by one of its authorized agents.

              B.      Within 180 days after, and as of the end of, each of its
                      fiscal years, a detailed financial statement including a
                      balance sheet and statements of income, retained earnings,
                      and cash flows audited by an independent certified public
                      accountant of recognized standing.

6.0      Negative Covenants.

         6.1  Definitions. As used in this agreement, the following terms shall
              have the following respective meanings:

              A.      "Debt Service" means for any period, principal and
                      interest payments either paid or due during that period on
                      all debt of the Borrower.

              B.      "EBITDA" means for any period, net income plus to the
                      extent deducted in determining net income, interest
                      expense (including but not limited to imputed interest on
                      capital leases), tax expense, depreciation, and
                      amortization.

              C.      "Subordinated Debt" means debt subordinated to the Bank in
                      manner and by agreement satisfactory to the Bank.

              D.      "Tangible Net Worth" means total assets less intangible
                      asses, total liabilities, and all sums owing from
                      stockholders, members, or partners, as the case may be,
                      and from officers, managers, and directors. Intangible
                      assets include goodwill, patents, copyrights, mailing
                      lists, catalogs, trademarks, bond discount and
                      underwriting expenses, organization expenses, and all
                      other intangibles.

         6.2  Unless otherwise noted, the financial requirements set forth in
              this section shall be computed in accordance with generally
              accepted accounting principles applied on a basis consistent with
              financial statements previously submitted by the Borrower to the
              Bank.

         6.3  Without the written consent of the Bank, the Borrower shall not:
              (where appropriate, covenants apply on a consolidated basis).

              A.      Dividends. Acquire or retire any of its shares of capital
                      stock, or declare or pay dividends or make any other
                      distributions upon any of its share of capital stock or
                      percentage ownership interests, except dividends payable
                      in its capital stock and dividends payable to "Subchapter
                      S" corporation shareholders and distributions payable to
                      LLC members in amounts sufficient to pay the shareholders'
                      or members' income tax obligations related to the
                      Borrower's taxable income.

              B.      Sale of Shares. Issue, sell or otherwise dispose of any
                      shares of its capital stock or other securities, or
                      rights, warrants or options to purchase or acquire any
                      such shares or securities.





                                       89



              C.      Debt. Incur, or permit to remain outstanding, debt for
                      borrowed money or installment obligations, except debt
                      reflected in the latest financial statement of the
                      Borrower furnished to the Bank prior to execution of this
                      agreement and not to be paid with proceeds of borrowings
                      or leases under the Credit Facilities. For purposes of
                      this covenant, the sale of any accounts receivable shall
                      be deemed the incurring of debt for borrowed money.

              D.      Guaranties. Guarantee or otherwise become or remain
                      secondarily liable on the undertaking of another, except
                      for endorsement of drafts for deposit and collection in
                      the ordinary course of business.

              E.      Liens. Create or permit to exist any lien on any of its
                      property, real or personal, except: existing liens known
                      to the Bank; liens to the Bank; liens incurred in the
                      ordinary course of business securing current nondelinquent
                      liabilities for taxes, worker's compensation, unemployment
                      insurance, social security and pension liabilities; and
                      liens for taxes being contested in good faith.

              F.      Advances and Investments. Purchase or acquire any
                      securities of, or make any loans or advances to, or
                      investments in, any person, firm or corporation, except
                      obligations of the United States Government, open market
                      commercial paper rated one of the top two ratings by a
                      rating agency of recognized standing, or certificates of
                      deposit in insured financial institutions.

              G.      Use of Proceeds. Use, or permit any proceeds of the Credit
                      Facilities to be used, directly or indirectly, for the
                      purpose of "purchasing or carrying any margin stock"
                      within the meaning of Federal Reserve Board Regulation U.
                      At the Bank's request, the Borrower shall furnish to the
                      Bank a completed Federal Reserve Board Form U-1.

              H.      Tangible Net Worth. Permit its Tangible Net Worth to be
                      less than $70,000,000.00.

              I.      Leverage Ratio. Permit the ratio of its total liabilities
                      to its Tangible Net Worth to exceed 1.00 to 1.00*.

              J.      Borrowing capabilities not to exceed $60,000.00.

*Tangible     Net Worth defined as total assets less intangible
              assets, less all sums owing from stockholders, officers,
              directors, employees, and investments in related entities, less
              total liabilities.

7.0      Representations by Borrower. Each Borrower represents that: (a) the
         execution and delivery of this agreement, the Notes, and the Leases and
         the performance of the obligations they impose do not violate any law,
         conflict with any agreement by which the Borrower is bound, or require
         the consent or approval of any governmental authority or other third
         party; (b) this agreement, the Notes, and the Leases are valid and
         binding agreements, enforceable in accordance with their terms; and (c)
         all balance sheets, profit and loss statements, and other financial
         statements furnished to the Bank are accurate and fairly reflect the
         financial condition of the organizations and persons to which they
         apply on their effective dates, including contingent liabilities of
         every type, which financial condition has not changed materially and
         adversely since those dates. Each Borrower, if other than a natural
         person, further represents that: (a) it is duly organized, existing and
         in good standing under the




                                       90



         laws of the jurisdiction under which it was organized; and (b) the
         execution and delivery of this agreement, the Notes, and the Leases
         and the performance of the obligations they impose (i) are within its
         powers; (ii) have been duly authorized by all necessary action of its
         governing body; and (iii) do not contravene the terms of its articles
         of incorporation or organization, its bylaws, or any partnership,
         operating or other agreement governing its affairs.

8.0      Events of Default/Acceleration.

         8.1  Events of Default/Acceleration. If any of the following events
              occurs, the Credit Facilities shall terminate and all borrowings
              and other obligations under them shall be due immediately, without
              notice, at the Bank's option whether or not the Bank has made
              demand.

              A.      The Borrower or any guarantor of any of the Credit
                      Facilities, the Notes, the Leases or any other Liabilities
                      (each, a "Guarantor") fails to pay when due any amount
                      payable under the Credit Facilities, under any other
                      Liabilities, or under any agreement or instrument
                      evidencing debt to any creditor;

              B.      The Borrower or any Guarantor (a) fails to observe or
                      perform any other term of this agreement, the Notes, or
                      the Leases; (b) makes any materially incorrect or
                      misleading representation, warranty, or certificate to the
                      Bank; (c) makes any materially incorrect or misleading
                      representation in any financial statement or other
                      information delivered to the Bank; or (d) defaults under
                      the terms of any agreement or instrument relating to any
                      debt for borrowed money (other than borrowings under the
                      Credit Facilities) such that the creditor declares the
                      debt due before its maturity;

              C.      There is a default under the terms of any loan agreement,
                      mortgage, security agreement or any other document
                      executed as part of the Credit Facilities or any other
                      Liabilities, or any guaranty of the obligations under the
                      Credit Facilities or any other Liabilities becomes
                      unenforceable in whole or in part, or any Guarantor fails
                      to promptly perform under its guaranty;

              D.      A "reportable  event" (as defined in the Employee
                      Retirement Income Security Act of 1974 as amended)
                      occurs that would  permit the Pension  Benefit  Guaranty
                      Corporation  to terminate  any  employee  benefit  plan of
                      the  Borrower  or any  affiliate  of the Borrower;

              E.      The Borrower or any  Guarantor  becomes  insolvent or
                      unable to pay its debts as they become due;

              F.      The Borrower or any  Guarantor (a) makes an  assignment
                      for the benefit of  creditors;  (b) consents to the
                      appointment  of a  custodian,  receiver or trustee for it
                      or for a substantial  part  of its  assets;  or  (c)
                      commences  any  proceeding  under  any bankruptcy,
                      reorganization, liquidation or similar laws of any
                      jurisdiction;

              G.      A custodian, receiver or trustee is appointed for the
                      Borrower or any Guarantor or for a substantial part of its
                      assets without its consent and is not removed within 60
                      days after such appointment;

              H.      Proceedings are commenced against the Borrower or any
                      Guarantor under any bankruptcy, reorganization,
                      liquidation, or similar laws of any jurisdiction, and such
                      proceedings remain undismissed for 60 days after
                      commencement; or the Borrower or Guarantor consents to the
                      commencement of such proceedings;

              I.      Any judgment is entered against the Borrower or any
                      Guarantor, or any attachment, levy or garnishment is
                      issued against any property of the Borrower or any
                      Guarantor;




                                       91


              J.      The Borrower or any Guarantor dies;

              K.      The Borrower or any Guarantor, without the Bank's written
                      consent, (a) is dissolved, (b) merges or consolidates with
                      any third party, (c) leases, sells or otherwise conveys a
                      material part of its assets or business outside the
                      ordinary course of business, (d) leases, purchases, or
                      otherwise acquires a material part of the assets of any
                      other corporation or business entity, except in the
                      ordinary course of business, or (e) agrees to do any of
                      the foregoing, (notwithstanding the foregoing, any
                      subsidiary may merge or consolidate with any other
                      subsidiary, or with the Borrower, so long as the Borrower
                      is the survivor);

              L.      The loan-to-value ratio of any pledged securities at any
                      time exceeds N/A%, and such excess continues for five (5)
                      days after notice from the Bank to the Borrower;

              M.      There is a substantial change in the existing or
                      prospective financial condition of the Borrower or any
                      Guarantor which the Bank in good faith determines to be
                      materially adverse; or

              N.      The Bank in good faith shall deem itself insecure.

         8.2  Remedies. If the borrowings and all other obligations under the
              Credit Facilities are not paid at maturity, whether by
              acceleration or otherwise, the Bank shall have all of the rights
              and remedies provided by any law or agreement. Any requirement of
              reasonable notice shall be met if the Bank sends the notice to the
              Borrower at least ten (10) days prior to the date of sale,
              disposition or other event giving rise to the required notice. The
              Bank is authorized to cause all or any part of the Collateral to
              be transferred to or registered in its name or in the name of any
              other person, firm or corporation, with or without designation of
              the capacity of such nominee. The Borrower shall be liable for any
              deficiency remaining after disposition of any Collateral. The
              Borrower is liable to the Bank for all reasonable costs and
              expenses of every kind incurred in the making or collection of the
              Credit Facilities, including, without limitation, reasonable
              attorney's fees and court costs (whether attributable to the
              Bank's in-house or outside counsel). These costs and expenses
              shall include, without limitation, any costs or expenses incurred
              by the Bank in any bankruptcy, reorganization, insolvency or other
              similar proceeding.

9.0      Miscellaneous.

         9.1  Notice from one party to another relating to this agreement shall
              be deemed effective if made in writing (including
              telecommunications) and delivered to the recipient's address,
              telex number or fax number set forth under its name below by any
              of the following means: (a) hand delivery, (b) registered or
              certified mail, postage prepaid, with return receipt requested,
              (c) first class or express mail, postage prepaid, (d) Federal
              Express or like overnight courier service or (e) fax, telex or
              other wire transmission with request for assurance of receipt in a
              manner typical with respect to communication of that type. Notice
              made in accordance with this section shall be deemed delivered
              upon receipt if delivered by hand or wire transmission, 3 business
              days after mailing if mailed by first class, registered or
              certified mail, or one business day after mailing or deposit with
              an overnight courier service if delivered by express mail or
              overnight courier.

         9.2  No delay on the part of the Bank in the exercise of any right or
              remedy shall operate as a waiver. No single or partial exercise by
              the Bank of any right or remedy shall preclude any other future
              exercise of it or the exercise of any other right


                                       92


              or remedy. No waiver or indulgence by the Bank of any default
              shall be effective unless in writing and signed be the Bank, nor
              shall a waiver on one occasion by construed as a bar to or waiver
              of that right on any future occasion.

         9.3  This agreement, the Notes, the Leases and any related loan
              documents embody the entire agreement and understanding between
              the Borrower and the Bank and supersede all prior agreements and
              understandings relating to their subject matter. If any one or
              more of the obligations of the Borrower under this agreement, the
              Notes or the Leases shall be invalid, illegal or unenforceable in
              any jurisdiction, the validity, legality and enforceability of the
              remaining obligations of the Borrower shall not in any way be
              affected or impaired, and such invalidity, illegality or
              unenforceability in one jurisdiction shall not affect the
              validity, legality or enforceability of the obligations of the
              Borrower under this agreement, the Notes or the Leases in any
              other jurisdiction.

         9.4  The Borrower, if more than one, shall be jointly and severally
              liable.

         9.5  This agreement is delivered in the State of Michigan and governed
              by Michigan law. This agreement is binding on the Borrower and its
              successors, and shall inure to the benefit of the Bank, its
              successors and assigns.

         9.6  Section headings are for convenience of reference only and shall
              not affect the interpretation of this agreement.

10.0          Information Sharing. The Bank may provide, without any limitation
         whatsoever, any information or knowledge the Bank may have about the
         undersigned or any matter relating to this agreement and any related
         documents to BANK ONE CORPORATION, or any of its subsidiaries or
         affiliates or their successors, or to any one or more purchasers or
         potential purchasers of this agreement or any related documents, and
         the undersigned waives any right to privacy the undersigned may have
         with respect to such matters. The Borrower agrees that the Bank may at
         any time sell, assign or transfer one or more interests or participants
         in all or any part of its rights or obligations in this agreement to
         one or more purchasers whether or not related to the Bank.

11.0          Waiver of Jury Trial. The Bank and the Borrower knowingly and
         voluntarily waive any right either of them have a trial by jury in any
         proceeding (whether sounding in contract or tort) which is in any way
         connected with this or any related agreement, or the relationship
         established under them. This provision may only be modified in a
         written instrument executed by the Bank and the Borrower.

Executed by the parties on: August 31, 2001.

Bank One, Michigan                               Borrower: Syntel, Inc.

BY:      /s/ Bryndon C. Skelton         BY:      /s/ R. S. Ramdas
    --------------------------------        -------------------------------
         Bryndon C. Skelton                      R. S. Ramdas
Its:     Loan Officer                   Its:     Sr., Director of Internal
Audit

Address for Notices:
2155 W. Big Beaver                               2800 Livernois Road, Suite 400
Troy, Michigan  48084                            Troy, Michigan  48083
Fax No. (249) 816-0254                           Fax/Telex No.


                                       93

EX-10.7

                                                                    EXHIBIT 10.7

                                  SYNTEL, INC.
                      1997 STOCK OPTION AND INCENTIVE PLAN
                             (AMENDED AND RESTATED)

                              I. GENERAL PROVISIONS

         1.1 ESTABLISHMENT. On April 1, 1997, the Board of Directors ("Board")
of Syntel, Inc. ("Corporation") adopted the 1997 Stock Option and Incentive Plan
("Plan"), which was approved by the shareholders of the Corporation on April 1,
1997. This Plan is further amended and restated as of August 11, 1997 and May
23, 2000.

         1.2 PURPOSE. The purpose of the Plan is (i) to promote the best
interests of the Corporation and its shareholders by encouraging Employees and
non-employee directors of the Corporation and its Subsidiaries to acquire an
ownership interest in the Corporation through Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards,
thus identifying their interests with those of shareholders, and (ii) to enhance
the ability of the Corporation to attract and retain qualified Employees and
non-employee directors. It is the further purpose of the Plan to permit the
granting of Nonqualified Stock Options, Stock Appreciation Rights and Annual
Incentive Awards that will constitute performance based compensation, as
described in Section 162(m) of the Code, and regulations promulgated thereunder.

         1.3 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:

              (a) "AGREEMENT" means the written agreement that sets forth the
terms of a Participant's Option, Stock Appreciation Right, Restricted Stock
Grant, Performance Share Award or Annual Incentive Award.

              (b) "ANNUAL INCENTIVE AWARD" means an award that is granted in
accordance with Article VI of the Plan.

              (c) "BOARD" means the Board of Directors of the Corporation.

              (d) "CHANGE IN CONTROL" means the occurrence of any of the
following events: (i) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one percent, or more, of the
outstanding Common Stock of the Corporation in a single transaction or a series
of related transactions within a one-year period; (ii) a sale of all or
substantially all of the assets of the Corporation to any person, firm or
corporation; or (iii) a merger or similar transaction between the Corporation
and another entity if shareholders of the Corporation do not own a majority of
the voting stock of the corporation surviving the transaction and a majority in
value of the total outstanding stock of such surviving corporation after the
transaction; provided, however, that any such event involving any of the current
shareholders of the Corporation as of the date of adoption of this Plan by the
Board (or any entity at any time controlled by any such shareholder or
shareholders) shall not be included within the meaning of "Change in Control."

              (e) "CHANGE IN POSITION" means, with respect to any Participant:
(i) such Participant's involuntary termination of employment; or (ii) a
significant reduction in such Participant's duties, responsibilities,
compensation and/or fringe benefits, or the assignment to such Participant of
duties inconsistent with his position (all as in effect immediately prior to a
Change in Control), whether or





                                       94



not such Participant voluntarily terminates employment as a result thereof.

              (f) "CODE" means the Internal Revenue Code of 1986, as amended.

              (g) "COMMITTEE" means the Compensation Committee of the
Corporation, which shall be comprised of two or more members of the Board.

              (h) "COMMON STOCK" means shares of the Corporation's authorized
common stock.

              (i) "CORPORATION" means Syntel, Inc., a Michigan corporation.

              (j) "DISABILITY" means total and permanent disability, as defined
in Code Section 22(e).

              (k) "EMPLOYEE" means an individual who has an "employment
relationship" with the Corporation or a Subsidiary, as defined in Treasury
Regulation 1.421-7(h), and the term "employment" means employment with the
Corporation, or a Subsidiary of the Corporation.

              (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.

              (m) "FAIR MARKET VALUE" means for purposes of determining the
value of Common Stock on the Grant Date, the Stock Exchange closing price of the
Corporation's Common Stock as reported in The Wall Street Journal (or as
otherwise reported by such Stock Exchange) for the Grant Date. In the event that
there were no Common Stock transactions on such date, the Fair Market Value
shall be determined as of the immediately preceding date on which there were
Common Stock transactions.

Unless otherwise specified in the Plan, "Fair Market Value" for purposes of
determining the value of Common Stock on the date of exercise means, the Stock
Exchange closing price of the Corporation's Common Stock on the last date
preceding the exercise on which there were Common Stock transactions.

              (n) "GRANT DATE" means the date on which the Committee authorizes
an individual Option, Stock Appreciation Right, Restricted Stock grant,
Performance Share Award or Annual Incentive Award, or such later date as shall
be designated by the Committee.

              (o) "INCENTIVE STOCK OPTION" means an Option that is intended to
meet the requirements of Section 422 of the Code.

              (p) "NONQUALIFIED STOCK OPTION" means an Option that is not
intended to constitute an Incentive Stock Option.

              (q) "OPTION" means either an Incentive Stock Option or a
Nonqualified Stock Option.

              (r) "PARTICIPANT" means an Employee or non-employee director
designated by the Committee to participate in the Plan.

              (s) "PERFORMANCE SHARE AWARD" means a performance share award that
is granted in accordance with Article V of the plan.

              (T) "PLAN" means the Syntel, Inc. 1997 Stock Option and Incentive
Plan, the terms of which are set forth herein, and amendments thereto.



                                       95



              (u) "RESTRICTION PERIOD" means the period of time during which a
Participant's Restricted Stock grant is subject to restrictions and is
nontransferable.

              (v) "RESTRICTED STOCK" means Common Stock that is subject to
restrictions.

              (w) "RETIREMENT" means termination of employment on or after the
attainment of age 65.

              (x) "STOCK APPRECIATION RIGHT" means the right to receive a cash
or Common Stock payment from the Corporation upon the surrender of a tandem
Option, in accordance with Article III of the Plan.

              (y) "STOCK EXCHANGE" means the principal national securities
exchange on which the Common Stock is listed for trading or, if the Common Stock
is not listed for trading on a national securities exchange, such other
recognized trading market or quotation system upon which the largest number of
shares of Common Stock has been traded in the aggregate during the last 20 days
before a Grant Date or date on which an Option is exercised, whichever is
applicable.

              (z) "SUBSIDIARY" means a corporation defined in Code Section
424(f).

              (aa) "VESTED" means the extent to which an Option or Stock
Appreciation Right granted hereunder has become exercisable in accordance with
this Plan and the terms of the respective Agreement pursuant to which such
Option or Stock Appreciation Right was granted.

        1.4   ADMINISTRATION.

              (a) The Plan shall be administered by the Committee. At all times
it is intended that the directors appointed to serve on the Committee shall be
"disinterested persons" (within the meaning of Rule 16b-3 promulgated under the
Exchange Act) and "outside directors" (within the meaning of Code Section
162(m)); however, the mere fact that a Committee member shall fail to qualify
under either of these requirements shall not invalidate any award made by the
Committee if the award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time, at the discretion of the Board.

              (b) The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award granted under the
Plan shall be final and binding upon all Participants. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any grant or award hereunder.

         1.5 PARTICIPANTS. Participants in the Plan shall be such Employees
(including Employees who are directors) and non-employee directors of the
Corporation and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee may grant Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards
to an individual upon the condition that the individual become an Employee of
the Corporation or of a Subsidiary, provided that the Option, Stock Appreciation
Right, Restricted Stock, Performance Share Award or Annual Incentive Award shall
be deemed to be granted only on the date that the individual becomes an
Employee.



                                       96


         1.6 STOCK. The Corporation has reserved 8,000,000 shares of the
Corporation's Common Stock for issuance under the Plan. Shares subject to any
unexercised portion of a terminated, cancelled or expired Option, Stock
Appreciation Right, Restricted Stock grant or Performance Share Award granted
hereunder, and pursuant to which a Participant never acquired benefits of
ownership, including payment of a stock dividend (but excluding voting rights),
may again be subjected to grants and awards under the Plan, but shares
surrendered pursuant to the exercise of a Stock Appreciation Right are not
available for future grants and awards. All provisions in this Section 1.6 shall
be adjusted, as applicable, in accordance with Article VIII.

                                II. STOCK OPTIONS

         2.1 GRANT OF OPTIONS. The Committee, at any time and from time to time,
subject to Section 9.8, may grant Options to such Employees and for such number
of shares of Common Stock (whole or fractional) as it shall designate. Provided,
however, that no Employee may be granted Options and Stock Appreciation Rights
during any one fiscal year to purchase more than 100,000 shares of Common Stock.
Any Participant may hold more than one Option under the Plan and any other Plan
of the Corporation or Subsidiary. The Committee shall determine the general
terms and conditions of exercise, including any applicable vesting requirements,
which shall be set forth in a Participant's Option Agreement. No Option granted
hereunder may be exercised after the tenth anniversary of the Grant Date. The
Committee may designate any Option granted as either an Incentive Stock Option
or a Nonqualified Stock Option, or the Committee may designate a portion of an
Option as an Incentive Stock Option or a Nonqualified Stock Option. At the
discretion of the Committee, an Option may be granted in tandem with a Stock
Appreciation Right. Nonqualified Stock Options are intended to satisfy the
requirements of Code Section 162(m) and the regulations promulgated hereunder.

         2.2 INCENTIVE STOCK OPTIONS. Any Option intended to constitute an
Incentive Stock Option shall comply with the requirements of this Section 2.2 No
Incentive Stock Option shall be granted with an exercise price below the Fair
Market Value of Common Stock on the Grant Date or with an exercise term that
extends beyond 10 years from the Grant Date. An Incentive Stock Option shall not
be granted to any Participant who owns (within the meaning of Code Section
424(d)) stock of the Corporation or any Subsidiary possessing more than 10% of
the total combined voting power of all classes of stock of the Corporation or a
Subsidiary unless, at the Grant Date, the exercise price for the Option is at
least 110% of the Fair Market Value of the shares subject to the Option and the
Option, by its terms, is not exercisable more than 5 years after the Grant Date.
The aggregate Fair Market Value of the underlying Common Stock (determined at
the Grant Date) as to which Incentive Stock Options granted under the Plan
(including a plan of a Subsidiary) may first be exercised by a Participant in
any one calendar year shall not exceed $100,000. To the extent that an Option
intended to constitute an Incentive Stock Option shall violate the foregoing
$100,000 limitation (or any other limitation set forth in Code Section 422), the
portion of the Option that exceeds the $100,000 limitation (or violates any
other Code Section 422 limitation) shall be deemed to constitute a Nonqualified
Stock Option.

         2.3 OPTION PRICE. The Committee shall determine the per share exercise
price for each Option granted under the Plan. The Committee, at its discretion,
may grant Nonqualified Stock Options with an exercise price below 100% of the
Fair Market Value of Common Stock on the Grant Date. The foregoing
notwithstanding, no Incentive Stock Option shall be granted with an exercise
price below the Fair Market Value of Common Stock on the Grant Date.



                                       97


         2.4  PAYMENT FOR OPTION SHARES.

              (a) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in cash or by
personal check, bank draft or money order at the time of exercise; provided,
however, that in lieu of such form of payment a Participant may pay such
purchase price in whole or in part by tendering shares of Common Stock, which
are freely owned and held by the Participant independent of any restrictions,
hypothecations or other encumbrances, duly endorsed for transfer (or with duly
executed stock powers attached), or in any combination of the above. Shares of
Common Stock surrendered upon exercise shall be valued at the Stock Exchange
closing price for the Corporation's Common Stock on the day prior to exercise,
as reported in The Wall Street Journal (or as otherwise reported by such Stock
Exchange), and the certificate(s) for such shares, duly endorsed for transfer or
accompanied by appropriate stock powers, shall be surrendered to the
Corporation. Participants who are subject to short swing profit restrictions
under the Exchange Act and who exercise an Option by tendering
previously-acquired shares shall do so only in accordance with the provisions of
Rule 16b-3 of the Exchange Act.

              (b) At the discretion of the Committee, as set forth in a
Participant's Option Agreement, any Option granted hereunder may be deemed
exercised by delivery to the Corporation of a properly executed exercise notice,
acceptable to the Corporation, together with irrevocable instructions to the
Participant's broker to deliver to the Corporation sufficient cash to pay the
exercise price and any applicable income and employment withholding taxes, in
accordance with a written agreement between the Corporation and the brokerage
firm ("cashless exercise procedure").

                         III. STOCK APPRECIATION RIGHTS

         3.1 GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may
be granted, held and exercised in such form as set by the Committee on an
individual basis. A Stock Appreciation Right may be granted to a Participant
with respect to such number of shares of Common Stock of the Corporation as the
Committee may determine. The number of shares covered by the Stock Appreciation
Right shall not exceed the number of shares of stock which the Participant could
purchase upon the exercise of the related Option. Stock Appreciation Rights are
intended to satisfy the requirements of Code Section 162(m) and the regulations
promulgated thereunder.

         3.2 EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
shall be deemed exercised upon receipt by the Corporation of written notice of
exercise from the Participant. Except as permitted under Rule 16b-3, notice of
exercise of a Stock Appreciation Right by a participant subject to the insider
trading restrictions of Section 16(b) of the Securities Exchange Act of 1934,
shall be limited to the period beginning on the third day following the release
of the Corporation's quarterly or annual summary of earnings and ending on the
12th business day after such release. The exercise term of each Stock
Appreciation Right shall be limited to 10 years from its Grant Date or such
earlier period as set by the related Option. A Stock Appreciation Right shall be
exercisable only at such times and in such amounts as the related Option may be
exercised. A Stock Appreciation Right granted to a Participant subject to the
insider trading restrictions shall not be exercisable in whole or part during
the first six months of its term, unless the Participant dies or becomes
disabled during such six-month period.

         3.3 STOCK APPRECIATION RIGHT ENTITLEMENT.


                                       98


              (a) Upon exercise of a Stock Appreciation Right, a Participant
shall be entitled to payment from the Corporation, in cash, shares, or partly in
each (as determined by the Committee in accordance with any applicable terms of
the Agreement), of an amount equal to the difference between--

              (1) the Fair Market Value of the number of shares subject to the
              Stock Appreciation Right on the exercise date, and

              (2) the Option price of the associated Option multiplied by the
              number of shares available under the Option.

              (b) Notwithstanding paragraph (a) of this Section, upon exercise
of a Stock Appreciation Right the Participant shall be required to surrender the
associated Option.

        3.4   MAXIMUM STOCK APPRECIATION RIGHT AMOUNT PER SHARE. The Committee
may, at its sole discretion, establish (at the time of grant) a maximum amount
per share which shall be payable upon the exercise of a Stock Appreciation
Right, expressed as a dollar amount or as a percentage or multiple of the Option
price of a related Option.

                              IV. RESTRICTED STOCK

         4.1 GRANT OF RESTRICTED STOCK. Subject to the terms and conditions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under this Plan to such Employees and in such amounts as it
shall determine.

         4.2 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement that shall specify the terms of the
restrictions, including the restriction period, or periods, the number of
Restricted Stock shares subject to the grant, and such other provisions,
including performance goals, as the Committee shall determine.

         4.3 TRANSFERABILITY. Except as provided in this Article IV of the Plan,
the shares of Restricted Stock granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Restriction Period or for such period of time as shall be
established by the Committee and as shall be specified in the Restricted Stock
Agreement, or upon the earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and as set forth in the Restricted Stock
Agreement. All rights with respect to the Restricted Stock granted to an
Employee shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative.

         4.4 OTHER RESTRICTIONS. The Committee shall impose such other
restrictions on any shares of Restricted Stock granted under the Plan as it may
deem advisable including, without limitation, restrictions under applicable
Federal or State securities laws, and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions.

         4.5 CERTIFICATE LEGEND. In addition to any legends placed on
certificates pursuant to Sections 4.3 and 4.4, each certificate representing
shares of Restricted Stock shall bear the following legend:

         The sale or other transfer of the shares of stock represented by this
         certificate, whether voluntary, involuntary or by operation of law, is
         subject to certain restrictions on transfer set forth in the Syntel,
         Inc. 1997 Stock Option and Incentive Plan ("Plan"), rules and
         administrative guidelines adopted pursuant to such Plan


                                       99



         and a Restricted Stock Agreement dated. A copy of the Plan, such rules
         and such Restricted Stock Agreement may be obtained from the General
         Counsel of Syntel, Inc.

         4.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Article IV of the Plan, and subject to applicable federal and state securities
laws, shares covered by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last day of the
Restriction Period. Once the shares are released from the restrictions, the
Participant shall be entitled to have the legend required by Section 4.5 of the
Plan removed from the applicable Common Stock certificate. Provided further, the
Committee shall have the discretion to waive the applicable Restriction Period
with respect to all or any part of a Restricted Stock grant.

         4.7 VOTING RIGHTS. During the Restriction Period, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to the Restricted Stock.

         4.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Restriction Period, a
Participant shall be entitled to receive all dividends and other distributions
paid with respect to shares of Restricted Stock. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.

         4.9 RESTRICTED STOCK AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Restricted Stock Awards as
granted pursuant to Code Section 162(m). Such Restricted Stock Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article IV:

             (a) Each Code Section 162(m) Restricted Stock Award shall be
based upon pre-established, objective performance goals that are intended to
satisfy the performance-based compensation requirements of Code Section 162(m)
and the regulations promulgated thereunder. Further, at the discretion of the
Committee, a Restricted Stock Award also may be subject to goals and
restrictions in addition to the performance requirements.

             (b) Each Code Section 162(m) Restricted Stock Award shall be
based upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or all of
the following: earnings (as measured by net income, net income per share,
operating income or operating income per share), sales growth and market
capitalization.

             (c) For each designated performance period, the Committee
shall (i) select those Employees who shall be eligible to receive a Restricted
Stock Award, (ii) determine the performance period, which may be a one to three
fiscal year period, (iii) determine the target levels of Corporation or
Subsidiary performance, and (iv) determine the number of shares subject to a
Restricted Stock Award to be paid to each selected Employee. The Committee shall
make the foregoing determinations prior to the commencement of services to which
a Restricted Stock Award relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.

             (d) For each performance period, the Committee shall certify,
in writing: (i) if the Corporation has attained the performance targets, and
(ii) the number of shares pursuant to the Restricted Stock Award that are to
become freely transferable. The Committee shall have no discretion to waive all
or part of the conditions, goals and restrictions applicable to the receipt of
full or


                                      100


partial payment of a Restricted Stock Award.

              (e) Any dividends paid during the Restriction Period automatically
shall be reinvested on behalf of the Employee in additional shares of Restricted
Stock under the Plan, and such additional shares shall be subject to the same
performance goals and restrictions as the other shares under the Restricted
Stock Award. No shares under a Code Section 162(m) Restricted Stock Award shall
become transferable until the Committee certifies in writing that the
performance goals and restrictions have been satisfied.

              (f) No Employee, in any one fiscal year of the Company, shall be
granted a Code Section 162(m) Restricted Stock Award for more than 25,000 shares
of Common Stock.

              (g) Except as provided in this Article IV of the Plan, the shares
pursuant to a Restricted Stock Award granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as shall be certified
in writing by the Committee. All rights with respect to a Performance Share
Award granted hereunder shall apply only to such Employee or the Employee's
legal representative.

              (h) Except as otherwise provided in this Article IV of the Plan,
and subject to applicable federal and state securities laws, shares covered by
each Restricted Stock Award made under the Plan shall become freely transferable
by the Employee after the Committee has certified that the applicable
performance targets and restrictions have been satisfied. Once the shares are
released from the restrictions, the Employee shall be entitled to have the
legend required by Section 4.5 of the Plan removed from the applicable Common
Stock certificate.

                           V. PERFORMANCE SHARE AWARDS

         5.1 GRANT OF PERFORMANCE SHARE AWARDS. The Committee, at its
discretion, may grant Performance Share Awards to Employees of the Corporation
and its Subsidiaries and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award.

         5.2 TERMS OF PERFORMANCE SHARE AWARDS. In general, Performance Share
Awards shall consist of rights to receive cash, Common Stock or a combination of
each, if designated performance goals are achieved. The terms of a Participant's
Performance Share Award shall be set forth in his individual Performance Share
Agreement. Each Agreement shall specify the performance goals applicable to a
particular Employee or group of Employees, the period over which the targeted
goals are to be attained, the payment schedule if the goals are attained, and
any other terms, conditions and restrictions applicable to an individual
Performance Share Award and not inconsistent with the provisions of the Plan.
The Committee, at its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a
Performance Share Award.

         5.3 PERFORMANCE SHARE AWARDS GRANTED UNDER CODE SECTION 162(M). The
Committee, at its discretion, may designate certain Performance Share Awards as
granted pursuant to Code Section 162(m). Such Performance Share Awards must
comply with the following additional requirements, which override any other
provision set forth in this Article V:

             (a) The Committee, at its discretion, may grant Code Section
162(m) Performance Share Awards based upon pre-established, objective
performance goals that are intended to satisfy the performance-based
compensation requirements of Code Section 162(m) and

                                      101




the regulations promulgated thereunder. Further, at the discretion of the
Committee, a Performance Share Award also may be subject to goals and
restrictions in addition to the performance requirements.

              (b) Each Code Section 162(m) Performance Share Award shall be
based upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or all of
the following: earnings (as measured by net income, net income per share,
operating income or operating income per share), sales growth and market
capitalization.

              (c) For each designated performance period, the Committee shall
(i) select those Employees who shall be eligible to receive a Code Section
162(m) Performance Share Award, (ii) determine the performance period, which may
be a one to three fiscal year period, (iii) determine the target levels of
Corporation or Subsidiary performance, and (iv) determine the Performance Share
Award to be paid to each selected Employee. The Committee shall make the
foregoing determinations prior to the commencement of services to which a
Performance Share Award relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.

              (d) For each performance period, the Committee shall certify, in
writing: (i) if the Corporation has attained the performance targets, and (ii)
the cash or number of shares (or combination thereof) pursuant to the
Performance Share Award that shall be paid to each selected Employee (or the
number of shares that are to become freely transferable, if a Performance Share
Award is granted subject to attainment of the designated performance goals). The
Committee, may not waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award.

              (e) Code Section 162(m) Performance Share Awards may be granted in
two different forms, at the discretion of the Committee. Under one form, the
Employee shall receive a Performance Share Award that consists of a legended
certificate of Common Stock, restricted from transfer prior to the satisfaction
of the designated performance goals and restrictions, as determined by the
Committee and specified in the Employee's Performance Share Agreement. Prior to
satisfaction of the performance goals and restrictions, the Employee shall be
entitled to vote the Performance Shares. Further, any dividends paid on such
shares during the performance/restriction period automatically shall be
reinvested on behalf of the Employee in additional Performance Shares under the
Plan, and such additional shares shall be subject to the same performance goals
and restrictions as the other shares under the Performance Share Award. No
shares under a Performance Share Award shall become transferable until the
Committee certifies in writing that the performance goals and restrictions have
been satisfied.

              (f) Under the second form, the Employee shall receive a
Performance Share Agreement from the Committee that specifies the performance
goals and restrictions that must be satisfied before the Company shall issue the
payment, which may be cash, a designated number of shares of Common Stock or a
combination of the two. Any certificate for shares under such form of
Performance Share Award shall be issued only after the Committee certifies in
writing that the performance goals and restrictions have been satisfied.

              (g) No Employee, in any one fiscal year of the Company, shall be
granted a Performance Share Award to receive more than 25,000 shares of Common
Stock.

              (h) Except as provided in this Article V of the Plan, the shares
pursuant to a Performance Share Award granted hereunder may not

                                      102



be transferred, pledged, assigned, or otherwise alienated or hypothecated until
the applicable performance targets and other restrictions are satisfied, as
shall be certified in writing by the Committee. All rights with respect to a
Performance Share Award granted hereunder shall apply only to such Employee or
the Employee's legal representative.

              (i) In addition to any legends placed on certificates pursuant to
paragraph (h), each certificate representing shares under a Performance Share
Award shall bear the following legend:

              The sale or other transfer of the shares of stock represented by
              this certificate, whether voluntary, involuntary or by operation
              of law, is subject to certain restrictions on transfer set forth
              in the Syntel, Inc. 1997 Stock Option and Incentive Plan ("Plan"),
              rules and administrative guidelines adopted pursuant to such Plan
              and a Performance Share Agreement dated. A copy of the Plan, such
              rules and such Performance Share Agreement may be obtained from
              the General Counsel of Syntel, Inc.

              (j) Except as otherwise provided in this Article V of the Plan,
and subject to applicable federal and state securities laws, shares covered by
each Performance Share Award made under the Plan shall become freely
transferable by the Employee after the Committee has certified that the
applicable performance targets and restrictions have been satisfied. Once the
shares are released from the restrictions, the Employee shall be entitled to
have the legend required by paragraph (i) removed from the applicable Common
Stock certificate.

                           VI. ANNUAL INCENTIVE AWARDS

         6.1  GRANT OF ANNUAL INCENTIVE AWARDS.

              (a) The Committee, at its discretion, may grant Annual Incentive
Awards to such Employees as it may designate from time to time. Annual Incentive
Awards shall be based upon pre-established, objective performance goals that are
intended to satisfy the performance-based compensation requirements of Code
Section 162(m) and the regulations promulgated thereunder.

              (b) The determination of Annual Incentive Awards for a given year
shall be based upon the attainment of specified levels of Corporation or
Subsidiary performance as measured by any or all of the following: earnings (as
measured by net income, net income per share, operating income or operating
income per share), sales growth and market capitalization.

              (c) For each fiscal year of the Corporation, the Committee shall
(i) select those Employees who shall be eligible to receive an Annual Incentive
Award, (ii) determine the performance period, which may be a one to three fiscal
year period, (iii) determine target levels of Corporation performance, and (iv)
determine the level of Annual Incentive Award to be paid to each selected
Employee upon the achievement of each performance level as provided below. The
Committee shall make the foregoing determinations prior to the commencement of
services to which an Annual Incentive Award relates (or within the permissible
time-period established under Code Section 162(m)) and while the outcome of the
performance goals and targets is uncertain.



                                      103


         6.2  ATTAINMENT OF PERFORMANCE TARGETS.

              (a) For each fiscal year, the Committee shall certify, in writing:
(i) the degree to which the Corporation has attained the performance targets,
and (ii) the amount of the Annual Incentive Award to be paid to each selected
Employee.

              (b) Notwithstanding anything to the contrary herein, the Committee
may, in its discretion, reduce any Annual Incentive Award based on such factors
as may be determined by the Committee, including, without limitation, a
determination by the Committee that such a reduction is appropriate: (i) in
light of pay practices of competitors; or (ii) in light of the Corporation's, a
subsidiary's, or an selected Employee's performance relative to competitors
and/or performance with respect to the Corporation's strategic business goals.

         6.3 PAYMENT OF ANNUAL INCENTIVE AWARDS. An Annual Incentive Award shall
be paid only if (i) the Corporation achieves at least the threshold performance
level; and (ii) the Committee makes the certification described in Section 6.2.

         6.4  ANNUAL INCENTIVE AWARD PAYMENT FORMS.

              (a) Annual Incentive Awards shall be paid in cash and/or shares of
Common Stock of the Corporation, at the discretion of the Committee. Payments
shall be made within 30 days following (i) a certification by the Committee that
the performance targets were attained, and (ii) a determination by the Committee
that the amount of an Annual Incentive Award shall not be decreased in
accordance with Section 6.2. The aggregate maximum Annual Incentive Award that
may be earned by any Participant on behalf of any one fiscal year (calculated as
of the last day of the fiscal year for which the Annual Incentive Award is
earned) may not exceed the lesser of two (2) times the Participant's base salary
for the fiscal year or $1,000,000.

              (b) The amount of an Annual Incentive Award to be paid upon the
attainment of each targeted level of performance shall equal a percentage of
each Participant's base salary for the fiscal year, as determined by the
Committee.

                         VIII. TERMINATION OF EMPLOYMENT

         7.1. OPTIONS AND STOCK APPRECIATION RIGHTS.

              (a) If, prior to the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant's employment is terminated for any
reason (other than as provided in Section 8.2, after a Change in Control), the
Participant's right to exercise the Option or Stock Appreciation Right shall
terminate and all rights thereunder shall cease.

              (b) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant's employment is terminated for any
reason other than death or Disability, the Participant shall have the right,
within the earlier of (i) the expiration of the Option or Stock Appreciation
Right, and (ii) three months after termination of employment, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and
unexercised on the date of the Participant's termination of employment, subject
to any other limitation on the exercise of the Option or Stock Appreciation
Right in effect on the date of exercise. The Committee may designate in a
Participant's Agreement that an Option or Stock Appreciation Right shall
terminate at an earlier time than set forth above.

              (c) If, on or after the date that an Option or Stock

                                      104




Appreciation Right first becomes Vested, a Participant dies while an Option or
Stock Appreciation Right is still exercisable, the person or persons to whom the
Option or Stock Appreciation Right shall have been transferred by will or by the
laws of descent and distribution, shall have the right within the exercise
period specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
Participant's date of death, subject to any other limitation on exercise in
effect on the date of exercise. Provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than one year after a Participant's date of death.

              (d) If, on or after the date that an Option or Stock Appreciation
Right first becomes Vested, a Participant terminates employment due to
Disability, the Participant shall have the right, within the exercise period
specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant's termination of employment, subject to any other
limitation on the exercise of the Option or Stock Appreciation Right in effect
on the date of exercise. If the Participant dies after termination of employment
while the Option or Stock Appreciation Right is still exercisable, the Option or
Stock Appreciation Right shall be exercisable in accordance with the terms of
paragraph (c) above.

              (g) The Committee, at the time of a Participant's termination of
employment, may accelerate a Participant's right to exercise an Option or extend
the exercise period of an Option or Stock Appreciation Right; provided, however
that the extension of the exercise period for an Incentive Stock Option may
cause such Option to forfeit its preferential tax treatment.

              (f) Shares subject to Options and Stock Appreciation Rights that
are not exercised in accordance with the provisions of (a) through (e) above
shall expire and be forfeited by the Participant as of their expiration date and
shall become available for new grants and awards under the Plan as of such date.

         7.2  RESTRICTED STOCK. If a Participant terminates employment for any
reason (other than as provided in Section 8.2, after a Change in Control), the
Participant's shares of Restricted Stock still subject to the Restriction Period
automatically shall expire and be forfeited by the Participant and, subject to
Section 1.6, shall be available for new grants and awards under the Plan as of
such termination date; provided, however, that the Committee, in its sole
discretion, may waive the restrictions remaining on any or all shares of
Restricted Stock and add such new restrictions to such shares of Restricted
Stock as it deems appropriate. Notwithstanding the foregoing, the Committee
shall not waive any restrictions on a Code Section 162(m) Restricted Stock
Award, but the Committee may include a provision in an Employee's Code Section
162(m) Restricted Stock Agreement stating that upon the Employee's termination
of employment due to (i) death, (ii) Disability, or (iii) involuntary
termination by the Company without cause prior to the attainment of the
associated performance goals and the termination of the Restriction Period, that
the performance goals and restrictions shall be deemed to have been satisfied on
a pro rata basis, so that the number of shares that become freely transferable
shall be based on the Employee's full number of months of employment during the
Restriction Period, and the Employee shall forfeit the remaining shares and his
rights to such forfeited shares shall terminate in full.

         7.3 PERFORMANCE SHARES. Performance Share Awards shall expire and be
forfeited by a Participant upon the Participant's termination of employment for
any reason (other than as provided in Section 8.2, after a Change in Control),
and such shares shall be available for new grants

                                      105




and awards under the Plan as of such termination date; provided, however, that
the Committee, in its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a
Performance Share Award. Notwithstanding the foregoing, the Committee shall not
waive any restrictions on a Code Section 162(m) Performance Share Award, but the
Committee may include a provision in an Employee's Code Section 162(m)
Performance Share Agreement stating that upon the Employee's termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary termination
by the Company without cause prior to the attainment of the associated
performance goals and restrictions, that the performance goals and restrictions
shall be deemed to have been satisfied on a pro rata basis, so that the number
of shares that become freely transferable shall be based on the Employee's full
number of months of employment during the employment period, and the Employee
shall forfeit the remaining shares and his rights to such forfeited shares shall
terminate in full.

        7.4  ANNUAL INCENTIVE AWARDS.

             (a) A Participant who has been granted an Annual Incentive Award
and terminates employment due to Retirement, Disability or death prior to the
end of the Corporation's fiscal year shall be entitled to a prorated payment of
the Annual Incentive Award, based on the number of full months of employment
during the fiscal year. Any such prorated Annual Incentive Award shall be paid
at the same time as regular Annual Incentive Awards or, in the event of the
Participant's death, to the beneficiary designated by the Participant.

              (b) A Participant who has been granted an Annual Incentive Award
and resigns or is terminated for any reason (other than Retirement, Disability
or death), before the end of the Corporation's fiscal year for which the Annual
Incentive Award is to be paid, shall forfeit the right to an Annual Incentive
Award payment for that fiscal year.

         7.5 OTHER PROVISIONS. The transfer of an Employee from one corporation
to another among the Corporation and any of its Subsidiaries, or a leave of
absence under the leave policy of the Corporation or any of its Subsidiaries
shall not be a termination of employment for purposes of the Plan, unless a
provision to the contrary is expressly stated by the Committee in a
Participant's Agreement issued under the Plan.

                     VIII. ADJUSTMENTS AND CHANGE IN CONTROL

         8.1 ADJUSTMENTS.

             (a) The total amount of Common Stock for which Options, Stock
Appreciation Rights, Restricted Stock, Performance Share Awards and Annual
Incentive Awards may be issued under the Plan, and the number of shares subject
to any such grants or awards (both as to the number of shares of Common Stock
and the Option price), shall be adjusted pro rata for any increase or decrease
in the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or a reclassification of Common Stock.

              (b) The foregoing adjustments shall be made by the Committee. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award.

         8.2 CHANGE IN CONTROL. Notwithstanding anything contained herein to the
contrary, in the event of a Participant's Change in Position subsequent to a
Change in Control, (i) any outstanding Option

                                      106




or Stock Appreciation Right granted to such Participant hereunder immediately
shall become fully Vested and exercisable in full, regardless of any installment
provision applicable to such Option or Stock Appreciation Right; (ii) the
remaining Restriction Period on any Restricted Stock granted to such Participant
hereunder immediately shall lapse and the shares shall become fully
transferable, subject to any applicable federal or state securities laws; (iii)
all performance goals and conditions shall be deemed to have been satisfied and
all restrictions shall lapse on any outstanding Performance Share Awards granted
to such Participant hereunder, and such Awards shall become payable in full; and
(iv) for purposes of any Annual Incentive Awards granted to such Participant
hereunder, the determination of whether the performance targets have been
achieved shall be made as of the date of the Change in Control and payments due
should become immediately payable.

                                IX. MISCELLANEOUS

         9.1 PARTIAL EXERCISE/FRACTIONAL SHARES. The Committee may permit, and
shall establish procedures for, the partial exercise of Options and Stock
Appreciation Rights granted under the Plan. No fractional shares shall be issued
in connection with the exercise of a Stock Appreciation Right or payment of a
Performance Share Award or Annual Incentive Award; instead, the Fair Market
Value of the fractional shares shall be paid in cash, or at the discretion of
the Committee, the number of shares shall be rounded down to the nearest whole
number of shares and any fractional shares shall be disregarded.

         9.2 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option or
Stock Appreciation Right (including, without limitation, the right of the
Committee to limit the time of exercise to specified periods), or the grant of
Restricted Stock or the payment of a Performance Share Award or Annual Incentive
Award, as may be required to satisfy the requirements of Rule 16b-3 of the
Exchange Act.

         9.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award until the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date the certificate is issued.

         9.4 NON-ASSIGNABILITY. No Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award shall be
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, an Option or Stock
Appreciation Right shall be exercised only by the Participant, except in the
event of the Participant's Disability, in which case the Participant's legal
guardian or the individual designated in the Participant's durable power of
attorney may exercise the Option or Stock Appreciation Right. Any transferee of
the Option or Stock Appreciation Right shall take the same subject to the terms
and conditions of this Plan. No transfer of an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award by
will or the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written notice
thereof and a copy of the will and/or such evidence as the Corporation may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of the Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award.


                                      107


        9.5. SECURITIES LAWS.

              (a) Anything to the contrary herein notwithstanding, the
Corporation's obligation to sell and deliver Common Stock pursuant to the
exercise of an Option or Stock Appreciation Right or deliver Common Stock
pursuant to a Restricted Stock grant, Performance Share Award or Annual
Incentive Award is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities as
the Corporation deems necessary or advisable. The Corporation shall not be
required to sell and deliver or issue Common Stock unless and until it receives
satisfactory assurance that the issuance or transfer of such shares shall not
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any stock
exchange on which the Common Stock may be listed, the provisions of any state
laws governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and laws.

              (b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option or Stock
Appreciation Right or the grant of Restricted Stock or the payment of a
Performance Share Award or Annual Incentive Award under the Plan as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) under the requirements of the Stock Exchange or
any other securities exchange, recognized trading market or quotation system
upon which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No shares
shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities
laws.

         9.6 FOREIGN LAW RESTRICTIONS. Anything to the contrary herein
notwithstanding, the Corporation's obligation to sell and deliver Common Stock
pursuant to the exercise of an Option or Stock Appreciation Right or deliver
Common Stock pursuant to a Restricted Stock grant, Performance Share Award or
Annual Incentive Award is subject to compliance with the laws, rules and
regulations of any foreign nation applying to the authorization, issuance or
sale of securities, providing of compensation, transfer of currencies and other
matters, as may apply to any Participant hereunder who is a resident of such
foreign nation. To the extent that it shall be impermissible under such foreign
laws for such a Participant to pay the exercise price for any Option granted
under the Plan (to the extent Vested), the Committee may treat such Participant
as being entitled instead to exercise additional Stock Appreciation Rights (to
the extent not previously granted in tandem with such Option) which are of
equivalent value to the Participant, as determined by comparing the Fair Market
Value upon exercise of the number of shares subject to the Option (to the extent
Vested), less the Option price of such shares. Further, to the extent that it
shall be impermissible under such foreign laws for the Corporation to deliver
Common Stock to any such Participant pursuant to any Option, Stock Appreciation
Right, Restricted Stock grant, Performance Share Award or Annual Incentive Award
granted under the Plan (to the extent Vested), the Committee may arrange for
payment to the Participant of an equivalent amount of cash in lieu of such
shares (less any amount otherwise payable by the Participant), in accordance
with all applicable United States and foreign currency restrictions and
regulations. To the extent that the Corporation is restricted in accordance with
such foreign laws from delivering shares of Common Stock to Participants as
would otherwise be provided for in this Plan, the Corporation shall be released
from such obligation and shall not be subject to the claims of any Participant
hereunder with respect thereto.





                                      108


         9.7  WITHHOLDING TAXES.

              (a) The Corporation shall have the right to withhold from a
Participant's compensation or require a Participant to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon the exercise
of an Option or Stock Appreciation Right or the lapse of the Restriction Period
on a Restricted Stock grant or the payment of a Performance Share Award or
Annual Incentive Award. A Participant may make a written election to tender
previously-acquired shares of Common Stock or have shares of stock withheld from
the exercise, provided that the shares have an aggregate Fair Market Value
sufficient to satisfy in whole or in part the applicable withholding taxes. The
cashless exercise procedure of Section 2.4 may be utilized to satisfy the
withholding requirements related to the exercise of an Option. At no point shall
the Corporation withhold from the exercise of an Option more shares than are
necessary to meet the established tax withholding requirements of federal, state
and local obligations.

              (b) A Participant subject to the insider trading restrictions of
Section 16(b) of the Exchange Act may use Common Stock to satisfy the applicable
withholding requirements only if such disposition is approved in accordance with
Rule 16b-3 of the Exchange Act. Any election by a Participant to utilize Common
Stock for withholding purposes is further subject to the discretion of the
Committee.

         9.8  TERMINATION AND AMENDMENT.

              (a) The Board may terminate the Plan, or the granting of Options,
Stock Appreciation Rights, Restricted Stock, Performance Share Awards or Annual
Incentive Awards under the Plan, at any time. No new grants or awards shall be
made under the Plan after the tenth anniversary of the adoption of this Plan by
the Board, or approval by the shareholders, whichever is earlier, as noted in
Section 1.1.

              (b) The Board may amend or modify the Plan at any time and from
time to time, but no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to Participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as
permitted under Sections 1.6 and 8.1; or (iii) change the provisions relating to
the eligibility of individuals to whom grants and awards may be made under the
Plan.

              (c) No amendment, modification, or termination of the Plan shall
in any manner affect any Option, Stock Appreciation Right, Restricted Stock
grant, Performance Share Award or Annual Incentive Award granted under the Plan
without the consent of the Participant holding the Option, Stock Appreciation
Right, Restricted Stock grant, Performance Share Award or Annual Incentive
Award.

         9.9 EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Option, Stock Appreciation Right, Restricted Stock, Performance
Share Award or Annual Incentive Award pursuant to the Plan shall be deemed to
create any right in any individual to be retained or continued in the employment
of the Corporation or a Subsidiary.

         9.10 USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the Plan will be used for general corporate purposes of the
Corporation.

         9.11 APPROVAL OF PLAN. As noted in Section 1.1, the Plan has been
approved by the shareholders of the Corporation within 12 months of adoption of
the Plan by the Board, as required by Section 422 of the Code.



                                      109



         IN WITNESS WHEREOF, this Amended and Restated 1997 Stock Option and
Incentive Plan has been executed on behalf of the Corporation on the 23rd day of
May, 2000.


                                           SYNTEL, INC.


                                           By: /s/   BHARAT DESAI
                                              -------------------------------
                                                     Bharat Desai, President




                                      110

EX-21

                                                                      EXHIBIT 21


                         SUBSIDIARIES OF THE REGISTRANT



Name                                                 State of Other Jurisdiction
                                                     of incorporation or Organization

                                                  
Syntel (India) Limited                                        India

Syntel Europe Limited                                         England

Syntel (Singapore) PTE. LTD.                                  Singapore

Syntel Mauritius                                              Mauritius

Syntel (Australia) Pty Limited                                Australia

Syntel Canada, Inc.                                           Canada

Syntel Deutschland GmbH                                       Germany

Syntel Hong Kong Ltd.                                         Hong Kong





                                      111