SYNTEL INC

FORM 10-Q(Quarterly Report)

Filed 08/11/08 for the Period Ending 06/30/08

Address 525 EAST BIG BEAVER ROADSUITE 300TROY, MI 48083

Telephone 2486193524CIK 0001040426

Symbol SYNTSIC Code 7371 - Computer Programming Services

Industry Computer ServicesSector Technology

Fiscal Year 12/31

http://www.edgar-online.com© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.

Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2008 or

For the transition period from to

Commission file number 000-22903

SYNTEL, INC. (Exact Name of Registrant as Specified in Its Charter)

(248) 619-2800 (Registrant’s Telephone Number, Including Area Code)

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No �

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes � No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, no par value: 41,474,564 shares issued and outstanding as of July 31, 2008.

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

� � � � Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Michigan 38-2312018 (State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

525 E. Big Beaver Road, Suite 300, Troy, Michigan 48083 (Address of Principal Executive Offices) (Zip Code)

Large accelerated filer � Accelerated filer

Non-accelerated filer � (Do not check if a smaller reporting company) Smaller reporting company �

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SYNTEL, INC.

INDEX

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Page

Part I Financial Information

Item 1 Financial Statements

Condensed Consolidated Statements of Income (unaudited) 3

Condensed Consolidated Balance Sheets (unaudited) 4

Condensed Consolidated Statement of Shareholders’ Equity (unaudited) 5

Condensed Consolidated Statements of Cash Flows (unaudited) 6

Notes to the Unaudited Condensed Consolidated Financial Statements 7

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 20

Item 3 Quantitative and Qualitative Disclosures about Market Risk 28

Item 4 Controls and Procedures 30

Part II Other Information 32

Item 1 Legal Proceedings 32

Item 1A Risk Factors 32

Item 4 Submission of Matters to a Vote of Security Holders 33

Item 6 Exhibits 34

Signatures 35

Exhibit 31.1 – Certification of Chief Executive Officer

Exhibit 31.2 – Certification of Chief Financial Officer

Exhibit 32 – Certification of Chief Executive Officer and Chief Financial Officer

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SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)

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

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THREE MONTHS ENDED

JUNE 30, SIX MONTHS ENDED

JUNE 30, 2008 2007 2008 2007

Net revenues $ 103,418 $ 80,357 $ 201,932 $ 155,787 Cost of revenues 60,900 49,697 119,728 95,599

Gross profit 42,518 30,660 82,204 60,188

Selling, general and administrative expenses 19,703 16,159 40,231 29,098

Income from operations 22,815 14,501 41,973 31,090

Other income (expense), net (920 ) 1,426 89 2,669

Income before provision for income taxes 21,895 15,927 42,062 33,759

Income tax expense 4,479 2,664 4,212 5,120

Net income $ 17,416 $ 13,263 $ 37,850 $ 28,639

Dividend per share $ 0.06 $ 0.06 $ 0.12 $ 0.12

EARNINGS PER SHARE:

Basic $ 0.42 $ 0.32 $ 0.92 $ 0.70 Diluted $ 0.42 $ 0.32 $ 0.92 $ 0.69

Weighted average common shares outstanding:

Basic 41,173 41,043 41,154 41,005 Diluted 41,332 41,185 41,308 41,252

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SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED) (IN THOUSANDS)

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

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June 30, 2008

December 31,

2007

ASSETS

Current assets:

Cash and cash equivalents $ 60,477 $ 61,555 Short term investments 55,520 54,643 Accounts receivable, net of allowances for doubtful accounts of $658 and $499 at June 30, 2008 and

December 31, 2007, respectively 57,352 51,783 Revenue earned in excess of billings 15,363 7,340 Deferred income taxes and other current assets 26,151 23,761

Total current assets 214,863 199,082 Property and equipment 123,149 110,186

Less accumulated depreciation and amortization 48,079 44,602

Property and equipment, net 75,070 65,584 Goodwill 906 906 Deferred income taxes and other non current assets 6,309 6,032

TOTAL ASSETS $ 297,148 $ 271,604

LIABILITIES AND SHAREHOLDERS ’ EQUITY

LIABILITIES

Current liabilities:

Accounts payable $ 10,374 $ 7,434 Accrued payroll and related costs 25,367 27,242 Income taxes payable 10,376 10,580 Accrued liabilities 16,701 12,236 Deferred revenue 3,929 3,691 Dividends payable 2,687 2,671

Total current liabilities 69,434 63,854

SHAREHOLDERS’ EQUITY

Total shareholders’ equity 227,714 207,750

TOTAL LIABILITIES AND SHAREHOLDERS ’ EQUITY $ 297,148 $ 271,604

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SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ E QUITY

(UNAUDITED) (IN THOUSANDS)

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

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Common Stock Restricted Stock

Additional

Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive

Income (Loss)

Total Shareholders’

Equity Shares Amount Shares Amount

Unrealized

Investment

Gain

Unamortised

actuarial gain

Foreign Currency

Translation

Adjustment Balance, January 1, 2008 41,140 $ 1 297 $ 5,113 $ 64,712 $ 124,049 $ 275 $ 42 $ 13,558 $ 207,750 Net income — — — — — 37,850 — — — 37,850 Other comprehensive income

(loss), net of tax — — — — — — 191 — (14,506 ) (14,315 ) ESPP & stock options activity 72 — — — 263 — — — — 263 Restricted stock activity — — (32 ) 1,108 — — — — — 1,108 Dividends — — — — — (4,942 ) — — — (4,942 )

Balance, June 30, 2008 41,212 $ 1 265 $ 6,221 $ 64,975 $ 156,957 $ 466 $ 42 $ (948 ) $ 227,714

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SYNTEL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) (IN THOUSANDS)

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

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SIX MONTHS ENDED

June 30, 2008 2007

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 37,850 $ 28,639 Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization 6,662 4,531 Bad debt provisions 249 — Realized gains on sales of short term investments (652 ) (265 ) Deferred income taxes (2,548 ) 808 Compensation expense related to restricted stock 1,135 715 Share based compensation expense 17 126

Changes in operating assets and liabilities:

Accounts receivable and revenue earned in excess of billings (20,197 ) (5,779 ) Other assets (1,330 ) (4,293 ) Accrued payroll and other liabilities 8,763 2,280 Deferred revenue 230 616

Net cash provided by operating activities 30,179 27,378

CASH FLOWS FROM INVESTING ACTIVITIES:

Property and equipment expenditures (21,938 ) (14,897 ) Purchase of mutual funds (64,344 ) (31,581 ) Purchase of term deposits with banks (9,806 ) (11,205 ) Proceeds from sales of mutual funds 56,710 57,529 Maturities of term deposits with banks 12,250 12,093

Net cash (used in) provided by investing activities (27,128 ) 11,939

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from issuance of common stock 194 566 Tax benefit on stock options exercised 51 204 Dividends paid (4,947 ) (4,949 )

Net cash used in financing activities (4,702 ) (4,179 )

Effect of foreign currency exchange rate changes on cash 573 (6,573 )

Change in cash and cash equivalents (1,078 ) 28,565 Cash and cash equivalents, beginning of period $ 61,555 $ 51,555

Cash and cash equivalents, end of period $ 60,477 $ 80,120

Non cash investing and financing activities:

Cash dividends declared but unpaid $ 2,687 $ 2,485 Cash paid for income taxes 5,613 3,503

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Syntel, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements of Syntel, Inc. (the “Company” or “Syntel”) have been prepared by management, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of Syntel and its subsidiaries as of June 30, 2008, the results of their operations for the three and six months ended June 30, 2008 and 2007, and cash flows for the six months ended June 30, 2008 and 2007. The year-end condensed consolidated balance sheet as of December 31, 2007 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2007.

Operating results for the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The condensed consolidated financial statements include the accounts of Syntel, Inc. (“Syntel”), a Michigan corporation, its wholly owned subsidiaries, and a joint venture. All significant inter-company balances and transactions have been eliminated.

The wholly owned subsidiaries of Syntel, Inc. are:

The formerly wholly owned subsidiary of Syntel Delaware (as of December 31, 2004) that became a partially owned joint venture of Syntel Delaware LLC on February 1, 2005 is:

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1. BASIS OF PRESENTATION:

2. PRINCIPLES OF CONSOLIDATION AND ORGANIZATION

• Syntel Limited (“Syntel India” ), an Indian limited liability company; • Syntel (Singapore) PTE. Limited. (“Syntel Singapore” ), a Singapore limited liability company; • Syntel Europe, Limited. (“Syntel Europe”), an United Kingdom limited liability company; • Syntel Canada Inc. (“Syntel Canada”), an Ontario limited liability company; • Syntel Deutschland GmbH (“Syntel Germany”), a German limited liability company; • Syntel Hong Kong Limited (“Syntel Hong Kong”), a Hong Kong limited liability company; • Syntel Delaware LLC (“Syntel Delaware” ), a Delaware limited liability company; • SkillBay LLC (“SkillBay” ), a Michigan limited liability company; • Syntel (Mauritius) Limited (“Syntel Mauritius” ), a Mauritius limited liability company; • Syntel Consulting Inc. (“Syntel Consulting” ), a Michigan corporation; • Syntel Sterling BestShores (Mauritius) Limited (“SSBML”), a Mauritius limited liability company; and • Syntel Worldwide (Mauritius) Limited (“Syntel Worldwide”), a Mauritius limited liability company. and • Syntel (Australia) Pty. Ltd. (“Syntel Australia” ), an Australian limited liability company.

• State Street Syntel Services (Mauritius) Limited. (“SSSSML”), a Mauritius limited liability company formerly known as Syntel Solutions (Mauritius) Limited.

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The wholly owned subsidiary of SSSSML is:

The wholly owned subsidiaries of Syntel Mauritius are:

The wholly owned subsidiary of SSBML is:

The wholly owned subsidiary of Syntel Europe is:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include, but are not limited to, the allowance for doubtful accounts, impairment of long-lived assets and goodwill, contingencies and litigation, the recognition of revenues and profits based on the proportional performance method and potential tax liabilities. Actual results could differ from those estimates and assumptions, used in the preparation of the accompanying financial statements.

The Company recognizes revenues from time and material contracts as the services are performed.

Revenue from fixed-price applications management, maintenance and support engagements is recognized as earned which generally results in straight-line revenue recognition as services are performed continuously over the term of the engagement.

Revenue from fixed-priced, applications development and integration projects in the Company’s application outsourcing and e-Business segments are measured using the proportional performance method of accounting. Performance is generally measured based upon the efforts incurred to date in relation to the total estimated efforts to the completion of the contract. The Company monitors estimates of total contract revenues and costs on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract revenues or costs is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss. The Company issues invoices related to fixed price contracts based on either the achievement of milestones during a project or other contractual terms. Differences between the timing of billings and the recognition of revenue based upon the proportional performance method of accounting are recorded as revenue earned in excess of billings or deferred revenue in the accompanying consolidated balance sheets.

Revenues are reported net of sales incentives.

Reimbursements of out-of-pocket expenses by clients are included in revenue in accordance with Emerging Issues Task Force Consensus (“EITF”) 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out of Pocket’ Expenses Incurred”.

The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment.” SFAS No. 123R requires the recognition of stock-based compensation expense in the consolidated financial statements for

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• State Street Syntel Services Private Limited. (“SSSSPL”), an Indian limited liability company. Formerly known as Syntel Sourcing Private Limited. (“ Syntel Sourcing” )

• Syntel International Private Limited. (“Syntel International” ), an Indian limited liability company; and • Syntel Global Private Limited. (“Syntel Global” ), an Indian limited liability company.

• Syntel Sterling BestShores Solutions Private Limited” (“SSBSPL”), an Indian limited liability company.

• Intellisourcing, sarl, a French limited liability company.

3. USE OF ESTIMATES

4. REVENUE RECOGNITION

5. STOCK-BASED EMPLOYEE COMPENSATION PLANS

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awards of equity instruments to employees and non-employee directors based on the grant-date fair value of those awards, estimated in accordance with the provisions of SFAS No. 123R. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under the prior accounting rules. This requirement reduces net operating cash flow and increases net financing cash flows in periods after adoption.

The Company follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended. The Company enters into foreign exchange forward contracts where the counter party is a bank. The Company purchases foreign exchange forward contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in certain foreign currencies. These contracts do not qualify for hedge accounting under SFAS No. 133, as amended. Accordingly these contracts are carried at fair value with resulting gains or losses included in the consolidated statements of income in other income (expense).

During the quarter ended June 30, 2008, the Company entered into foreign exchange forward contracts with a notional amount of $17.0 million and with maturity dates of five months. During the quarter ended June 30, 2008, contracts amounting to $36.4 million expired resulting in a loss of $3.6 million. At June 30, 2008, foreign exchange forward contracts amounting to $49.0 million were outstanding. The fair value of the foreign exchange forward contracts of $3.1 million is reflected in other current liabilities in the balance sheet of the Company as at June 30, 2008. During the three months ended June 30, 2008 forward contract loss of $2.5 million pertaining to direct client related contracts is recorded as other expense and forward loss of $1.1 million pertaining to inter company related contracts is recorded as other comprehensive loss.

For the purpose of reporting Cash and Cash Equivalents, the Company considers all liquid investments purchased with an original maturity of three months or less to be cash equivalents.

At June 30, 2008 and December 31, 2007, approximately $10.2 million and $12.6 million, respectively, were in a money market fund maintained by JP Morgan Chase Bank NA that invests in corporate bonds, treasury notes and other securities. The remaining amounts of cash and cash equivalents were invested in money market accounts with various banking and financial institutions.

Total Comprehensive Income for the three and six months ended June 30, 2008 and 2007 is as follows:

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6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

7. CASH AND CASH EQUIVALENTS

8. COMPREHENSIVE INCOME

Three Months Ended

June 30, Six Months Ended

June 30, 2008 2007 2008 2007 (In thousands) (In thousands) Net income $ 17,416 $ 13,263 $ 37,850 $ 28,639 Other comprehensive income:

- Unrealized investment gain 84 956 191 1,489 - Foreign currency translation adjustments (13,724 ) 4,913 (14,506 ) 5,534

Total comprehensive income $ 3,776 $ 19,132 $ 23,535 $ 35,662

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Basic and diluted earnings per share are computed in accordance with SFAS No. 128 “Earnings Per Share”.

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 the basic earnings per share. Diluted earnings per share is calculated using the treasury stock method for the dilutive effect of options which have been granted pursuant to the stock option plan, by dividing the net income by the weighted average number of shares outstanding during the period adjusted for these potentially dilutive options, except when the results would be anti-dilutive. The potential tax benefits on exercise of stock options is considered as additional proceeds while computing dilutive earnings per share using the treasury stock method.

The following tables set forth the computation of earnings per share:

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9. EARNINGS PER SHARE

Three Months Ended June 30, 2008 2007

Weighted

Average Shares

Earnings

per Share

Weighted

Average Shares

Earnings

per Share

(in thousands, except per share earnings)

Basic earnings per share 41,173 $ 0.42 41,043 $ 0.32 Potential dilutive effect of stock options outstanding 159 (0.00 ) 142 (0.00 )

Diluted earnings per share 41,332 $ 0.42 41,185 $ 0.32

Six Months Ended June 30, 2008 2007

Weighted

Average Shares

Earnings

per Shares

Weighted

Average Shares

Earnings

per Share

(In thousands, except per share earnings)

Basic earnings per share 41,154 $ 0.92 41,005 $ 0.70 Potential dilutive effect of stock options outstanding 154 (0.00 ) 247 (0.01 )

Diluted earnings per share 41,308 $ 0.92 41,252 $ 0.69

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The Company is organized geographically and by business segment. For management purposes, the Company is primarily organized on a worldwide basis into four business segments:

These segments are the basis on which the Company reports its primary segment information to management. Management allocates all corporate expenses among the segments. No balance sheet/identifiable assets data is presented since the Company does not segregate its assets by segment. Financial data for each segment for the three and six months ended June 30, 2008 and 2007 is as follows:

During the three and six months ended June 30, 2008, State Street Bank and American Express Corp. each contributed revenues in excess of 10% of total consolidated revenues. Revenue from State Street Bank and American Express Corp. was $20.7 million and $19.9 million, respectively, during the three months ended June 30, 2008, contributing approximately 20.1% and 19.2%, respectively, of total consolidated revenues. The corresponding revenues for the three months ended June 30, 2007 from State Street Bank and American Express Corp. was $12.0 million and $14.9 million, respectively, contributing approximately 15.0% and 18.5%, respectively, of total consolidated revenues. During the six months ended June 30, 2008, revenue from State Street Bank and American Express Corp. was $40.3 million and $37.3 million, respectively, contributing approximately 20.0% and 18.5%, respectively, of total consolidated revenues. The corresponding revenues for the six months ended June 30, 2007 from State Street Bank and American Express Corp. was $22.5 million and $29.3 million respectively, contributing approximately 14.9% and 18.5%, respectively, of total consolidated revenues. At June 30, 2008 and December 31, 2007, accounts receivable from State Street Bank were $13.6 million and $12.1 million, respectively. Accounts receivable from American Express Corp. were $2.8 million and $2.2 million as at June 30, 2008 and December 31, 2007, respectively.

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10. SEGMENT REPORTING

• Applications Outsourcing; • e-Business; • TeamSourcing; and • Knowledge Process Outsourcing (“KPO”) (*Formerly reported as Business Process Outsourcing or BPO)

Three Months Ended

June 30, Six Months Ended

June 30, 2008 2007 2008 2007 (in thousands) (in thousands) Revenues:

Applications Outsourcing $ 66,469 $ 55,018 $ 132,491 $ 107,721 e-Business 13,032 10,403 23,162 20,045 TeamSourcing 2,709 3,694 5,094 7,704 KPO 21,208 11,242 41,185 20,317

103,418 80,357 201,932 155,787

Gross Profit:

Applications Outsourcing 22,615 19,845 44,933 38,969 e-Business 7,028 4,684 11,539 8,280 TeamSourcing 988 1,214 1,668 2,880 KPO 11,887 4,917 24,064 10,059

42,518 30,660 82,204 60,188

Selling, general and administrative expenses 19,703 16,159 40,231 29,098

Income from operations $ 22,815 $ 14,501 $ 41,973 $ 31,090

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The Company’s clients are primarily located in the United States. Net revenues and net income (loss) were attributed to each geographic location, based on the countries in which the respective Syntel entities are incorporated, as follows:

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11. GEOGRAPHIC INFORMATION

Three Months Ended

June 30, Six Months Ended

June 30, 2008 2007 2008 2007 (in thousands) (in thousands)

Net Revenues:

North America, primarily United States $ 84,136 $ 76,987 $ 163,810 $ 151,793 India 48,632 38,621 95,448 74,071 UK 2,205 3,655 4,957 6,395 Far East, primarily Singapore 122 48 122 116 Germany 1,212 364 2,187 805 Mauritius 9,633 3,482 18,055 5,700 Australia 94 — 94 —

Inter-company revenue elimination (primarily India) (42,616 ) (42,800 ) (82,741 ) (83,093 )

Total revenue $ 103,418 $ 80,357 $ 201,932 $ 155,787

Net Income/(Loss):

North America, primarily United States $ 8,646 $ 4,253 $ 16,491 $ 9,223 India 6,637 8,492 16,821 18,504 UK 213 654 326 897 Far East, primarily Singapore 3 (52 ) (38 ) (113 ) Germany 434 (2 ) 774 166 Mauritius 1,432 (82 ) 3,425 (38 ) Australia 51 — 51 —

Total net income $ 17,416 $ 13,263 $ 37,850 $ 28,639

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The following table accounts for the differences between the federal statutory tax rate of 35% and the Company’s overall effective tax rate:

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007 and initially recognized a FIN 48 liability in the financial statements by debiting retained earnings, when it is more likely than not, based on the technical merits, that a tax position will be sustained upon examination.

The Company records provisions for income taxes based on enacted tax laws and rates in the various taxing jurisdictions in which it operates. In determining the tax provisions, the Company provides for tax uncertainties based on the “more likely than not” recognition threshold as per FIN 48. Such uncertainties, which are recorded in income taxes payable, are based on FIN 48 interpretation and on management’s estimates and may also be revised based on additional information. The provision no longer required for any particular tax year is credited to the current period’s income tax expense. Conversely, in the event of a future tax examination, if the Company does not prevail on certain tax positions taken in filed returns, any additional tax expense not previously provided for will be recognized in the period in which management estimates that the examiner’s position is determined to be final.

Syntel Inc. and its subsidiaries file income tax returns in various tax jurisdictions. The Company is no longer subject to US federal tax examinations by tax authorities for years before 2004 and for state tax examinations for years before 2003. Further, Syntel India has disputed tax matters for the financial years 1995-96 to 2004-05 pending at various levels of tax authorities. Financial year 2005-06 and onwards are open for regular tax scrutiny by the Indian tax authorities. However, the tax authorities in India are authorized to re-open the already concluded tax assessments and may re-open the case of Syntel India for financial year 2002-03 and onwards.

As a result of the adoption of FIN 48, the Company recognized $7.99 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. The aforesaid amount is comprised of $7.36 million and $0.63 million towards tax and interest liability, respectively.

During the quarter ended March 31, 2008, the Company received favorable orders from the Income Tax Appellate Authorities of one jurisdiction, resulting in meeting the more-likely-than-not threshold for a particular tax position. The Company reviewed its FIN 48 liability and reversed an earlier provision amounting to $2.99 million, which comprised of $2.21 million and $0.78 million towards tax and interest income, respectively. The Company is also entitled for interest on the tax paid. The tax authorities filed further appeals before The Bombay High Court. Due to the uncertain nature of the outcome of the ultimate settlement of the above tax position, the Company has not recorded such interest income as of June 30, 2008.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of tax expense. During the quarter ended June 30, 2008, the Company recognized tax charge of approximately $0.02 million and approximately

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12. INCOME TAXES

Three Months Ended

June 30, Six Months Ended

June 30, 2008 2007 2008 2007 Statutory provision 35.0 % 35.0 % 35.0 % 35.0 % State taxes, net of federal benefit 0.7 % 1.0 % 0.7 % 0.8 % Tax-free investment income — (0.1 )% — (0.0 )% Foreign effective tax rates different from US statutory rate (15.2 )% (15.9 )% (17.7 )% (18.7 )% Tax Reserve — 0.5 % (7.1 )% 0.4 % Others, net — (3.8 )% (0.9 )% (2.3 )%

Effective Income Tax Rate 20.5 % 16.7 % 10.0 % 15.2 %

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$0.01 million as interest. During the six months ended June 30, 2008, the Company recognized tax charge of approximately $0.04 million and approximately $0.02 million as interest.

The United States Internal Revenue Services (IRS) commenced an examination of the Company’s U.S. income tax returns for years 2004 and 2005 in the first quarter of 2006. During December 2007, the IRS had proposed certain adjustments to the Company’s transfer pricing tax positions. Management had evaluated those proposed adjustments and had responded to IRS accordingly. In July 2008, the IRS has sent a formal notice about those proposed adjustments and the Company is in the process of sending formal response to IRS about its position on these proposed adjustments. The Company does not anticipate the adjustments to result in any material change to its financial position.

During the three months ended June 30, 2008 and 2007, the effective income tax rates were 20.5% and 16.7%, respectively. During the six months ended June 30, 2008 and 2007, the effective income tax rates were 10.0% and 15.2%, respectively. The tax rate for the six months ended June 30, 2008 is impacted by a reversal of $2.99 million of taxes provided earlier under FIN 48 and $0.32 million towards credit of Michigan Single Business tax for the years 2001 to 2003.

Syntel’s software development centers/units in India located at Mumbai, Chennai, Pune and Gurgaon, enjoy favorable tax provisions due to their registration in Special Economic Zone (SEZ), as Export Oriented Unit (EOU) and as units located in Software Technologies Parks of India (STPI). Under the Indian Income Tax Act, 1961 (the “Act”) Units registered with STPI, EOU’s and certain units located in SEZ are exempt from payment of corporate income taxes for 10 years of operations on the profits generated by these units or March 31, 2010 (substituted for “2009” by Finance Act, 2008-‘the sunset date’), whichever is earlier. Finance Act 2008 has extended the sunset date to March 31, 2010. The extension of the sunset date will have a positive impact on the effective tax rate for the year 2009, the same shall have a marginal adverse impact on the effective tax rate for the year 2008. Certain units located in SEZ are eligible for 100% exemption from payment of corporate taxes for the first 5 years of operation and a 50% exemption for the next 5 years. New units in SEZ operational after April 1, 2005 are eligible for 100% exemption from payment of corporate taxes for first 5 years of operation, 50% exemption for the next 5 years and further 50% for another 5 years subject to fulfillment of criteria laid down.

Syntel India has not provided for disputed Indian income tax liabilities amounting to $2.51 million as of June 30, 2008 for the financial years 1995-96 to 2001-02, after recognizing certain tax liabilities aggregating $0.04 million provided at the adoption of FIN 48 during the year 2007. Syntel India has obtained an opinion from one independent legal counsel (a former Chief Justice of the Supreme Court of India) for the financial year 1998-99 and opinions from another independent legal counsel (also a former Chief Justice of the Supreme Court of India) for the financial years 1995-96, 1996-97, 1997-98, 1999-2000 and 2000-01 and for subsequent periods, which support Syntel India’s position in this matter.

Syntel India had earlier filed an appeal with the Commissioner of Income Tax (Appeals) (“CIT(A)”) for the financial year 1998-99 and received a favorable decision. However, the Income tax department filed a further appeal with the Income Tax Appellate Tribunal (“ITAT”) against this favorable decision. In May 2006, the ITAT dismissed the appeal filed by the Income tax department. During the quarter ended March 31, 2008, the Income tax department has filed further appeal before The Bombay High Court.

A similar appeal filed by Syntel India with the CIT(A) for the financial year 1999-2000 was however dismissed in March 2004. Syntel India has appealed this decision with the ITAT. During the year 2007, Syntel India received a favorable order from the ITAT on this appeal. During the quarter ended March 31, 2008, the Income tax department filed further appeal before The Bombay High Court. Syntel India has also received orders for appeals filed with the CIT(A) against the demands raised by the Income Tax Officer for similar matters relating to the financial years 1995-96, 1996-97, 1997-98, 2000-01 and 2001-02 and received a favorable decision for 1995-96. The contention of Syntel India was partially upheld for the other years. Syntel India filed a further appeal with the ITAT

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for the amounts not allowed by the CIT(A). The Income Tax Department has appealed the favorable decisions for 1995-96 and the partially favorable decisions for the year 1996-97, 1997-98 and 2000-01 with the ITAT. During the quarter ended March 31, 2008, the Company has received a favorable order from the ITAT. During the quarter ended June 30, 2008, the Income tax department has filed further appeals before The Bombay High Court.

Syntel India has also not provided for other disputed Indian income tax liabilities aggregating to $8.36 million as of June 30, 2008 for the financial years 2001-02 to 2004-05 which is after recognizing tax on certain tax liabilities aggregating $0.03 million provided at the adoption of FIN 48 during the year 2007 against which Syntel India has filed the appeals with the CIT(A). Syntel India has obtained opinions from independent legal counsels, which support Syntel India’s stand in this matter. Syntel India has received an order from the CIT(A) for the financial year 2001-02 in which the contention of Syntel India was partially upheld. Syntel India filed a further appeal with the ITAT in relation to the amounts not allowed by the CIT(A). The Income tax department has also filed further appeal against the relief granted to Syntel India by CIT(A).

During the year 2007, Syntel India has received the order for appeal filed with CIT(A) relating to financial year 2002-03, wherein the contention of Syntel India is partially upheld. Syntel India has gone into further appeal with the ITAT for the amounts not allowed by the CIT(A). The Income tax department has also filed further appeal against the relief granted to Syntel India by CIT(A). During the quarter ended March 31 2008, Syntel India received an order from the CIT(A) for financial year 2003-04, wherein the contention of Syntel India is partially upheld. Syntel India has gone into further appeal with the ITAT for the amounts not allowed by the CIT(A). The Income tax department has also filed further appeal against the relief granted to Syntel India by CIT(A).

Further, Syntel India has not provided for disputed income tax liabilities aggregating to $0.17 million for various years, which is after recognizing certain tax liabilities aggregating $0.01 million provided at the adoption of FIN 48 during the year 2007, for which Syntel India has filed necessary appeals/ petition.

Syntel India has provided for tax liability amounting to $2.64 million as of June 30, 2008 in the books for the financial years 1995-96 to 2004-05 on a particular tax matter. Syntel India has been contending the taxability of the same with the Indian Income Tax department. For the financial years 1998-99 and 1999-00, the ITAT has held the matter in favor of Syntel India. During the quarter ended March 31, 2008, the Income Tax department filed further appeal before The Bombay High Court. For the financial years 1995-96 to 1997-98 and 2000-01, the appeals were heard by the ITAT on October 10, 2007. During the quarter ended March 31, 2008, the Company has received a favorable order from the ITAT, wherein the contention of the Company is upheld for these years. The Income tax department filed a further appeal before The Bombay High Court. For the financial years 2001-02 and 2002-03, the CIT(A) has held against Syntel India and Syntel India has filed further appeal with the ITAT. For the financial year 2003-04, the CIT(A) has partially allowed the appeal in favor of Syntel India. Syntel India has gone into further appeal with the ITAT for the amounts not allowed by the CIT(A). The Income Tax department has filed further appeal with ITAT for the amounts allowed by the CIT(A). For the financial year 2004-05, the Indian Income Tax department has decided against Syntel India and Syntel India has filed an appeal with the CIT(A).

All the above tax exposures involve complex issues and may need an extended period to resolve the issues with the Indian income tax authorities. Management, after consultation with legal counsel, believes that the resolution of the above matters will not have a material adverse effect on the Company’s consolidated financial position.

Fringe Benefit Tax on Stock Based Compensation

As per the Finance Act, 2007, effective April 1, 2007, some changes in Indian tax law were made, which impact Syntel’s Indian subsidiaries, with respect to introduction of Fringe Benefit Tax (“FBT”) on Employee Stock Options/Restricted Options. Based on the opinions of tax advisors, Syntel’s Indian subsidiaries have estimated and recorded a FBT charge of $0.23 million and $0.30 million for the three and six months ended June 30, 2008, respectively, on Employee Stock Options/Restricted Stock Grants.

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Branch Profit Tax

Syntel India is subject to a 15% USA Branch Profit Tax (BPT) related to its effectively connected income in the USA, to the extent its US taxable adjusted net income during the taxable year is not invested in the USA. The Company expects that US profits earned on or after January 1, 2008 will be permanently invested in the USA. Accordingly, effective January 1, 2008, the provision for Branch profit taxes is not required and accordingly BPT provision amounting to $0.30 million has not been recorded in the books for the quarter ended June 30, 2008. Further reconciliations carried out during the quarter at the time of preparation of the Annual Return for Year 2007 has resulted in a write back of the BPT amounting to $0.43 million for the period up to December 31, 2007. The accumulated deferred tax liability of $1.73 million up to December 31, 2007 will continue to be carried forward.

Further, the above reconciliations have also resulted in a write back of $0.24 million towards the US Tax liability for Syntel India for Year 2007 and $0.12 million for the quarter ended March 31, 2008.

Undistributed earnings of foreign subsidiaries

The Company intends to use accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and, accordingly, undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision for U. S. federal and state income tax or applicable dividend distribution tax has been provided thereon.

Estimated additional taxes which would be due, if undistributed earnings were to be distributed, approximate $81.0 million as of June 30, 2008.

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Share Based Compensation:

The Company originally established a Stock Option and Incentive Plan in 1997 (the “1997 Plan”). On June 1, 2006 the Company adopted the Amended and Restated Stock Option and Incentive Plan (the “Stock Option Plan”), which amended and extended the 1997 Plan. Under the plan, a total of 8 million shares of Common Stock were reserved for issuance. The dates on which options granted under the Stock Option Plan become 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. For the options granted thereafter, the Company grants the options at the fair market value on the date of grant of the options.

The shares issued upon the exercise of the options are generally new share issues. In some instances the shares are issued out of treasury stock purchased from the market.

The Company accounts for share-based compensation under the provisions of SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”). SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Statement of Income. Share-based compensation expense recognized under SFAS 123(R) for the three months ended June 30, 2008 and 2007 was $0.45 million and $0.43 million, respectively, including a charge for restricted stock. For the six months ended June 30, 2008 and 2007, the share-based compensation expense recognized under SFAS 123(R) was $1.15 million and $0.84 million, respectively.

Restricted Stock:

On different dates during the quarter ended June 30, 2004, the Company issued 319,300 shares of incentive restricted stock to its non-employee directors and some employees as well as to some employees of its subsidiaries. The shares were granted to employees for their future services as a retention tool at a zero exercise price, with the restrictions on transferability lapsing with regard to 10%, 20%, 30%, and 40% of the shares issued on or after the first, second, third and fourth anniversary of the grant dates, respectively. The restriction on all stocks described in this paragraph lapsed during the three months ended June 30, 2008.

On different dates during the six month ended June 30, 2008 and the years ended December 31, 2007, 2006 and 2005, the Company issued 8,676, 14,464, 16,536 and 54,806 shares, respectively, of incentive restricted stock to its non-employee directors and some employees as well as to some employees of its subsidiaries. The shares were granted to employees for their future services as a retention tool at a zero exercise price, with the restrictions on transferability lapsing with regard to 25% of the shares issued on or after the first, second, third and fourth anniversary of the grant dates. Generally, the shares to non-employee directors are granted for their future services starting from the date of the annual meeting to the date of the following annual meeting.

In addition to the shares of restricted stock described above, on different dates during the six months ended June 30, 2008 and the years ended December 31, 2007 and 2006 the Company issued another 33,000, 66,000 and 57,500 shares, respectively, of incentive restricted stock to some employees as well as to some employees of its subsidiaries. The shares were granted to employees for their future services as a retention tool at a zero exercise price, with the restrictions on transferability lapsing with regard to 20% of the shares issued on or after the first, second, third, fourth and fifth anniversary of the grant dates.

During the year ended December 31, 2006, the Company issued 153,500 shares of performance restricted stock to some employees as well as to some employees of its subsidiaries. Each such performance restricted stock grant is divided in a

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13. STOCK BASED COMPENSATION

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pre-defined proportion with the vesting (lifting of restriction) of one portion based on the overall annual performance of the Company and the vesting (lifting of restriction) of the other portion based on the achievement of pre-defined long term goals of the Company. These stocks will vest (have the restrictions lifted) over a period of 5 years (at each anniversary) in equal installments, subject to meeting the above pre-defined criteria of overall annual performance and achievement of the long term goal. The stock linked to overall annual performance would lapse (revert to the Company) on non-achievement of the overall annual performance in the given year. However, the stock linked to achievement of the long term goal would roll over into a common pool and would lapse only on the non-achievement of the long term goal on or prior to the end of fiscal year 2012.

During the three months ended June 30, 2008 and 2007, the Company expensed $0.44 million and $0.37 million, respectively, as compensation on account of the above stock grants. During the six months ended June 30, 2008 and 2007, the Company expensed $1.11 million and $0.69 million, respectively, as compensation on account of the above stock grants.

The recipients are also eligible for dividends declared on their restricted stock. The dividends accrued or paid on shares of unvested restricted stock are charged to compensation cost. For the three months ended June 30, 2008 and 2007, the Company recorded $0.01 million and $0.01 million, respectively, as compensation cost for dividends paid on shares of unvested restricted stock and recorded $0.03 million and $0.02 million, respectively, for the six months ended June 30, 2008 and 2007.

For the restricted stock issued during the years ended December 31, 2007, 2006 and 2005 and six months ended June 30, 2008, the dividend is accrued and paid subject to the same restriction as the restriction on transferability.

Impact of FAS 123(R)

The impact on the Company’s results of operations of recording stock-based compensation (including impact of restricted stock) for the three and six months ended June 30, 2008 and 2007 was as follows:

Cash received from option exercises under all share-based payment arrangements for the three months ended June 30, 2008 and 2007, was $0.17 million and $0.10 million, respectively and for the six months ended June 30, 2008 and 2007, was $0.19 million and $0.60 million, respectively. New shares were issued for all options exercised during the three months ended June 30, 2008.

As of June 30, 2008, the estimated compensation cost of non-vested options (excluding restricted stock) is $0.02 million to be vested mainly over the next two years.

Valuation Assumptions

The Company calculates the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used for each respective period:

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Three Months Ended

June 30, Six Months Ended

June 30, 2008 2007 2008 2007 (in thousands) (in thousands) Cost of revenues $ 99 $ 190 $ 355 $ 369 Selling, general and administrative expenses 354 236 797 472

$ 453 $ 426 $ 1,152 $ 841

Six Months Ended June 30, 2008 2007

Assumptions:

Risk free interest rate 3.27 % 4.85 % Expected life 5.00 5.00 Expected volatility 62.70 % 64.17 % Expected dividend yield 0.73 % 0.69 %

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The Company’s computation of expected volatility for the six months ended June 30, 2008 and 2007 is based on historical volatility from exercised options on the Company’s stock. The Company’s computation of expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is estimated based on the dividend yield at the time of grant, adjusted for expected dividend increases of historical pay out policy.

Share-based Payment Award Activity

The following table summarizes activity under our equity incentive plans for the six months ended June 30, 2008:

No options were granted during the three and six months ended June 30, 2008 and 2007. The aggregate intrinsic value of options exercised during the six months ended June 30, 2008 and 2007 was $0.13 million and $1.24 million, respectively. The aggregate fair value of shares vested during the six months ended June 30, 2008 and 2007 was $0.10 million and $0.20 million, respectively.

The gross charge for unutilized earned leave was $1.37 million and $1.18 million for the three months ended June 30, 2008 and 2007, respectively, and $2.8 million and $2.0 million for the six months ended June 30, 2008 and 2007, respectively.

The amounts accrued for unutilized earned leave are $10.1 million and $7.9 million as of June 30, 2008 and December 31, 2007, respectively, and are included within ‘Accrued payroll and related costs’.

Certain prior period amounts have been reclassified to conform to the current period presentation.

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Shares

Weighted

Average Exercise

Price

Weighted Average

Remaining Contractual

Term

(in years)

Aggregate Intrinsic

Value (in thousands)

Outstanding at January 1, 2008 137,605 $ 14.05

Granted — —

Exercised 9,375 20.78

Forfeited — —

Expired / Cancelled — —

Outstanding at June 30, 2008 128,230 $ 13.56 3.80 $ 2,719

Options Exercisable at June 30, 2008 127,630 $ 13.54 3.78 $ 2,708

14. PROVISION FOR UNUTILIZED LEAVE

15. RECLASSIFICATION

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SYNTEL INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

Net Revenues. The Company’s revenues consist of fees derived from its Applications Outsourcing, e-Business, TeamSourcing and Knowledge Process Outsourcing (“KPO”) (*Formerly reported as Business Process Outsourcing or BPO) business segments. Net revenues in the three months ended June 30, 2008 increased to $103.4 million from $80.4 million in the three months ended June 30, 2007, representing a 28.7% increase. The Company’s verticalization sales strategy focusing on Banking and Financial Services; Healthcare; Insurance; Telecom; Automotive; Retail; Logistics and Travel has enabled better focus and relationships with key clients leading to continued growth in business. Further, continued focus on execution and investments in new offerings such as our Testing, Center of Excellence have contributed to the growth in business. The focus is to continue investments in more new offerings. Worldwide billable headcount as of June 30, 2008 increased by 23.7% to 8,134 employees as compared to 6,576 employees as of June 30, 2007. However, the growth in revenues was not commensurate with the growth in the billable headcount. This is primarily because, though a significant growth in the billable headcount was in India, where our revenues per offshore billable resource are generally lower as compared to an on-site based resource, the revenue for the three and six months ended June 30, 2008 was partially impacted positively by better pricing. As of June 30, 2008, the Company had approximately 80.3% of its billable workforce in India as compared to 76.9% as of June 30, 2007. The Company’s top five clients accounted for 58.0% of the total revenues in the three months ended June 30, 2008, up from 53.1% of its total revenues in the three months ended June 30, 2007. Moreover, the Company’s top 10 clients accounted for 70.1% of the total revenues in the three months ended June 30, 2008 as compared to 72.0% in the three months ended June 30, 2007.

Applications Outsourcing Revenues. Applications Outsourcing revenues increased to $66.5 million for the three months ended June 30, 2008 or 64.3% of total revenues, from $55.0 million, or 68.5% of total revenues for the three months ended June 30, 2007. The $11.5 million increase was attributable primarily to revenues from new engagements contributing $45.5 million, largely offset by $34.0 million in lost revenues as a result of project completion and net reduction in revenues from existing projects. The revenues for the six months ended June 30, 2008 increased to $132.5 million, or 65.6% of total revenues, from $107.7 million or 69.1% of total revenues for the six months ended June 30, 2007. The $24.8 million increase for the six months ended June 30, 2008 was attributable primarily to revenues from new engagements of $83.0 million, largely offset by $58.2 million in lost revenues as a result of project completion and net decrease in revenues from existing projects.

Applications Outsourcing Cost of Revenues . Application Outsourcing cost of revenues consists of costs directly associated with billable consultants in the US and offshore, including salaries, payroll taxes, benefits, relocation costs, immigration costs, finder’s fees, trainee compensation and travel. Applications Outsourcing cost of revenues increased to 66.0% of total Applications Outsourcing revenues for the three months ended June 30, 2008, from 63.9% for the three months ended June 30, 2007. The 2.1 percentage point increase in cost of revenues, as a percent of revenues for the three months ended June 30, 2008 was attributable primarily to offshore wage increases effective April 2008, increase in travel, visa, investments in new areas and other expenses, partly offset by rupee depreciation. Cost of revenues for the six months ended June 30, 2008 increased to 66.1% of total Applications Outsourcing revenues, from 63.9% for the six months ended June 30, 2007. The 2.2 percentage point increase in cost of revenues, as a percent of revenues for the six months ended June 30, 2007 was attributable primarily to offshore wage increases effective April 2008 and increase in other expenses, partly offset by rupee depreciation impact.

e-Business Revenues . e-Business revenues increased to $13.0 million for the three months ended June 30, 2008, or 12.6% of total revenues, from $10.4 million, or 12.9% of total revenues for the three months ended June 30, 2007. The $2.6 million increase was attributable primarily to revenues from new engagements contributing $7.5 million, largely offset by $4.9 million in lost revenues as a result of project completion and net reduction in revenues from existing projects. The revenues for the six months ended June 30, 2008 increased to $23.2 million, or

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ITEM 2. MANAGEMENT ’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AN D RESULTS OF OPERATIONS

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11.5% of total revenues, from $20.0 million or 12.9% of total revenues for the six months ended June 30, 2007. The $3.2 million increase for the six months ended June 30, 2008 was attributable principally to revenues from new engagements contributing $11.5 million, largely offset by $8.3 million in lost revenues as a result of project completion and net reduction in revenues from existing projects.

e-Business Cost of Revenues . e-Business cost of revenues consists of costs directly associated with billable consultants in the US and offshore, including salaries, payroll taxes, benefits, relocation costs, immigration costs, finder’s fees, trainee compensation, and travel. e-Business cost of revenues decreased to 46.1% of total e-Business revenues for the three months ended June 30, 2008, from 55.0% for the three months ended June 30, 2007. The 8.9 percentage point decrease in cost of revenues as a percent of e-Business revenues for the three months ended June 30, 2008 is principally attributable to better pricing, utilization of resources and rupee depreciation impact during the three months ended June 30, 2008, as compared to the three months ended June 30, 2007, partially offset by offshore wage increases effective April 2008. Cost of revenues for the six months ended June 30, 2008 decreased to 50.2% of total e-business revenues, from 58.7% for the six months ended June 30, 2007. The 8.5 percentage point decrease in cost of revenues, as a percent of revenues for the six months ended June 30, 2008 was attributable primarily to better pricing & utilization of resources, decrease visa filing expenses and rupee depreciation for the six months ended June 30, 2008, partly offset by offshore wage increases effective April 2008.

TeamSourcing Revenues . TeamSourcing revenues decreased to $2.7 million for the three months ended June 30, 2008, or 2.6% of total revenues, from $3.7 million, or 4.6% of total revenues for the three months ended June 30, 2007. The $1.0 million decrease was attributable primarily to $3.2 million in lost revenues as a result of project completion, including conversion of staffing engagements into Syntel managed engagements and net reduction in revenues from existing projects, partially offset by revenues from new engagements and revenue from the SkillBay web portal, which helps clients of Syntel with their supplemental staffing requirements, contributing $2.2 million. The revenues for the six months ended June 30, 2008 decreased to $5.1 million, or 2.5% of total revenues, from $7.7 million or 4.9% of total revenues for the six months ended June 30, 2007. The $2.6 million decrease for the six months ended June 30, 2008 was attributable principally to $6.7 million in lost revenues as a result of project completion and net reduction in revenues from existing projects, largely offset by revenues from new engagements and revenue from the SkillBay web portal contributing $4.1 million.

TeamSourcing Cost of Revenues . TeamSourcing cost of revenues consists of costs directly associated with billable consultants in the US, including salaries, payroll taxes, benefits, relocation costs, immigration costs, finder’s fees, trainee compensation, and travel. TeamSourcing cost of revenues decreased to 63.5% of TeamSourcing revenues for the three months ended June 30, 2008, from 67.1% for the three months ended June 30, 2007. The 3.6 percentage point decrease in cost of revenues, as a percent of total TeamSourcing revenues was attributable primarily due to better utilization of resources. Cost of revenues for the six months ended June 30, 2008 increased to 67.3% of total TeamSourcing revenues, from 62.6% for the six months ended June 30, 2007. This increase in cost of revenues, as a percent of total TeamSourcing revenues was attributable primarily to onsite wage increase effective January 2008.

KPO Revenues . Revenues from this segment were $21.2 million or 20.5% of total revenues for the three months ended June 30, 2008 as against $11.2 million or 14.0% of total revenues for the three months ended June 30, 2007. The $10.0 million increase was attributable primarily to revenues from new engagements and a net increase in revenues from existing projects by $10.3 million, partially offset by $0.3 million in lost revenues as a result of project completion. The revenues for the six months ended June 30, 2008 increased to $41.2 million, or 20.4% of the total revenues, from $20.3 million, or 13.0% of the total revenues for the six months ended June 30, 2007. The $20.9 million increase was attributable primarily to revenues from new engagements and net increase in revenues from existing projects by $21.8 million, partially offset by $0.9 million in lost revenues as a result of project completion.

KPO Cost of Revenues . KPO cost of revenues consists of costs directly associated with billable consultants, including salaries, payroll taxes, benefits, finder’s fees, trainee compensation, and travel. Cost of revenues for the three months

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ended June 30, 2008 decreased to 44.0% of KPO revenues from 56.3% for the three months ended June 30, 2007. Cost of revenues for the six months ended June 30, 2008 decreased to 41.6% of KPO revenues, from 50.5% for the six months ended June 30, 2007. Both 12.3 and 8.9 percentage point decrease in cost of revenues, as a percent of total KPO revenues, was attributable primarily to better utilization of resources, lower travel & other costs and revenue increases and rupee depreciation, partially offset by an increase in headcount and other employee benefits.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses consist primarily of salaries, payroll taxes and benefits for sales, solutions, finance, administrative, and corporate staff; travel; telecommunications; business promotions; and marketing and various facility costs for the Company’s global development centers and other offices. Selling, general, and administrative expenses for the three months ended June 30, 2008 were $19.7 million or 19.1% of total revenues, compared to $16.2 million or 20.1% of total revenues for the three months ended June 30, 2007.

The 1.0 percentage point decrease is primarily due to increase in revenue that has resulted in an approximately 5.4 percentage point decrease for the three months ended June 30, 2008 as against the three months ended June 30, 2007, partially offset by increase in compensation, depreciation & amortization, office rent and other expenses. Selling, general and administrative expenses for the three months ended June 30, 2008 include foreign exchange gain of $2.0 million reflecting a 2.0 percentage point decrease in selling, general, and administrative expenses as a percentage of revenue. Cost increases include compensation of $2.0 million inclusive of provision for bonus & increments, depreciation of $0.9 million including one time software amortization of $0.3 million, rent of $0.8 million towards the additional new facilities at Mumbai, Pune and Chennai in India, telecommunication expenses of $0.2 million, office expenses of $0.9 million towards increase in facility related costs, bad debts provision of $0.3 million, marketing fees of $0.3 million, professional expenses of $0.9 million and other expenses $0.3 million, which has resulted in an approximately 6.4 percentage point increase.

Selling, general, and administrative expenses for the six months ended June 30, 2008 were $40.2 million or 19.9% of total revenues, compared to $29.1 million or 18.7% of total revenues for the six months ended June 30, 2007.

In addition to the above-described items, the 1.2 percentage point increase is primarily due to increases in certain costs in the six months ended June 30, 2008 as against the six months ended June 30, 2007 partially offset by an increase in revenue that has resulted in an approximately 5.9 percentage point decrease. Selling, general and administrative expenses for the six months ended June 30, 2008 include foreign exchange gain of $2.4 million, impacting 1.2 percentage point decrease in selling, general, and administrative expenses as a percentage of revenue. Cost increases include increase in compensation cost of $3.8 million, depreciation of $2.5 million, rent of $1.9 million towards the additional new facilities at Mumbai, Pune and Chennai in India, telecommunication expenses of $0.6 million, office expenses of $2.4 million, marketing expenses of $0.5 million and professional expenses of $1.5 million which has resulted in an approximately 8.3 percentage point increase.

Other Income (Expense). Other income (expense) includes interest and dividend income, gains and losses from sale of securities, other investments and treasury operations.

Other income for the three months ended June 30, 2008 was negative $0.9 million or negative 0.9% of total revenues, compared to $1.4 million or 1.8% of total revenues for the three months ended June 30, 2007. The decrease in other income of $2.3 million was primarily due to loss on forward contract of $2.5 million, decrease in gain on sale of mutual fund of $0.1 million, partially offset by increase in interest income of $0.3 million.

Other income for the six months ended June 30, 2008 was $0.1 million or 0.0% of total revenues, compared to $2.7 million or 1.7% of total revenues for the six months ended June 30, 2007. The decrease in other income of $2.6 million was primarily due to loss on forward contract of $3.1 million, partially offset by increase in gain on sale of mutual fund of $0.4 million and interest income of $0.1 million.

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Income Taxes

The Company records provisions for income taxes based on enacted tax laws and rates in the various taxing jurisdictions in which it operates. In determining the tax provisions, the Company has provided for tax contingencies based on FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”) and on the Company’s assessment of future regulatory reviews of filed tax returns. Such reserves, which are recorded in income taxes payable, are based on FIN 48 interpretation and on management’s estimates and may also be revised based on additional information. The provision no longer required for any particular tax year is credited to the current period’s income tax expenses.

During the three months ended June 30, 2008 and 2007, the effective income tax rates were 20.5% and 16.7%, respectively. During the six months ended June 30, 2008 and 2007, the effective income tax rates were 10.0% and 15.2%, respectively The tax rate for the six months ended June 30, 2008 is impacted by a reversal of $2.99 million of taxes provided earlier under FIN 48 and $0.32 million towards credit of Michigan Single Business tax for the years 2001 to 2003.

FINANCIAL POSITION

Cash and Cash Equivalents: Cash and Cash equivalents decreased from $80.1 million at June 30, 2007 to $60.5 million at June 30, 2008 primarily due to increased revenue and outstanding receivables, purchases of short term investments and capital expenditures during the six months ended June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

The Company generally has financed its working capital needs through operations. The Mumbai, Chennai, Pune (India) and other expansion programs are financed from internally generated funds. The Company’s cash and cash equivalents consist primarily of certificates of deposit, corporate bonds and treasury notes. These amounts are held by various banking institutions including US-based and India-based banks.

Net cash generated by operating activities was $30.2 million for the six months ended June 30, 2008. This includes a reduction of $20.2 million related to an increase in outstanding accounts receivable and revenue earned in excess of billings. The net cash generated by operating activities was $27.4 million for the six months ended June 30, 2007. The number of days sales outstanding in net accounts receivable was approximately 63 days and 62 days as of June 30, 2008 and 2007, respectively. The increase in the number of day’s sales outstanding in net accounts receivable was due to lower collections.

Net cash used by investing activities was $27.1 million for the six months ended June 30, 2008, consisting principally of (i) $21.9 million of capital expenditures primarily for construction / acquisition of Global Development Center at Pune, Knowledge Process Outsourcing facility at Mumbai and an additional facility in Chennai, as well as for acquisition of computers and software and communications equipment and also capital advance for guest house at Mumbai and (ii) the purchase of short term investments of $74.2 million, partially offset by $69.0 million from the sale of short term investments. Net cash provided by investing activities was $11.9 million for the six months ended June 30, 2007, consisting principally of sale of short term investments of $69.6 million, partially offset by $42.8 million for the purchase of short term investments and $14.9 million of capital expenditures consisting principally of computer hardware, software, communications equipment, infrastructure and facilities.

Net cash used in financing activities was $4.7 million for the six months ended June 30, 2008, consisting principally of $4.9 million in dividends paid out, partially offset by proceeds from the issuance of shares under the Company’s employee stock option plan & employee stock purchase plan and tax benefit on stock options exercised during the six months. Net cash used in financing activities was $4.2 million for the six months ended June 30, 2007, consisting principally of $4.9 million in dividends paid out, partially offset by $0.5 million of proceeds from the issuance of shares under the Company’s employee stock option plan and employee stock purchase plan and $0.2 million of tax benefit on stock options exercised during the six months.

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The Company has a line of credit with JP Morgan Chase Bank NA, which provides for borrowings up to $20.0 million. The line of credit expires on August 31, 2008. The line of credit has a sub-limit of $5.0 million for letters of credit, which bear a fee of 1% per annum of the face value of each standby letter of credit issued. Borrowings under the line of credit bear interest at (i) a formula approximating the Eurodollar rate plus the applicable margin of 1.25%, (ii) the bank’s prime rate minus 1.0% or (iii) negotiated rate plus 1.25%. There were no outstanding borrowings at June 30, 2008 or December 31, 2007.

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.

CRITICAL ACCOUNTING POLICIES

We believe the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of our consolidated financial statements. The Company has discussed this critical accounting policy and the estimates with the Audit Committee of the Board of Directors.

Revenue Recognition. Revenue recognition is the most significant accounting policy for the Company. The Company recognizes revenue from time and material contracts as services are performed. During the three months ended June 30, 2008 and 2007, revenues from time and material contracts constituted 62% and 61% of total revenues, respectively. Revenue from fixed-price, application management, maintenance and support engagements is recognized as earned, which generally results in straight-line revenue recognition as services are performed continuously over the term of the engagement. During the three months ended June 30, 2008 and 2007, revenues from fixed price application management and support engagements constituted 29% and 26% of total revenues, respectively.

Revenue on fixed price development projects is measured using the proportional performance method of accounting. Performance is generally measured based upon the efforts incurred to date in relation to the total estimated efforts required through the completion of the contract. The Company monitors estimates of total contract revenues and cost on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract revenues or costs is reflected in the period in which the change becomes known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss. The Company issues invoices related to fixed price contracts based on either the achievement of milestones during a project or other contractual terms. Differences between the timing of billings and the recognition of revenue based upon the proportional performance method of accounting are recorded as revenue earned in excess of billings or deferred revenue in the accompanying financial statements. During the three months ended June 30, 2008 and 2007, revenues from fixed price development contracts constituted 9% and 13% of total revenues, respectively.

Significant Accounting Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. The Company bases its estimates and judgments on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Revenue Recognition. The use of the proportional performance method of accounting requires that the Company make estimates about its future efforts and costs relative to its fixed price contracts. While the Company has procedures in place to monitor the estimates throughout the performance period, such estimates are subject to change as each contract progresses. The cumulative impact of any such changes is reflected in the period in which the change becomes known.

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Allowance for Doubtful Accounts. The Company records an allowance for doubtful accounts based on a specific review of aged receivables. The provision for the allowance for doubtful accounts is recorded in selling, general and administrative expenses. These estimates are based on our assessment of the probable collection from specific client accounts, the aging of the accounts receivable, analysis of credit data, bad debt write-offs, and other known factors.

Income Taxes—Estimates of Effective Tax Rates and Reserves for Tax Contingencies . The Company records provisions for income taxes based on enacted tax laws and rates in the various taxing jurisdictions in which it operates. In determining the tax provisions, the Company has provided for tax contingencies based on FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”) and on the Company’s assessment of future regulatory reviews of filed tax returns. Such reserves, which are recorded in income taxes payable, are based on FIN 48 interpretation and on management’s estimates and accordingly are subject to revision based on additional information. The provision no longer required for any particular tax year, is credited to the current period’s income tax expenses.

Accruals for Legal Expenses and Exposures . The Company estimates the costs associated with known legal exposures and their related legal expenses and accrues reserves for either the probable liability, if that amount can be reasonably estimated, or otherwise the lower end of an estimated range of potential liability.

Undistributed earnings of foreign subsidiaries. The Company intends to use accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and accordingly undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision for U. S. federal and state income tax or applicable dividend distribution tax has been provided thereon.

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FORWARD LOOKING STATEMENTS / RISK FACTORS

Certain information and statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report, including the allowance for doubtful accounts, contingencies and litigation, potential tax liabilities, interest rate or foreign currency risks, and projections regarding our liquidity and capital resources, could be construed as forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements containing words such as “could”, “expects”, “may”, “anticipates”, “believes”, “estimates”, “plans”, and similar expressions. In addition, the Company or persons acting on its behalf may, from time to time, 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. Some of the factors that could cause future results to materially differ from the recent results or those projected in the forward looking statements include the following, which factors are more fully discussed in the Company’s most recently filed Annual Report on Form 10-K and other SEC filings, in each case under the section entitled “Risk Factors”:

The Company does not intend to update the forward looking statements or risk factors to reflect future events or circumstances.

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• Recruitment and Retention of IT Professionals • Government Regulation of Immigration • Client Concentration; Risk of Termination • Exposure to Political and Regulatory Conditions in India • Wage Pressures in India • Ability to Repatriate Earnings • Intense Competition • Ability to Manage Growth • Lack of Attention from Management and Failure to Increase Sales & Marketing for Some Services • Fixed-Price Engagements • Potential Liability to Clients • Dependence on Key Personnel • Limited Intellectual Property Protection • Potential Anti-Outsourcing Legislation • Adverse Economic Conditions • Failure to Successfully Develop and Market New Services • Failure to Anticipate and Respond to Technology Advances • Benchmarking Provisions • Corporate Governance Issues • Loss in Investor Confidence Due to Adverse Assessment of Internal Controls Over Financial Reporting • Telecom/Infrastructure Issues • New Facilities • Stock Option Accounting • Terrorist Activity, War or Natural Disasters • Instability and Currency Fluctuations • Risks Related to Possible Acquisitions • Variability of Quarterly Operating Results

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RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007; however during December 2007, the FASB issued proposed FASB staff position “FSP” FAS 157-b which would delay the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This proposed FSP partially defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. Effective January 2008, the Company has adopted SFAS No. 157, except as it applies to those non-financial assets and non-financial liabilities as noted in FSP FAS 157-2 issued by FASB in February 2008. The partial adoption of SFAS 157 does not presently have any impact on the Company’s financial position, results of operations and liquidity and its related disclosures, since the Company has not opted to elect the fair value option for any of its financial instruments or any other eligible item.

In February 2007, the FASB issued SFAS No 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Effective January 2008, the Company has adopted SFAS No. 159. The adoption of SFAS 159 does not presently have any impact on the Company’s financial position, results of operations and liquidity and its related disclosures, since the Company has not opted to elect the fair value option for any of its financial instruments or any other eligible item.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, which improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. The new standard requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141 (R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact, if any, SFAS No. 141 (R) will have on the Company’s financial position, results of operations and liquidity and its related disclosures.

In December 2007, the FASB issued SFAS No. 160, “Non controlling Interests in Consolidated Financial Statements” which improves the relevance, comparability, and transparency of financial information provided in consolidated financials statements by establishing accounting and reporting standards for the non controlling (minority) interests in subsidiaries and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact, if any, SFAS No. 160 will have on the Company’s financial position, results of operations and liquidity and its related disclosures.

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In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133.” SFAS No. 161 enhances the required disclosures regarding derivatives and hedging activities, including disclosures regarding how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. Management is currently evaluating the requirements of SFAS No. 161 and has not yet determined the impact, if any, on the Company’s consolidated financial statements.

In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP ETIF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Management is currently evaluating the requirements of FSP EITF 03-6-1 and has not yet determined the impact on the Company’s consolidated financial statements.

The Company is exposed to the impact of interest rate changes and foreign currency fluctuations.

Interest Rate Risk

The Company considers investments purchased with an original maturity of less than three months at date of purchase to be cash equivalents. The following table summarizes the Company’s cash and cash equivalents and short term investments:

The Company’s exposure to market rate risk for changes in interest rates relates primarily to its investment portfolio. The Company does not use derivative financial instruments in its investment portfolio. The Company’s investments are in high-quality Indian Mutual Funds and, by policy, limit the amount of credit exposure to any one issuer. At any time, changes in interest rates could have a material impact on interest earnings for our investment portfolio. The Company strives to protect and preserve our invested funds by limiting default, market and reinvestment risk. Investments in interest earning instruments carry a degree of interest rate risk. Floating rate securities may produce less income than expected if there is a decline in interest rates. Due in part to these factors, the Company’s future investment income may fall short of expectations, or the Company may suffer a loss in principal if the Company is forced to sell securities, which have declined in market value due to changes in interest rates as stated above.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES AB OUT MARKET RISK.

June 30,

2008

December 31,

2007 (in thousands) ASSETS

Cash and cash equivalents $ 60,477 $ 61,555 Short term investments 55,520 54,643

Total $ 115,997 $ 116,198

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Foreign Currency Risk

The Company’s sales are primarily sourced in the United States and its subsidiary in the United Kingdom and are mostly denominated in U.S. dollars or UK pounds, respectively. Its foreign subsidiaries incur most of their expenses in the local currency. Accordingly, all foreign subsidiaries use the local currency as their functional currency. The Company’s business is subject to risks typical of an international business, including, but not limited to differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, the Company’s future results could be materially adversely impacted by changes in these or other factors. The risk is partially mitigated as the Company has sufficient resources in the respective local currencies to meet immediate requirements. The Company is also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into U.S. dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations.

During the three months ended June 30, 2008, the Indian rupee has depreciated against the U.S. dollar by 5.8% as compared to the three months ended March 31, 2008. This rupee depreciation positively impacted the Company’s gross margin by 162 basis points, operating income by 237 basis points and net income by 248 basis points, each as a percentage of revenue. The Indian rupee denominated cost of revenues and selling, general and administrative expense was 51% and 72% of the expenses, respectively.

Although the Company cannot predict future movement in interest rates or fluctuations in foreign currency rates, the Company does not currently anticipate that interest rate risk or foreign currency risk will have a significant impact. In order to limit the exposure to interest rate fluctuations, the Company entered into foreign exchange forward contracts where the counter party is a bank during the three months ended June 30, 2008, but these contracts do not have a material impact on the financial statements. The Company considers the risks of non-performance by the counter party as not material. Aggregate contracted principal amounts of contracts outstanding amounted to $49.0 million as of June 30, 2008. The outstanding foreign exchange forward contracts as of June 30, 2008 mature between one to four months. The fair value of the foreign exchange forward contracts of $3.1 million is reflected in other current liabilities in the balance sheet of the Company as at June 30, 2008. Net Gains/(losses) on foreign exchange forward and options contracts are included under the heading ‘Other Income (Expense)’ in the statement of income and amounted to $(2.5) million for the three months ended June 30, 2008.

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Evaluation of disclosure controls and procedures . Based on their evaluation of the Company’s disclosure controls and procedures as of June 30, 2008 as well as mirror certifications from senior management, the Company’s Chairman & Chief Executive Officer and its Chief Financial Officer & Chief Information Security Officer have concluded that the Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and are operating in an effective manner. There have been no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the last quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure Controls and Internal Controls. Disclosure Controls are procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (the SEC) rules and forms. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Internal Controls are procedures designed to provide reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls. The Company’s management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures.

Scope of the Controls Evaluation. In the course of the Controls Evaluation, we sought to identify data errors, control problems or acts of fraud and confirm that appropriate corrective actions, including process improvements, were being undertaken. Our Internal Controls are also evaluated on an ongoing basis by our Internal Audit Department and by other personnel in our organization. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls, and to modify them as necessary; our intent is to maintain the Disclosure Controls and the Internal Controls as dynamic systems that change as conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were any ‘significant deficiencies’ or ‘material weaknesses’ in the Company’s Internal Controls, and whether the company had identified any acts of fraud involving personnel with a significant role in the Company’s Internal Controls. This information was important both for the Controls Evaluation generally, and because the Rule 13a-14 Certifications of the CEO and CFO require that the CEO and CFO disclose that information to our Board’s Audit Committee and our independent auditors. We also sought to deal with other controls matters in the Controls Evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accordance with our ongoing procedures.

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ITEM 4. CONTROLS AND PROCEDURES

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Conclusions. Based upon the Controls Evaluation, our CEO and CFO have concluded that as of June 30, 2008 our disclosure controls and procedures are effective to ensure that material information relating to Syntel and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles in the United States of America.

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PART II

OTHER INFORMATION

While the Company is a party to ordinary routine litigation incidental to its business, the Company is not a party to any material pending legal proceedings.

There have been no material changes in the Company’s risk factors as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2007, other than as set forth below:

The Company’s business could be materially adversely affected if one of the Company’s significant clients terminates its engagement of us or if there is a downturn in one of the industries the Company serves.

The Company has in the past derived, and believes will continue to derive, a significant portion of its revenues from a limited number of large, corporate clients. The Company’s ten largest clients generated approximately 73%, 70%, and 65% of the Company’s total revenues for the years ended December 31, 2007, 2006 and 2005, respectively. The Company’s largest client for the years ended December 31, 2007, 2006 and 2005, was American Express, which generated approximately 19%, 18% and 16% of the Company’s total revenues for the years ended December 31, 2007, 2006 and 2005, respectively. The Company’s second largest client is State Street Bank which generated approximately 17%, 10% and 6% of the Company’s total revenues for the years ended December 31, 2007, 2006 and 2005, respectively, for both KPO and IT services. The Company expects to continue to derive a significant portion of the Company’s revenues from American Express and State Street Bank. Failure to meet a client’s expectations could result in cancellation or non-renewal of the Company’s engagement and could damage the Company’s reputation and adversely affect its ability to attract new business. Many of the Company’s contracts, including all of the Company’s contracts with its ten largest clients, are terminable by the client with limited notice to the company and without compensation beyond payment for the professional services rendered through the date of termination. An unanticipated termination of a significant engagement, including in connection with the acquisition of a significant client, 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 client or engagement could have a material adverse effect on the Company’s business, results of operations and financial condition.

In addition, the Company’s KPO services to State Street Bank and two other clients are provided through a joint venture between the Company and an affiliate of State Street Bank. Sales of KPO services only to these three clients represented approximately 16% of the Company’s total revenues for the first half of 2008, and approximately 14% and 7% of the Company’s total revenues for the years ended December 31, 2007 and 2006, respectively. A wholly owned subsidiary of the joint venture employs most of the KPO professionals and owns most of the assets that are used for KPO operations for these three clients. Commencing in February 2010, the State Street Bank affiliate has the right to purchase the Company’s interest in the joint venture at an agreed upon formula price. The exercise of this purchase right would have the effect of terminating the Company’s KPO services to these three clients and transferring the related KPO professionals and assets to the State Street Bank affiliate. The loss of this KPO services arrangement and the related KPO professionals could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company also has derived, and expects to continue to derive, a significant portion of its revenues from clients in certain industries, including the financial services, insurance and healthcare industries. Clients in the financial services industry generated approximately 48%, 43% and 40% of the Company’s revenues for the years ended December 31, 2007, 2006 and 2005, respectively. A downturn in the financial services industry or other industries from which the Company derive significant revenues could result in less revenue from current and potential clients in such industry and could have a material adverse effect on the Company’s business, results of operations and financial condition.

32

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

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There are risks associated with the Company’s investment in new facilities and physical infrastructure.

The Company’s business model includes developing and operating Global Development Centers in order to support the Company’s Global Delivery Service. The Company has Global Development Centers located in Mumbai, Pune and Chennai, India. The Company is in the process of expanding its Global Development Center in Pune and in creating a new Global Development Center in Chennai both on land located in Special Economic Zones (SEZ). With regard to the construction on land located in a SEZ, there are certain construction and other requirements that must be met in order to maximize certain tax and other benefits. If those conditions are not met, Syntel may not be able to maximize all benefits associated with the SEZ designations. The full completion of the development of these facilities is contingent on many factors including the Company’s funding the continuation of the construction and obtaining appropriate construction and other permits from the Indian government. The Company cannot make any assurances that the construction of these facilities or any future facilities that the Company may develop will occur on a timely basis or that they will be completed. If the Company is unable to complete the construction of these facilities, the Company’s business, results of operation and financial condition will be adversely affected. In addition, the Company is developing these facilities in expectation of increased growth in the Company’s business. If the Company’s business does not grow as expected, the Company may not be able to benefit from its investment in this or other facilities.

None.

None.

The Company held its annual meeting of shareholders on Thursday, June 5, 2008 (the “Meeting”). As of the record date for the Meeting, April 7, 2008, there were 41,431,318 shares of the Company’s common stock outstanding and entitled to vote. There were 37,482,392 shares of the Company’s common stock represented in person or by proxy at the Meeting. The Company’s shareholders elected the six nominees to the Board of Directors named in the Company’s proxy statement, all of whom were elected to serve a one year term until the next annual meeting of shareholders in 2009. The six directors elected at the Meeting constitute all of the members of the Company’s Board of Directors. The Company’s shareholders also ratified the appointment of Crowe Chizek and Company LLC as the Company’s independent registered public accounting firm for fiscal year 2008. The vote of the shareholders follows:

Ratification of Appointment of Independent Auditors:

Number of Shares

33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

Election of Directors Number of Shares FOR WITHHELD

Paritosh K. Choksi 37,445,241 37,151 Bharat Desai 37,361,719 120,673 Paul R. Donovan 37,447,257 35,135 Prashant Ranade 36,521,537 960,855 Vasant Raval 37,447,257 35,135 Neerja Sethi 37,411,948 70,444

FOR AGAINST ABSTAIN BROKER NON-VOTES

37,445,036 36,980 376 -0-

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None.

Exhibits

34

Item 5. Other Information.

Item 6. Exhibits.

Exhibit No. Description 10.1

Shareholders Agreement by and between State Street International Holdings, Syntel Delaware, LLC, and Syntel Solutions (Mauritius) Limited.*

10.2

First Amendment to the Shareholders Agreement by and Among State Street International Holdings, Syntel Delaware, LLC and State Street Syntel (Mauritius) Limited.*

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer. * Portions of this exhibit have been omitted pursuant to Syntel’s request to the Secretary of the Securities and Exchange Commission for

confidential treatment pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements 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.

35

SYNTEL, INC.

Date : August 11, 2008 /s/ Bharat Desai Bharat Desai, Chairman & Chief Executive Officer

Date : August 11, 2008 /s/ Arvind Godbole Arvind Godbole, Chief Financial Officer & Chief Information Security Officer

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EXHIBIT INDEX

36

Exhibit No. Description 10.1

Shareholders Agreement by and between State Street International Holdings, Syntel Delaware, LLC, and Syntel Solutions (Mauritius) Limited.*

10.2

First Amendment to the Shareholders Agreement by and Among State Street International Holdings, Syntel Delaware, LLC and State Street Syntel (Mauritius) Limited.*

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer. * Portions of this exhibit have been omitted pursuant to Syntel’s request to the Secretary of the Securities and Exchange Commission for

confidential treatment pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

EXHIBIT 10.1

E XECUTION V ERSION

STATE STREET INTERNATIONAL HOLDINGS

and

SYNTEL DELAWARE, LLC,

and

SYNTEL SOLUTIONS (MAURITIUS) LIMITED

SHAREHOLDERS AGREEMENT

relating to SYNTEL SOLUTIONS (MAURITIUS) LIMITED

1 February 2005

Page 1 of 28

** Portions of this exhibit have been omitted pursuant to Syntel’s request to the Secretary of the Securities and Exchange Commission for confidential treatment pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

E XECUTION V ERSION

SHAREHOLDERS AGREEMENT

This Shareholders Agreement (this “Agreement” ) is dated as of February 1, 2005 and made by and among:

WHEREAS

IT IS AGREED as follows:

In this Agreement, unless the context otherwise requires, the following words and expressions shall have the following meanings:

“Affiliate” means, in relation to a body corporate, a company or entity that directly or indirectly holds more than 25% of the voting rights of that body corporate and/or a company or entity in which that body corporate holds directly or indirectly more than 25% of the voting rights;

Page 2 of 28

(1) STATE STREET INTERNATIONAL HOLDINGS , a company organized under the authority of Chapter 167F, Section 2(6) of the Massachusetts General Laws and Section 25A of the Federal Reserve Act, as amended with its principal office at 225 Franklin Street, Boston, Massachusetts 02110, USA (“ State Street ” );

(2) SYNTEL DELAWARE, LLC , a company incorporated under the laws of the State of Delaware, and having its registered office at 1209 Orange Street, Wilmington, Delaware 19801, USA ( “Syntel” ); and

(3) SYNTEL SOLUTIONS (MAURITIUS) LIMITED , a company incorporated in Mauritius, and having its registered office at 608 St. James Court, St. Denis Street, Port Louis, Republic of Mauritius (the “Company” ).

A. State Street and Syntel together currently own 100% of the issued and outstanding Shares (as defined herein below) of the Company;

B. The Company owns 100% (except as set forth in the Subscription Agreement, as defined below) of the issued and outstanding equity voting share capital of Syntel Sourcing Private Limited, an Indian company incorporated under the (Indian) Companies Act, 1956, as amended ( “Companies Act” ), with its registered office at B/101-104, Delphi, “B” wing, Hiranandani Business Park, Powai, Mumbai 400 076, India ( “SSI” ); and

C. This is the Shareholders Agreement contemplated in the Subscription Agreement.

1. INTERPRETATION

1.1 Definitions

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“Agreement” has the meaning given to such term in the introduction to this Agreement;

“Auditors” means Ernst and Young or such other auditors as the Company may appoint from time to time;

“Board” means the Board of Directors of the Company from time to time;

“Business” has the meaning set out in Section 2;

“Business Day” means any day on which the New York Stock Exchange is open for ordinary business;

“Call Notice” has the meaning given to such term in Section 11.7;

“Call Offer Period” has the meaning given to such term in Section 11.7;

“Call Offer Price” means the price equivalent to **

“Call Offer to Purchase” has the meaning given to such term in Section 11.7;

“Chairman” means the chairman from time to time of the Board;

“Class A Common Shares” shall mean the shares of Class A Common Shares, without par value, of the Company;

“Class B Common Shares” shall mean the shares of Class B Common Shares, without par value, of the Company;

“Class A Directors” shall mean the directors nominated by the holder of shares of Class A Common Shares, as described in the Constitution;

“Class B Directors” shall mean the directors nominated by the holder of shares of Class B Common Shares, as described in the Constitution;

“Class A Shareholder” shall mean the holder of shares of Class A Common Shares;

“Class B Shareholder” shall mean the holder of shares of Class B Common Shares;

“Companies Act” has the meaning given to such term in the recitals to this Agreement;

“Company” has the meaning given to such term in the introduction to this Agreement;

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“Control” or “control” , with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management, business or policies of such person, whether through the ownership of voting securities, by contract or otherwise, or the power to elect or appoint at least 50% of the directors, managers, partners or other individuals exercising similar authority with respect to such person;

“Constitution” means the constitution of the Company to be adopted by the Company in the form set out in Exhibit A of the Subscription Agreement;

“Contractual Documents” has the meaning given to such term in Section 16.1;

“Damages” means all or any damages, claims, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Encumbrances, losses, reasonable expenses, fees and any Taxes and/or interest, charges, penalties or other amounts imposed with respect to any Tax by any Governmental Authority, including, without limitation, court costs, reasonable attorney’s fees, disbursements and expenses (to the extent permitted by applicable law).

“Deed of Adherence” means a deed of adherence in the form set out in Schedule 1 ;

“Director” means any Class A Director or Class B Director appointed to the Board from time to time;

“Effective Date” means the Closing Date under the Subscription Agreement;

“ Employees ” means all persons employed or retained by the Company and/or SSI, including, without limitation, those employees on long term disability leave or other absence;

“Encumbrance” means any interest or equity of any person (including, without limitation, any right to acquire, option or right of pre-emption) and any charge, mortgage, security interest, pledge, lien (including retention of title claims), assignment, power of sale or hypothecation and any rental, hire purchase, creditor, conditional sale or other agreement for payment on deferred terms or any other third party right, restriction or encumbrance of any nature whatsoever (whether or not perfected) and the term Encumber shall be construed accordingly;

“FTE” means full-time equivalent Employee;

“ Governmental Authority ” means any government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, or any other government authority, agency, department, board, commission or instrumentality of United States of America or any political subdivision thereof, and any court, tribunal or arbitrator(s) of competent jurisdiction, and, any governmental or non-governmental self-regulatory organization, agency or authority;

“Group Company” means the Company and its Subsidiaries from time to time;

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“Material Event” means that State Street has received an opinion of counsel to the effect that pursuant to legal or regulatory requirements, State Street is prohibited from continuing in a joint venture relationship with the Class B Shareholder;

“MSA” means that certain Master Services Agreement between SSI and State Street Bank and Trust Company;

“Notice” has the meaning given to such term in Section 23.1;

“Permitted Transferee” has the meaning given to such term in Section 11.2;

“ Preferred Shares ” means the Preferred Shares, without par value, of the Company, the holders of which shall have no rights other than the right to receive dividends in accordance with the terms set forth in the Company’s Constitution;

“ Put Notice ” has the meaning given to such term in Section 11.6;

“ Put Offer to Sell ” has the meaning given to such term in Section 11.6;

“ Put Offer Period ” has the meaning given to such term in Section 11.6;

“Share” means shares of Class A Common Shares, Class B Common Shares and the Preferred Shares;

“Shareholder” means a holder of Shares;

“Shareholder Support” means any undertaking, covenant, guarantee of, performance bond from, pledge of Shares held by, or any other recourse to, the Shareholders, and provided by the Shareholders to, or in favour of, any third person pursuant to any financing arrangement of the Company or any other Group Company from time to time;

“SSI” has the meaning given to such term in the recitals to this Agreement;

“SSI Board” means the board of directors of SSI from time to time;

“SSI Chairman” means the chairman from time to time of the SSI Board;

“Standard of Conduct” has the meaning given to such term in Section 5;

“State Street” has the meaning given to such term in the introduction to this Agreement;

“Subscription Agreement” means the agreement dated as of February 1, 2005 among State Street, Syntel and the Company for the subscription of 51 shares of Class A Common Shares of the Company;

“Syntel” has the meaning given to such term in the introduction to this Agreement;

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“ Tax ” means all taxes imposed by any Governmental Authority, including, (i) any tax based upon or measured by income, gross receipts, sales use or value added; (ii) any taxes denominated as ad valorem, transfer, franchise, capital shares, payroll, employment excise, occupation, property, windfall profits, environmental, customers, or withholding taxes; and (iii) any interest, penalties, or other amounts imposed with respect to any tax;

“Transfer Value” means the price per Share calculated in accordance with the provisions of Schedule 2 ;

“United States Dollars” , “ USD ” and “US$” means the lawful currency of the United States of America.

In this Agreement unless otherwise specified:

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1.2 Construction of certain references

1.2.1 the index and headings are for ease of reference only and shall not be taken into account in construing this Agreement;

1.2.2 references to this Agreement or any other document shall be construed as references to this Agreement or that other

document as amended, varied, novated, supplemented or replaced from time to time;

1.2.3 references to any recital, Section, clause, paragraph, Schedule or Appendix are to those contained in this Agreement, and

references to a part of a Schedule are to the part of the Schedule in which the reference appears and all Schedules and Appendices to this Agreement are an integral part of this Agreement;

1.2.4 the expression “ this Section ” shall, unless followed by reference to a specific provision, be deemed to refer to the whole

Section (not merely the clause, sub-clause, paragraph or other provision of such Section) in which the expression occurs;

1.2.5 references to a party mean a party to this Agreement including that party’s successors in title and assigns or transferees

permitted in accordance with the terms of this Agreement provided that the relevant property, right or liability has been properly assigned or transferred to such person;

1.2.6 references to a Director shall, where the context allows, include reference to the alternate of such Director;

1.2.7 references to any gender shall include the other gender; and words in the singular include the plural and vice versa;

1.2.8 law includes any legislation, any common or customary law, constitution, decree, judgment, order, ordinance, treaty or other

legislative measure in

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The business of the Company (the “Business” ) shall be to act as an investment holding company and acquire and manage directly or indirectly equity controlling interests in SSI, an Indian incorporated limited company offering back- and middle-office services for institutional investors.

Both parties acknowledge and agree that the relationship between State Street and Syntel is not exclusive, and each party may enter into joint ventures with other third parties for similar services anywhere in the world, subject to any restrictions set forth in this Agreement and the MSA. Both parties agree to provide reasonable cooperation, at the requesting party’s expense, in furtherance of the foregoing sentence and in response to requests or requirements by Governmental Authorities.

If, at any time, State Street ceases to own the Class A Common Shares of the Company, the Shareholders and the Company agree to take all such steps as are necessary to change

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any jurisdiction and any present or future directive, notification, circular, request, requirement or guideline (in each case, whether or not having the force of law but, if not having the force of law, compliance with which is in accordance with the general practice of persons to whom the directive, notification, circular, request, requirement or guideline is addressed);

1.2.9 references to legislation include any statute, by-law, regulation, rule, notification, circular, subordinate or delegated

legislation or order; and reference to any legislation is to such legislation or order as amended, modified or consolidated from time to time and to any legislation replacing it or made under it;

1.2.10 reference to a person (or to a word importing a person) shall be construed so as to include:

(a) individual, firm, partnership, trust, joint venture, company, corporation, body corporate, unincorporated body,

association, organization, any government, or state or any agency of a government or state, or any local or municipal authority or other governmental body (whether or not in each case having separate legal personality);

(b) that person’s successors in title and assigns or transferees permitted in accordance with the terms of this Agreement;

and

(c) references to a person’s representatives shall be to its officers, employees, legal or other professional advisers, sub-

contractors, agents, attorneys and other duly authorized representatives;

1.2.11 in writing includes any communication made by letter or fax but does not include e-mail or other forms of electronic

communication.

2. BUSINESS AND NAME OF COMPANY

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the name of the Company and SSI to a name that does not in any manner whatsoever include any tradename or trademark of State Street, or any words similar thereto in any language. Any such name change shall also be made on all letterhead, signs, logos, literature and any other items of the Company and SSI that identify the Company or the Business or SSI or the business of SSI.

This Agreement shall come into force and effect from the Effective Date.

As soon as practicable and in any event within thirty (30) days following the earlier of (i) the Effective Date or (ii) the hiring of an Employee of the respective company, the Shareholders shall cause their respective Directors to cause each of the Company and SSI to take all steps as are necessary to have in place a set of rules (collectively, the “ Standard of Conduct ”) in the form set out in Schedule 3 which will be required to be complied by any and all Employees. Each Employee shall provide an undertaking to the Company pursuant to which the Employee undertakes (i) to perform his duties, responsibilities and functions to the Company to the best of his abilities in a diligent, trustworthy, professional and efficient manner, and (ii) to comply with the Company’s policies and procedures, including, without limitation, the Standard of Conduct.

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3. EFFECTIVE DATE

4. PROVISION OF FINANCE

4.1 Financing the Company

4.1.1 **

4.1.2 **

5. EMPLOYEES

6 THE BOARD AND MANAGEMENT **

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The Board shall consist of ** Directors, ** of whom (including one Mauritian resident Director) shall be nominated and elected by the Class A Shareholder and considered Class A Directors and ** of whom (including one Mauritian resident Director) shall be nominated and elected by the Class B Shareholder and considered Class B Directors. Once nominated, the Shareholders agree to take all action necessary or desirable so as to cause the number of directors and the members of the Board to be as set forth herein and in the constituent documents of the Company. Any person nominated as a Director by a Shareholder shall be appointed and may be removed from such office only by the relevant nominating Shareholder, by a memorandum signed in writing by such Shareholder, which shall take effect from the date stated in such memorandum or, if no such date shall be stated, from the date when such memorandum is lodged at the registered office of the Company. For the avoidance of doubt, a Director shall be removed from office without notice if he is guilty of any gross default or misconduct in connection with or affecting the Business, or is guilty of fraud, dishonesty or any criminal offence (save for minor road traffic offences).

Subject to Section 6.2, any Director appointed to the Board shall be entitled to nominate an alternate to attend and vote at Board meetings in his absence. Such alternate shall be approved in writing by the Shareholder who appointed such nominating Director.

**

Board meetings shall be held at the registered office of the Company at intervals of not more than three months. Except as otherwise agreed by all the Directors:

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6.2 Directors

6.3 Alternate Directors

6.4 Chairman and Officers

6.5 Board Meetings

6.5.1 Board meetings shall be convened by any Director or the company secretary by not less than 5 Business Days’ notice, or

where the particular circumstances require a shorter period, such shorter period as the circumstances reasonably require, sent to each Director;

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The quorum for a Board meeting shall be one Class A Director and one Class B Director (who are not also Mauritian resident Directors) present in person or by their alternates and one Mauritian resident Director. If within 30 minutes . of the time appointed for a Board meeting there is no quorum, the Director(s) present shall adjourn the meeting to the same place and time on the third Business Day following the adjourned meeting provided that at such adjourned meeting the requirement that such Directors shall be present shall not apply and any two Directors (including at least one Mauritian resident Director) present may conduct the business of the meeting.

Subject to the Constitution and Schedule 4 , the Board may function through one or more committees.

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6.5.2 notice shall be sent to each Director to the address, fax number and/or e-mail address notified to the Company for these

purposes, provided if notice is sent by fax or e-mail a copy of such notice shall also be sent by post;

6.5.3 each notice of a Board meeting shall be accompanied by a full agenda and all supporting papers;

6.5.4 each Board meeting shall deal with the business set out in the agenda which accompanied the notice convening that Board

meeting and, in the event any other business is raised at such meeting, it shall only be considered to the extent it is so approved by at least one Class A Director and one Class B Director (who are not also Mauritian resident Directors);

6.5.5 minutes of each meeting of the Board shall be taken and kept by the company secretary in the books of the Company. Copies of the minutes of each such meeting shall be delivered to each member of the Board as soon as practicable. If a member has not been present at the meeting, copies of all papers considered by the Board at the meeting shall be sent to him with the minutes;

6.5.6 any Director may participate in a Board meeting by means of a telephone or video conference, and the Chairman may

appoint a Mauritian Director to chair any such meeting; and

6.5.7 notwithstanding any other provisions of this Section 6, a resolution in writing signed by all Directors (which resolution may

consist of several counterparts) shall be as valid and effective as if it had been adopted by a duly convened meeting of the Board.

6.6 Quorum

6.7 Board Committees

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Unless agreed to otherwise, if there is a reduction in the percentage of Shares held by a Shareholder at any time which affects a Shareholder’s right to appoint a Director pursuant to Section 6.2 the relevant Shareholder shall procure the resignation of the relevant number of Directors (which shall not include a Mauritian resident Director) appointed by it and shall procure that such directors resign without cost to the Company and such Shareholder shall indemnify the Company and the other Shareholder(s) from and against all claims, demands and rights which any such director may have against the Company in respect of dismissal, redundancy or otherwise.

A Director may from time to time disclose to the Shareholder who appointed him and its representatives such information as he has regarding the Business as shall reasonably be requested by the Shareholder appointing him.

The Company shall reimburse each Director for all reasonable travel, hotel and other expenses incurred by that Director in attending Board and committee meetings or otherwise in working for the Company.

The Class A Directors shall be entitled to recommend the Auditors to be appointed for the Company and SSI from time to time, and the other Shareholders agree that they will use their best efforts to cause the Directors nominated by them to vote in favor of the Auditors so recommended so long as such Auditors have expertise in international tax and accounting matters.

The Board will adopt a policy to establish the Company’s policy with respect to the allocation of profits and losses of the Company. **

Each Shareholder shall be entitled to have notice of any Shareholders’ meeting of the Company given to it at its address set out in Section 23.1 . Notices shall

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6.8 Shareholders to Procure Director’s Resignation

6.9 Directors may pass information to their Appointer

6.10 Directors’ Expenses

6.11 Auditors

6.12 Allocation of Profits and Losses

7 SHAREHOLDER MEETINGS

7.1 Notice of Shareholder Meetings

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be sent by mail and to such fax number or e-mail address (if any) as the Shareholder shall have provided to the company secretary.

The quorum for a Shareholders’ meeting of the Company shall be an authorized representative or authorized representatives together representing Shareholders holding more than 51% of the Company’s issued share capital from time to time. If within 30 minutes of the time appointed for a Shareholders’ meeting of the Company there is no quorum, the chairman of the meeting shall adjourn the meeting to a place and time not less than three Business Days later provided that at such adjourned meeting the quorum shall be an authorized representative or authorized representatives together representing a Shareholder or Shareholders holding not less than 52% of the Company’s issued share capital from time to time.

The chairman of any Shareholders’ meeting of the Company shall be the Chairman of the Board and shall not be entitled to a second or casting vote. In the event the Chairman is absent from any Shareholders meeting, the Shareholders present may appoint the chairman of the meeting.

Notwithstanding any other provisions of this Section 7, a resolution in writing signed by all Shareholders (which resolution may consist of several counterparts) shall be as valid and effective as if it had been passed at a duly convened Shareholders’ meeting.

State Street shall, subject to the further provisions of this Section 8, indemnify, defend and hold Syntel, its Affiliates and its respective directors, officers, representatives, employees and agents, and Syntel’s successors and permitted assigns harmless from and against any and all Damages incurred by any of them as a result of, arising from, or in connection with, or relating to (a) any breach of the representations and warranties made by State Street in this Agreement; or (b) the non-performance (in whole or in part) by State Street of any of its covenants, obligations or agreements contained in this Agreement, except for non-performance resulting from a breach of this Agreement by the Company or Syntel.

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7.2 Quorum for Shareholder Meetings

7.3 Chairman of Shareholder Meetings

7.4 Resolution in Writing

8. INDEMNIFICATION

8.1 Indemnification by State Street

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Syntel shall, subject to the further provisions of this Section 8, indemnify, defend and hold State Street, its Affiliates and their respective directors, officers, representatives, employees and agents, and State Street’s successors and permitted assigns (including, without limitation, the Company), harmless from and against any and all Damages incurred by any of them as a result of, arising from, or in connection with, or relating to (a) any breach of the representations and warranties made by the Company or Syntel in this Agreement; or (b) the non-performance (in whole or in part) by the Company or Syntel of any of its covenants, obligations or agreements contained in this Agreement, except for non-performance resulting from a breach of this Agreement by State Street.

**

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8.2 Indemnification by Syntel.

8.3 Notice of Claim; Right to Participate in and Defend Third Party Claim; Non -Third Party Claims

(a) Notice of Claim . If any indemnified party receives notice of any Action in respect of which indemnification may be sought under this Agreement (a “Third Party Claim”), and the indemnified party intends to seek indemnification under this Agreement, then the indemnified party (the “Beneficiary”) promptly shall provide the indemnifying party with written notice of the Third Party Claim and the relevant facts and circumstances to the extent known; provided, however, that if such claim is under Section 8.1 or 8.2, notice of the Third Party Claim must be delivered prior to the expiration of the pertinent representation or warranty as described in Section 8.4 of this Agreement. The failure by the Beneficiary to notify an indemnifying party of a Third Party Claim shall not relieve the indemnifying party of any indemnification responsibility under this Section 8.3, unless such failure materially prejudices the ability of the indemnifying Party to defend such Third Party Claim. The indemnifying party shall have the right, at its option and expense, to participate in the defense of such Third Party Claim, but not to control the defense,

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All the representations and warranties contained in this Agreement shall survive until the second year anniversary of the Closing Date.

Neither party shall have any liability or obligation to the other party with respect to any claim arising out of this Agreement until the total of all Damages with respect to such matters exceed ** (the “Threshold”), and thereafter, liability shall be only for those Damages in excess of the Threshold. The

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negotiation or settlement thereof, (which control shall at all times rest with the Beneficiary) unless (i) such Third Party Claim involves only money damages and not an injunction or other equitable relief, or (ii) if the indemnifying party has a defense or counterclaim in relation to such Third Party Claim which the Beneficiary is not entitled to assert (to the extent necessary to assert and maintain such defense or counterclaim), and the indemnifying Party furnishes satisfactory evidence of its financial ability to indemnify the Beneficiary, in which case the indemnifying party may assume such control through counsel of its choice (which counsel shall be satisfactory to the Beneficiary) at its own expense; provided that the Beneficiary shall continue to have the right to be represented, at its own expense, by counsel of its choice in connection with the defense, negotiation or settlement of such Third Party Claim. If the indemnifying Party does not assume control of the defense of such Third Party Claim, the entire defense, negotiation or settlement of such Third Party Claim by the Beneficiary shall be deemed to have been consented to by, and shall be binding upon, the indemnifying party as fully as though the indemnifying party alone had assumed the defense thereof and a judgment had been entered in such Third Party Claim in respect of such settlement or judgment. If the indemnifying party does assume control of the defense of such Third Party Claim, it shall not, without the prior written consent of the Beneficiary, settle such Third Party Claim or consent to entry of any judgment relating thereto which does not include as an unconditional term the giving by the claimant to the Beneficiary a release from all liability in respect of such Third Party Claim. The parties to this Agreement agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Third Party Claim.

(b) Non-Third Party Claims . Any indemnifiable claim under this Agreement that is not a Third Party Claim must, in order to be valid and effective hereunder, be asserted by the indemnified party by prompt delivery of written notice thereof to the indemnifying party, provided that if such claim is under Section 8.1 or 8.2, it must be delivered prior to the expiration of the pertinent representation or warranty as described in Section 8.4 of this Agreement.

8.4 Survival of Representations and Warranties

8.5 Limitation on Liability

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determination of the amount of any Damages arising out of the breach of more than one representation, warranty, covenant or agreement shall be determined without duplication or double counting of the same Damages. Any amounts payable by either party pursuant to this Section 8 shall be reduced by any related insurance recoveries net of cost incurred for such recovery. Each of the indemnifying party and the indemnified party shall take action to mitigate any Damages as a result of, arising from, or in connection with, or relating to (i) any matter inconsistent with, or any breach of, the representations and warranties contained in this Agreement and (ii) the non-performance (in whole or in part) of any covenants or agreements contained in this Agreement, including, without limitation, if required by Applicable Law, causing the Company to take such action with respect to mitigation of Damages. Notwithstanding anything herein to the contrary, Damages shall not include special, indirect, consequential or punitive damages.

The right to indemnification, payment of Damages or other remedy based on the representations, warranties, covenants, obligations and agreements contained in this Agreement shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the Closing Date, with respect to the accuracy or inaccuracy of or compliance or non-compliance with, any such representation, warranty, covenant, obligation or agreement.

The Company shall provide to each Shareholder and the Directors and, where requested, to their representatives copies of all financial statements, business plans, audit reports and other information which the Company shall receive from SSI and, without prejudice to the foregoing, the Company shall keep the Shareholders fully and promptly informed of all material developments regarding the financial and business affairs and all significant events (including any material litigation or arbitration) which will or may materially and adversely affect any party.

The Company agrees, so far as it lawfully may, and the Shareholders agree to procure, so far as is within their powers as Shareholders or under this Agreement, that the matters listed in Schedule 4 shall require and shall only be implemented if the Company shall have received the prior written consent of all Shareholders (provided that if such prior written consent is not refused within 5

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8.6 Right to Indemnification Not Affected by Knowledge

9. INFORMATION

9.1 Information

10. VETO MATTERS

10.1 List of Veto Matters

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Business Days of it being requested by the Company it shall be deemed to have been given).

No Shareholder shall assign, transfer, exchange, Encumber or otherwise dispose of any of the Shares held by it or any interest in them except in accordance with the provisions of this Section 11.

Notwithstanding the provisions of Section 11.1, a Shareholder may transfer all or part of its Shares to any of its Affiliates (a “Permitted Transferee ” ) subject to the transferring Shareholder guaranteeing, to the satisfaction of the remaining Shareholders, all of the Permitted Transferee’s obligations under this Agreement and Shareholder Support obligations and subject to the Permitted Transferee agreeing immediately to transfer all of its Shares to the transferor Shareholder or to another Permitted Transferee of the transferor Shareholder immediately upon the Permitted Transferee ceasing to be an Affiliate of the transferor Shareholder.

It shall be a condition of any allotment or transfer of Shares to any person (including a Permitted Transferee not being an existing shareholder of the Company) that the allottee or transferee shall enter into a deed substantially in the form of Schedule 1 agreeing to become party to and to be bound by the terms of this Agreement and thereafter any reference to a party or Shareholder herein shall be deemed to include a reference to such transferee as if named herein as a party.

In order to verify that a transfer of Shares is to a Permitted Transferee, a Permitted Transferee shall give the Company such information and evidence as the Board may require and the Board shall refuse to register a relevant transfer until the information is provided in a form reasonably satisfactory to the Board.

Each of the parties expressly understands and agrees to give effect to each transfer made in accordance with this Section 11 and agrees to cause the Board to register each such transfer pursuant to the terms of this Agreement.

During the term of this Agreement, State Street shall have the right to give one or more notices (each, a “Put Notice” ) at any time to Syntel, containing an offer by

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11. TRANSFER OF SHARES

11.1 Restrictions on Transfer

11.2 Permitted Transfers

11.3 Transfers Conditional on Transferee’s Agreement

11.4 Directors’ Right to Verify Transfers

11.5 General Consent under the Constitution

11.6 Syntel’s Option to Buy State Street Shares

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State Street, to sell all or any of the Shares of the Company owned by State Street at that time (the “Put Offer to Sell” ) at the Transfer Value of such Shares. Within 15 Business Days of any Put Notice being given (the “Put Offer Period” ), Syntel shall have the option to accept the Put Offer to Sell by giving notice of such acceptance to State Street. If Syntel elects to exercise its right to accept the Put Offer to Sell, Syntel shall purchase, and State Street shall sell, the number of Shares of the Company owned by State Street as specified in the Put Notice at the Transfer Value of such Shares and the transaction of purchase and sale shall be completed within 30 Business Days of the expiry of the Put Offer Period, subject to receipt of requisite governmental or regulatory approvals.

Notwithstanding Section 11.1 of this Agreement, State Street shall, effective from the date following the 5th (Fifth) anniversary of the execution of this Agreement and at any time (and from time to time) thereafter, have the right to give notice (such notice being referred to in this section as the “Call Notice” ) to Syntel, containing an offer by State Street to purchase all, but not less than all, of the Shares of the Company owned by Syntel at that time (the “Call Offer to Purchase” ) at the Call Offer Price. Within 15 Business Days of the Call Notice being given (the “Call Offer Period” ), Syntel shall accept the Call Offer to Purchase by giving notice of such acceptance to State Street and Syntel shall sell and State Street shall purchase all the Shares of the Company beneficially owned by Syntel at such time at the Call Offer Price and the transaction of purchase and sale shall be completed within 30 Business Days of the expiry of the Call Offer Period, subject to the receipt of applicable regulatory, governmental or corporate approvals.

If a Material Event outside the reasonable control of State Street occurs at any time after the execution of this Agreement and State Street is required by applicable law or regulatory guidance to promptly terminate the joint venture relationship with the Class B Shareholder, State Street shall have the option to give a Call Notice at any time to Syntel, containing a Call Offer to Purchase the Shares of the Company owned by Syntel at that time at the Transfer Value. Within the Call Offer Period, Syntel shall accept the Call Offer to Purchase by giving notice of such acceptance to State Street and Syntel shall sell and State Street shall purchase all the Shares of the Company beneficially owned by Syntel at such time at the Transfer Value and the transaction of purchase and sale shall be completed within 30 Business Days of the expiry of the Call Offer Period, subject to the receipt of applicable regulatory, governmental or corporate approvals.

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11.7 State Street’s Right to Call

11.8 Material Event

11.9 Dissolution and Liquidation; Redemption

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Syntel represents and warrants to State Street and to the Company as follows:

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(a) The Company shall be liquidated in accordance with Section 11.9(b) at any time upon the unanimous consent of the

Shareholders, which consent shall not be unreasonably withheld.

(b) In the event of any winding-up and liquidation of the Company pursuant to Section 11.9(a), the Shareholders shall take all such action as may be necessary to terminate this Agreement and, subject to the provisions of this Section 11.9, the Company shall be dissolved, wound up and liquidated in accordance with applicable law. In any dissolution, winding-up or liquidation of the Company, any tangible or intangible properties or assets of the Company which may be distributable under applicable law shall, upon such dissolution, winding-up and liquidation of the Company, be divided and distributed among the Shareholders in proportion to their respective share ownership in the Company at the time of such distribution; provided, however, that the rights to all Employees of the Company and physical assets (e.g., equipment) of the Company shall be distributed to the Class B Shareholder. Upon any such dissolution, winding-up and liquidation, the Shareholders shall cause the Auditors engaged by the Company (whose determination shall be final, conclusive and binding on the Shareholders) to prepare and deliver to the Shareholders a final accounting statement as soon as reasonably practicable after all of the activities of the Company have been concluded, all monies payable to the Company have been received and all expenses and obligations of the Company have been paid, satisfied or otherwise provided for, and upon delivery of such accounting statement, this Agreement shall forthwith terminate and be of no further force and effect (except to the extent of any liability or obligation of a Shareholder which accrued prior to any such termination or any provisions herein which are expressly provided to survive any termination hereof). Any costs, fees and other expenses of any kind (including reasonable attorneys’ fees) associated in connection with the dissolution and liquidation of the Company shall be borne by the parties in equal proportion.

(c) The Class A Shareholder may at any time request the Company to redeem, and the Company shall redeem, the Class A

Common Shares held by the Class A Shareholder for an aggregate purchase price of **.

12. REPRESENTATIONS AND WARRANTIES

12.1 Warranties by Syntel

12.1.1 Syntel is a limited liability company organized and validly existing under the laws of the State of Delaware, USA;

E XECUTION V ERSION

State Street represents and warrants to Syntel and to the Company as follows:

The Company shall as soon as practicable after the Company receives notice of any general meeting of shareholders of SSI, convene a Board meeting in accordance with the provisions of Section 6.5.1 and pass to the Shareholders copies of such notice and any circulars or other correspondence from SSI to its shareholders in respect of such general meeting. Subject to the provisions of Schedule 4 , the Board shall resolve how the shares in SSI held directly or indirectly by the Company shall be voted at the relevant general meeting.

Each party agrees that it will, and cause its Affiliates and representatives to, treat in confidence all documents, materials and other information which it shall have obtained

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12.1.2 the signature, execution and performance of this Agreement and all ancillary documents by Syntel have been duly authorized

and are within the corporate power of Syntel, constitute binding obligations on Syntel in accordance with their terms and will not give rise to any breach of any instrument, agreement, law, order, judgment or decree by which Syntel is bound; and

12.1.3 all consents, licences or approvals required by law or regulation in order for Syntel to enter into and perform its obligations

pursuant to this Agreement have been obtained without conditions or limitations which would limit Syntel’s performance of this Agreement.

12.2 Warranties by State Street

12.2.1 State Street is a company organized and validly existing under the authority of the Commonwealth of Massachusetts and the

Board of Governors of the Federal Reserve System of the United States of America;

12.2.2 the signature, execution and performance of this Agreement and all ancillary documents by State Street have been duly authorized and are within the corporate power of State Street, constitute binding obligations on State Street in accordance with their terms and will not give rise to any breach of any instrument, agreement, law, order, judgment or decree by which State Street is bound; and

12.2.3 all consents, licences or approvals required by law or regulation in order for State Street to enter into and perform its

obligations pursuant to this Agreement have been obtained without conditions or limitations which would limit State Street’s performance of this Agreement.

13. SYNTEL SOURCING PRIVATE LIMITED

13.1 General Meetings

14. CONFIDENTIALITY

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regarding the other party, the Company, Syntel Sourcing, and their respective customers during the term of this Agreement. Upon termination of this Agreement, each party will return to the other party all copies of nonpublic documents and materials which have been furnished in connection therewith. The obligation of each party to treat such documents, materials and other information in confidence shall not apply to any information which (i) is or becomes available to such party from a source not under an obligation to maintain the confidentiality of such documents, materials and other information, (ii) is or becomes available to the public other than as a result of disclosure by such party or its agents, or (iii) is required to be disclosed under applicable law or judicial process, but only to the extent it must be disclosed. The parties agree that a breach of the covenants in this Section 14 will cause irreparable harm. Therefore, the parties agree that, in addition to any other remedies available, the injured party shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by a party of the covenants in this Section 14.

Each of the Shareholders agrees it shall exercise its rights hereunder and as a Shareholder in the Company in such manner as could reasonably be expected to prevent, and shall not exercise those rights in any manner which could reasonably be expected to result in, a breach by the Company of any of its obligations under this Agreement or any restrictions imposed upon it under its Constitution (whether or not enforceable against the Company itself).

Nothing in this Agreement, and no action taken under this Agreement, shall create a partnership or establish a relationship of principal and agent between any of the parties or (save as otherwise stated herein) otherwise authorize any party to bind any other party for any purpose.

This Agreement together with any other documents in the agreed form referred to in this Agreement (together the “Contractual Documents” ) contains the whole agreement between the parties relating to the subject matter of this Agreement at the date of this Agreement to the exclusion of any terms implied by law which may be excluded by contract and except to the extent repeated in this Agreement or any Contractual Document, supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in this Agreement.

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15. RELATIONSHIP BETWEEN SHAREHOLDERS AND THE COMPANY

15.1 Shareholders’ Procurement Obligation

15.2 No Partnership

16. ENTIRE AGREEMENT AND SEVERANCE

16.1 Entire Agreement

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Each party acknowledges that:

The parties intend that the provisions of this Agreement shall prevail over the Constitution in the event of conflict and, accordingly, the Shareholders shall, if necessary, exercise all voting and other rights and powers available to them as Shareholders or under this Agreement, and shall cause their nominees on the Board, to procure any amendment to the Constitution and the Memorandum of Association and the Articles of Association of SSI required to give effect to the provisions of this Agreement.

If at any time any provision in this Agreement is or becomes illegal, invalid or unenforceable, in whole or in part, under any enactment or rule of law, such provision or part shall to that extent be deemed not to form part of this Agreement but the legality, validity or enforceability of the remainder of this Agreement shall not be affected. The parties shall negotiate in good faith to replace such illegal, invalid or unenforceable provision with a valid provision which, as far as possible, has the same legal and commercial effect as that which it replaces.

This Agreement may not be changed, altered or waived unless in writing and signed by or on behalf of each of the parties to this Agreement.

Except as results from a transfer of Shares as permitted under this Agreement, no party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other parties to this Agreement.

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16.2 Acknowledgment by Parties

16.2.1 in entering into this Agreement, it does not rely on, and shall have no remedy in respect of, any representation (whether

negligent or otherwise), warranty or undertaking made to it by any person (whether a party to this Agreement or not) which is not expressly set out or referred to in this Agreement; and

16.2.2 it has received independent legal advice relating to all the matters provided for in this Agreement, including the provisions of

this Section, and agrees, having considered the terms of this Section 16.2 and the Agreement as a whole, that the provisions of this Section are fair and reasonable.

16.3 Conflict with the Constitution

16.4 Invalidity

17. AMENDMENTS

18. NO ASSIGNMENT

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No default by any party in the performance of or compliance with any provision of this Agreement shall be waived or discharged except with the express written consent of all other parties.

No waiver by any party of any default by another party in the performance of or compliance with any of the provisions of this Agreement shall operate or be construed as a waiver of any other or further default whether of a like or different character.

No failure to exercise, nor delay or omission by any party in exercising, any right, power or remedy conferred on it under this Agreement or provided by law shall:

No single or partial exercise by any party of any right, power or remedy shall prevent any further exercise of that right, power or remedy or the exercise of any other right, power or remedy.

The rights, powers and remedies conferred on the parties by this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law or otherwise.

The parties do not intend that any term of this Agreement shall be enforceable by any person who is not a party to this Agreement and accordingly no person who is not a party to this Agreement shall be deemed a beneficiary of or shall have any rights or entitlements under this Agreement. The parties may rescind, vary, waive, release, assign, novate or otherwise dispose of all or any of their respective rights or obligations under this Agreement without the consent of any person who is not a party to this Agreement.

Each party shall bear the legal costs and expenses incurred by it in connection with the preparation, negotiation and implementation of this Agreement.

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19. REMEDIES AND WAIVERS

19.1 No Waiver or Discharge

19.2 Saving for Future Waivers

19.3 Failure to Exercise etc. not a Waiver

19.3.1 affect that right, power or remedy; or

19.3.2 operate as a waiver of it.

19.4 Rights and Remedies Cumulative

20. THIRD PARTY RIGHTS

21. COSTS

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The rights and obligations of each Shareholder shall continue and be enforceable by or against it only while it is a Shareholder of the Company save for:

Any notice, claim or demand in connection with this Agreement shall be in writing in English (a “Notice” ) and shall be sufficiently given or served if delivered or sent in accordance with Section 11.6 of the Subscription Agreement.

This Agreement shall be governed by, and construed in accordance, with the laws of the State of Delaware without regard to conflicts of law principles, and the Parties agree to submit to jurisdiction of any court of law sitting in the State of Delaware.

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Delivery of counterparts may be by facsimile transmission. Any party may enter into this Agreement by signing any such counterpart but the Agreement shall not be effective until each party has executed at least one counterpart.

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22. DURATION

(a) rights and obligations in respect of Sections 8, 22, 23 and 24 which shall continue to have effect notwithstanding a party ceasing to

be a Shareholder or termination of this Agreement; and

(b) rights and obligations in respect of antecedent breaches of this Agreement or the Constitution.

23. NOTICES

23.1 Service

24. GOVERNING LAW

25. COUNTERPARTS

E XECUTION V ERSION IN WITNESS WHEREOF, this Agreement has been duly executed under seal on the date first above written.

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STATE STREET INTERNATIONAL HOLDINGS

By: ** Name: ** Title: **

SYNTEL DELAWARE, LLC

By: Name: Title:

SYNTEL SOLUTIONS (MAURITIUS) LIMITED

By: Name: Title:

E XECUTION V ERSION

SCHEDULE 1

**

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E XECUTION V ERSION

SCHEDULE 2

Transfer Value

The aggregate Transfer Value for all of the Class A Common Shares held by State Street shall be **.

The aggregate Transfer Value for all of the Class B Common Shares and Preferred Shares held by Syntel shall be the price equivalent to **

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E XECUTION V ERSION

SCHEDULE 3

Standard of Conduct

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E XECUTION V ERSION

SCHEDULE 4

Veto Matters

The following decisions, actions and resolutions of the Board shall require the vote of all of the Directors:

(a) any sale by the Company of all or substantially all of its assets or stock, or any reorganization, consolidation or merger (or similar transaction or series of transactions) of the Company with another entity;

(b) any acquisition of all or substantially all of the assets or stock of another entity;

(c) any liquidation, dissolution or winding up of the Company;

(d) the authorization or creation of any equity security of the Company;

(e) repurchase or redemption of any equity security of the Company;

(f) any amendment to the Memorandum of Association or these Articles;

(g) any increase or decrease in the number of directors that shall constitute the Board;

(h) any material change in the nature of the business of the Company;

(i) any change in the name of the Company or any assumed name of the Company;

(j) any incurrence of indebtedness in excess of **;

(k) any capital expenditures in any calendar year in excess of **;

(l) any material change in the manner that the Company maintains its books and records of account;

(m) any change in the make-up or powers of the Operating Committee

(n) the creation of any committee of the Board; or

(o) the declaration or payment of any dividend or distribution.

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EXHIBIT 10.2

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FIRST AMENDMENT TO THE SHAREHOLDERS AGREEMENT

This First Amendment to the Shareholders Agreement (this “ Amendment ” ) is made on this 30th day of August, 2006, by and among

WHEREAS

NOW THEREFORE , in consideration of this and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

“ Call Offer Price ” means the price equivalent to **

“ Constitution ” means the Constitution of the Company as amended from time to time;”

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** Portions of this exhibit have been omitted pursuant to Syntel’s request to the Secretary of the Securities and Exchange Commission for confidential treatment pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

(1) STATE STREET INTERNATIONAL HOLDINGS , a company organized under the authority of Chapter 167F, Section 2(6) of the Massachusetts General Laws and Section 25A of the Federal Reserve Act, as amended, with its principal office at 225 Franklin Street, Boston, Massachusetts 02110, USA (“ State Street” );

(2) SYNTEL DELAWARE, LLC, a company incorporated under laws of the State of Delaware, and having its registered office at 1209 Orange Street, Wilmington, Delaware 19801, USA (“ Syntel ” ); and

(3) STATE STREET SYNTEL SERVICES (MAURITIUS) LIMITED, f ormerly known as Syntel Solutions (Mauritius) Limited, a company incorporated in Mauritius, and having its registered office at 2nd Floor, Fairfax House, No. 21 Mgr. Gonin Street, Street, Port Louis, Republic of Mauritius (the “ Company ” ).

A. The parties hereto are parties to a Shareholders Agreement dated as of February 1, 2005 (the “ Shareholders Agreement” ).

B. The parties hereto have agreed to amend the Shareholders Agreement upon the terms and subject to the conditions specified herein.

1. AMENDMENTS

A. On and from the date of execution of this Amendment, the following terms set forth in Section 1.1 of the Shareholders

Agreement shall be amended to read and shall stand in their entirety as follows:

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“ Fiscal Year End ” means the year beginning on January 1 of each year and terminating on December 31 of the immediately succeeding year;”

“ MSA ” means that certain Master Services Agreement by and among SSI, State Street and Syntel, Inc., a Michigan Corporation with its principal office located at 525 E. Big Beaver, 3 rd Floor, Troy, Michigan 48083, United States of America;”

“ Related-party contract ” means a contract between a company or any of its subsidiaries or affiliates of any of them, and a director, officer or shareholder of the Company or any of its subsidiaries, or affiliates of any of them; or any arrangements pursuant to which a company, or any of its subsidiaries, or affiliates of any of them, and a director, officer or shareholder of the Company or any of its subsidiaries or affiliates of any of them each invests in, or provides finance to another undertaking or asset;”

“ SSI Nominee Shareholders ” has the meaning given to such term in Section 13.2.2 of this Amendment;”

“ Subscription Agreement ” means the agreement dated as of February 1, 2005 by and among State Street, Syntel and the Company as the same may be amended from time to time;”

Any and all terms not amended pursuant to this Amendment shall be defined in accordance with the Shareholders Agreement.

Each Class A Director and each Class B Director shall be entitled to 1 vote. The Board shall act by majority vote, except in relation to any matter listed out in Schedule 4 in which case no decision or action shall be taken unless the votes cast by all of the Directors approve such matter, and except as may be

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B. On and from the date of execution of this Amendment, Section 4.1 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“4.1 Financing the Company **

C. On and from the date of execution of this Amendment, Section 6.1 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 6.1 Action by the Board

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prohibited by law. Subject to overall supervision by the Board so as to maintain the tax residency status of the Company, the Board may delegate any of its powers to committees consisting of such member or members of its body as it thinks fit.”

The Board shall consist of ** Directors (or such number as a majority of the Board may determine from time to time, provided, however, that the number of Directors shall in no event be less than 3 nor more than 11 ** of whom (including one Mauritian resident Director) shall be nominated and elected by the Class A Shareholder and considered Class A Directors and ** of whom (including one Mauritian resident Director) shall be nominated and elected by the Class B Shareholder and considered Class B Directors. Once nominated, the Shareholders agree to take all action necessary or desirable so as to cause the number of directors and the members of the Board to be as set forth herein and in the constituent documents of the Company. Any person nominated as a Director by a Shareholder shall be appointed and may be removed from such office only by the relevant nominating Shareholder, by a memorandum signed in writing by such Shareholder, which shall take effect from the date stated in such memorandum or, if no such date shall be stated, from the date when such memorandum is lodged at the registered office of the Company. For the avoidance of doubt, a Director shall be removed from office without notice if he is guilty of any gross default or misconduct in connection with or affecting the Business, or is guilty of fraud, dishonesty or any criminal offence (save for minor road traffic offences).”

Board meetings shall be held at the registered office of the Company and the Board shall meet at least once in every calendar quarter, or as otherwise prescribed by law, and any gap between each meeting shall not exceed 5 (five) calendar months. Except as otherwise agreed by all the Directors:

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D. On and from the date of execution of this Amendment, Section 6.2 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“6.2 Directors

E. On and from the date of execution of this Amendment, Section 6.5 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 6.5 Board Meetings

6.5.1 Board meetings shall be convened by any Director or the Company Secretary by not less than 5 Business Days’ notice,

or where the particular circumstances require a shorter period, such shorter period as the circumstances reasonably require, sent to each Director;

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The quorum for a Board meeting shall be one Mauritius resident Class A Director and one Mauritius resident Class B Director or their alternates present in Mauritius in person and one Class A Director and one Class B Director (neither of whom shall be a Mauritius resident Director), present in person or their alternates participating by means of telephone or video conference. If within 30 minutes of the time appointed for a Board meeting there is no quorum, the Director(s) present shall adjourn the meeting to such date, time and place as they may determine, provided that at such adjourned meeting the quorum requirement shall be two Mauritian resident Directors or their

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6.5.2 notice shall be sent to each Director to the address, fax number and/or e-mail address notified to the Company for these

purposes;

6.5.3 each notice of a Board meeting shall be accompanied by a full agenda and all supporting papers;

6.5.4 each Board meeting shall deal with the business set out in the agenda which accompanied the notice convening that Board meeting and, in the event any other business is raised at such meeting, it shall only be considered to the extent it is so approved by at least one Class A Director and one Class B Director (who are not also Mauritian resident Directors);

6.5.5 minutes of each meeting of the Board shall be taken and kept by the Company Secretary in the books of the Company. Copies of the minutes of each such meeting shall be delivered to each member of the Board as soon as practicable. If a member has not been present at the meeting, copies of all papers considered by the Board at the meeting shall be sent to him with the minutes;

6.5.6 any Director may participate in a Board meeting by means of a telephone or video conference, and the Chairman may appoint any Director who is physically present in Mauritius to chair any such meeting; provided that if the Chairman of the Board is not present at a meeting, and where a chairman of the meeting has not been appointed by the Chairman of the Board, the Directors present may choose one of their number to be chairman of the meeting; and

6.5.7 notwithstanding any other provisions of this Section 6, a resolution in writing signed by all Directors (which resolution

may consist of several counterparts) shall be as valid and effective as if it had been adopted by a duly convened meeting of the Board.

F. On and from the date of execution of this Amendment, Section 6.6 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 6.6 Quorum

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alternates, present in person in Mauritius.”

Subject to the Constitution and Schedule 4 hereto, the Board may function through one or more committees, comprised of Board and non-Board members, as the Board deems appropriate, provided that no meeting of any such committee shall be validly constituted unless a prior written notice of such meeting is provided to all committee members, including a nominee of each of the Class A and Class B Shareholders. Every such notice of a meeting shall specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted thereat.”

The Company may, at the sole discretion of the Board, reimburse each Director for all reasonable travel, hotel and other expenses incurred by that Director in attending Board and committee meetings or otherwise in representing the Company.”

The quorum for a Shareholders’ meeting of the Company shall be an authorized representative or authorized representatives together representing Shareholders holding more than 51% of the Company’s share capital having a voting right. If within 30 minutes of the time appointed for a Shareholders’ meeting of the Company there is no quorum, the meeting shall be adjourned to the same day in the following week at the same time and place, or to such other date, time and place as the directors may appoint provided that at such adjourned meeting the quorum shall be an authorized representative or representatives together representing a member or members holding more than 51% of the Company’s share capital having a voting right, present in person or represented by proxy(ies).”

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G. On and from the date of execution of this Amendment, Section 6.7 of the Shareholders Agreement shall amended to read and

shall stand in its entirety as follows:

“ 6.7 Board Committees

H. On and from the date of execution of this Amendment, Section 6.10 of the Shareholders Agreement shall amended to read

and shall stand in its entirety as follows:

“ 6.10 Directors’ Expenses

I. On and from the date of execution of this Amendment, Section 7.2 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 7.2 Quorum for Shareholder Meetings

J. On and from the date of execution of this Amendment, Section 7.3 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as

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The chairman of any Shareholders’ meeting of the Company shall be the Chairman of the Board and shall not be entitled to a second or casting vote. In the event the Chairman is absent from any Shareholders’ meeting, the Shareholders present at that meeting shall elect a chairman to act as such at that meeting.

The Company agrees, so far as it lawfully may, and the Shareholders agree to procure, so far as is within their powers as Shareholders or under this Agreement, that the matters listed in Schedule 4 shall require and shall only be implemented if the Company shall have received the prior written consent of all Shareholders.”

Notwithstanding Section 11.1 of this Agreement, State Street shall, effective from the date following the 5th (Fifth) anniversary of the execution of this Agreement and at any time (and from time to time) thereafter, have the right to give notice (such notice being referred to in this section as the “ Call Notice ”) to Syntel, containing an offer by State Street to (a) purchase all, but not less than all, of the Shares of the Company owned by Syntel, its Affiliates or its designees at that time at the Call Offer Price and, (b) purchase, at a price not exceeding the aggregate of the face value of such shares, any stamp duty payable under the then applicable laws and any transfer fees payable under the articles of association of SSI (“ SSI Offer Price ”), all, but not less than all, of the nominee shares of SSI held by Syntel, its Affiliates, its designees, or nominees at that time (the “ Call Offer to Purchase ”). Within 15 Business Days of the Call Notice being given (the “ Call Offer Period ”), Syntel shall accept the Call Offer to Purchase by giving notice of such acceptance to State Street and Syntel shall (i) sell and State Street or any of its Affiliates shall purchase all of the Shares of the Company beneficially owned by Syntel at such time at the Call Offer Price and, (ii) sell and State Street or any of its Affiliates incorporated outside India shall purchase all of the nominee shares of SSI held by Syntel, its Affiliates, its designees, or nominees at such time at the SSI Offer Price. The transaction of purchase and sale shall be completed

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follows:

“ 7.3 Chairman of Shareholder Meetings

K. On and from the date of execution of this Amendment, Section 10.1 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 10.1 List of Veto Matters

L. On and from the date of execution of this Amendment, Section 11.7 of the Shareholders Agreement shall be amended to read

and shall stand in its entirety as follows:

“ 11.7 State Street’s Right to Call

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within 30 Business Days of the expiry of the Call Offer Period, subject to the receipt of applicable regulatory, governmental or corporate approvals and/or filings that may be required under applicable laws.”

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M. On and from the date of execution of this Amendment, the following Sections 13.2, 13.3 and 13.4 shall stand included after

Section 13.1 of the Shareholders Agreement:

“ 13.2 Representative for SSI General Meetings

13.2.1 At any general meeting of the shareholders of SSI, the authorized representative of the Company who shall be duly

appointed by the Board to represent the Company at any such meeting shall always be a nominee of the Class A Shareholder.

13.2.2 In respect of the shareholders of SSI other than the Company (each an “ SSI Nominee Shareholder ,” and collectively, the “ SSI Nominee Shareholders ”), each of the Class A Shareholder and the Class B Shareholder shall, and shall cause the Company to ensure that (a) each of the SSI Nominee Shareholders is and always shall be either a nominee of the Class A Shareholder or a nominee approved by the Class A Shareholder, (b) each SSI Nominee Shareholder shall not transfer any share held by such SSI Nominee Shareholder in SSI without the prior consent of each of the directors nominated by the Class A and Class B Shareholders on the SSI Board, and (c) each SSI Nominee Shareholder is and always shall be a Person outside of India. A purported transfer of any of the shares of SSI held by a SSI Nominee Shareholder in contravention of the terms of this Section 13.2.2 shall be deemed to be null and void and shall not be recognized by the Company or the Board. For purposes of this section 13.2.2, “ Person” shall mean a corporation or any other entity formed outside of India.”

“ 13.3 SSI Board

13.3.1 The SSI Board shall consist of no more than eleven (11) directors (or such number as a majority of the Board may determine from time to time, provided, however that the number of Directors of the SSI Board shall in no event be less than 3 nor more than 11, and provided ** of whom shall the nominees of the Class A Shareholder, and ** directors shall be the nominees of the Class B Shareholder.

13.3.2 **

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The Company shall not transfer any share of SSI held by it in SSI without the prior written consent of each of the nominees of the Class A and Class B Shareholders on the Board. A purported transfer of any of the shares of SSI held by the Company in contravention of the terms of this Section 13.4 shall be deemed to be null and void and shall not be recognized by the Company or the Board.”

“SCHEDULE 4 Veto Matters

The following decisions, actions and resolutions of the Board shall require the vote of all of the Directors and subject to Section 10.1 as amended, the prior written approval of all Shareholders:

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13.3.3 Each of the Class A Shareholder and the Class B Shareholder agree to cause the Company and the Company shall vote the

shares of SSI held by it to elect and appoint as directors on the SSI Board, the nominees of the Class A Shareholder and the nominees of the Class B Shareholder in the proportion set forth in Section 13.3.1 and Section 13.3.2 hereinabove.”

“ 13.4 Transfer of any shares of SSI

N. On and from the date of execution of this Amendment, Schedule 4 of the Shareholders Agreement shall be amended to read

and shall stand its entirety as follows:

(a) any sale by the Company of all or substantially all of its assets or shares, or any reorganization, consolidation or merger (or

similar transaction or series of transactions) of the Company with another entity;

(b) any acquisition of all or substantially all of the assets or shares of another entity;

(c) any liquidation, dissolution or winding up of the Company;

(d) the authorization or creation of any shares of the Company;

(e) repurchase or redemption of any shares of the Company;

(f) any amendment to the Constitution of the Company or the Memorandum of Association or Articles of Association of Syntel

Sourcing Private Limited;

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(g) any increase or decrease in the number of Directors that shall constitute the Board;

(h) any material change in the nature of the business of the Company;

(i) any change in the name of the Company or any assumed name of the Company;

(j) any incurrence of indebtedness in excess of U.S. ** or equivalent amount in other currencies;

(k) any capital expenditures in any calendar year in excess of U.S. ** or equivalent amount in other currencies;

(l) any material change in the manner that the Company maintains its books and records of account;

(m) the establishment of any committee of the Board and the functions and powers of such committees, including any change in

the make-up or powers of any such committee of the Board;

(n) the declaration or payment of any dividend or distribution;

(o) the recommendation of any increase in the share capital of the Company by such sum, to be divided into shares of such

amount, as may be specified in the resolutions;

(p) the recommendation of any consolidation and division of all or any of the Company’s share capital into shares of larger

amount than its existing shares;

(q) the recommendation of any sub-division of its existing shares or any of them into shares of smaller amount than exist at the

time of any such recommendation;

(r) the recommendation of any cancellation of any shares which, at the date of the passing of the resolution, have not been taken

or agreed to be taken by any person;

(s) the recommendation of any reduction in any manner and with, and subject to, any incident authorized and consent required

by law, (i) the Company’s share capital; (ii) any capital redemption reserve account; or (iii) any share premium account;

(t) the recommendation of the buy-back of any number of the Company’s issued and outstanding shares;

(u) any matter related to the creation of or transfer of any equity or other shares; and

(v) the approval of any and all Related-party contracts.

2. BINDING COMMITMENT

FINAL

Notwithstanding any other provision of the Shareholders Agreement, the agreement and obligations of the parties to this Amendment contained in Section 1 hereinabove shall be legally binding upon the parties hereto and enforceable against the parties hereto in accordance with its terms. This Amendment shall constitute a legally binding contract among the parties hereto.

Except as set forth in this Amendment, all of the other terms and provisions of the Shareholders Agreement shall remain unmodified and continue to have full force and effect in accordance with their respective terms.

This Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement. A facsimile transmission of the executed signature page of this Amendment by a party hereto shall constitute due and proper execution of this Amendment by such party.

This Amendment may not be modified or waived except in writing executed by all parties to this Amendment.

The Shareholders Agreement as amended by this Amendment shall be binding upon the successors and assigns of the parties hereto.

Any notice or other communication to be served, given, made or sent under or in relation to this Amendment shall be served, given, made or sent as specified in Section 23.1 of the Shareholders Agreement.

This Amendment shall be governed by, and construed in accordance, with the laws of the State of Delaware without regard to conflicts of law principles, and the parties hereto agree to submit to jurisdiction of any court of law sitting in the State of Delaware.

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3. OTHER PROVISIONS

4. COUNTERPARTS

5. NO MODIFICATION

6. SUCCESSORS AND ASSIGNS

7. NOTICES

8. GOVERNING LAW

FINAL IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed and delivered as of the date first above written.

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STATE STREET INTERNATIONAL HOLDINGS

By: /s/ ** Name: ** Title: Authorized Signatory

SYNTEL DELAWARE, LLC

By: Name: Daniel Moore Title: Chief Administrative Officer

SYNTEL SOLUTIONS (MAURITIUS) LIMITED

By: Name: Daniel Moore Title: Chief Administrative Officer

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBAN ES-OXLEY ACT OF 2002

I, Bharat Desai, Chairman & Chief Executive Officer of Syntel, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Syntel, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date : August 11, 2008

/s/ Bharat Desai Bharat Desai, Chairman & Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBAN ES-OXLEY ACT OF 2002

I, Arvind Godbole, Chief Financial Officer & Chief Information Security Officer of Syntel, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Syntel, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date : August 11, 2008

/s/ Arvind Godbole Arvind Godbole, Chief Financial Officer & Chief Information Security Officer.

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Syntel, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Bharat Desai, Chairman & Chief Executive Officer of the Company and Arvind Godbole, Chief Financial Officer & Chief Information Security officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Bharat Desai Bharat Desai Syntel, Inc. Chairman & Chief Executive Officer August 11, 2008

/s/ Arvind Godbole Arvind Godbole Syntel, Inc. Chief Financial Officer & Chief Information Security Officer August 11, 2008