BIENAVENTURADA VIRGEN MARÍA DE GUADALUPE

Historically, our business has been conducted as an operating division of Tata Sons, which has included certain subsidiaries of Tata Sons. On October 25, 2002, the Board of Directors of Tata Sons Limited and Tata Consultancy Services Limited approved the filing of the Scheme, under Sections 391 to 394 of the Companies Act for the transfer of the TCS Division to TCS Limited. The Scheme was filed with the High Court of Judicature at Bombay on December 17, 2002. At a meeting convened by the High Court, the shareholders and creditors of Tata Sons and TCS Limited sanctioned the Scheme. The High Court of Judicature at Bombay sanctioned the Scheme under Sections 391 to 394 of the Companies Act by its orders dated May 9, 2003 and April 7, 2004. The High Court order sanctioning the Scheme was filed with the Registrar of Companies, Maharashtra, on April 21, 2004.

Benefits of the Transfer

We believe that we will realize benefits from the Transfer, including the following:

Increased Speed and Responsiveness. As a separate company, we will have a board of directors and a management

team focused exclusively on our business. We believe this will strengthen our ability to make decisions quickly, deploy resources more rapidly and efficiently and operate with more agility.

Direct Access to Capital Markets. As a separate company, we will be able to directly access the capital markets to

issue debt or equity securities. We will also be able to use our equity shares for acquisitions and thereby have greater flexibility in our acquisition strategies.

Scheme of Arrangement

The Scheme was negotiated between TCS Limited and Tata Sons and governs the transfer of the TCS Division of Tata Sons to TCS Limited.

Transfer of the TCS Division

The Scheme provides that the TCS Division shall be transferred to and vested in TCS Limited with effect from April 1, 2004, which is the Appointed Date under the Scheme. The Scheme will become effective upon the execution of the Underwriting Agreement for this Offer. From the Appointed Date up to the date on which the Scheme is effective, Tata Sons will hold the TCS Division in trust for and on account of TCS Limited.

The TCS Division includes all the undertakings (including the STPs), and all assets and liabilities, of Tata Sons which pertain to the TCS Division as of the Appointed Date. Under the laws of India, the Transfer and vesting of the TCS Division in favour of TCS Limited will occur by virtue of the Scheme sanctioned by the High Court in accordance with its terms. The Scheme also provides that Tata Sons and TCS Limited will execute such other deeds, confirmations or other writings as are necessary to give effect to the Scheme.

The Scheme provides that if any asset in relation to the TCS Division cannot be transferred for any reason whatsoever as of the effective date of the Scheme, Tata Sons shall hold such asset in trust for the benefit of TCS Limited, and complete the transfer in favour of TCS Limited as soon as practicable.

The Scheme states that from the date of filing the Scheme with the High Court of Judicature at Bombay and until the date on which the Scheme becomes effective, Tata Sons shall not encumber the TCS Division and shall carry on the business and activities of the TCS Division with reasonable diligence and business prudence. Tata Sons is prohibited from undertaking any additional financial commitments, borrowing any amounts or from incurring any other liabilities or expenditure, except in the ordinary course of business or if permitted by the Scheme or unless the prior written consent of TCS Limited has been obtained.

When the Scheme becomes effective, all legal or other proceedings (other than proceedings in relation to corporate taxes on profits under the Income Tax Act, 1961) by or against Tata Sons, whether pending or which may be initiated in the future, in any matter relating to the TCS Division will be transferred to TCS Limited. The Scheme provides that TCS Limited will reimburse and indemnify Tata Sons against all liabilities incurred by Tata Sons in

respect of such proceedings after the Transfer and Tata Sons will defend such proceedings in accordance with the advice of TCS Limited.

With respect to employees, the Scheme provides that TCS Limited shall employ all employees of Tata Sons currently engaged in the TCS Division on the same terms and conditions of service. TCS Limited shall be substituted for Tata Sons in the employee benefit arrangements such as provident fund trusts, pension fund trusts and all other employee benefit arrangements, and be required to make the same contributions thereto as Tata Sons was required to make. For the purposes of computing terminal benefits for the employees transferred to TCS Limited, the past services of such employees with TCS Division shall also be taken into account.

The Scheme provides that the Appointed Date was April 1, 2003, or such later date as may be determined by the board of directors of Tata Sons. The Scheme also provides that if the Scheme did not take effect by September 30, 2003, or such later date as may be agreed by the respective boards of directors of Tata Sons and TCS Limited, the Scheme would become null and void (the “Termination Date”). However, on September 17, 2003, the boards of directors of Tata Sons Ltd and TCS Limited respectively revised the Termination Date to September 30, 2004 and September 29, 2003. On March 4, 2004, the board of directors of Tata Sons approved amendments changing the Appointed Date to April 1, 2004 in accordance with the provisions of Scheme.

Consideration and other Costs

The Scheme provides that TCS Limited shall pay Tata Sons Rs. 23,000 million as purchase consideration for the Transfer.

The consideration is non-interest bearing and shall become payable upon the successful completion of the Offer. In the event that payment of the consideration is delayed beyond the period of three days from the date of receipt of trading permission from the Stock Exchanges for the Equity Shares, interest at mutually agreeable commercial rates, which we currently expect to be approximately 6% per annum, would be payable to Tata Sons. Tata Sons would have the first right to the Offer proceeds after all Offer expenses are paid. TCS Limited will use the net proceeds from the Fresh Issue in this Offer to pay the purchase consideration for the Transfer.

TCS Limited has agreed to bear all costs, charges, levies and duties (including stamp duty and registration fees) and expenses in relation to or in connection with or incidental to the Scheme. The Transfer is subject to stamp duty primarily in the state of Maharashtra, where the registered offices of Tata Sons and TCS Limited are located. TCS Limited has filed a copy of the drawn-up order with the Superintendent of Stamps for adjudication of the stamp duty payable in the State of Maharashtra for registration of the Scheme. The maximum amount of stamp duty payable in respect of the Transfer in the State of Maharashtra is Rs. 250 million. However, the Government of Maharashtra has issued a notification permitting companies in the IT industry to pay only 10% of the applicable stamp duty for schemes of arrangement such as the Scheme. Accordingly, we believe that our stamp duty liability in the State of Maharashtra will not exceed Rs. 25 million, and have applied to the Superintendent of Stamps at Mumbai for adjudication of the stamp duty liability.

Additionally, we may be liable for stamp duty in respect of the transfer of immovable properties in the other states in India in which they are located. We estimate the aggregate market value of these properties to be approximately Rs. 1,400 million. The stamp duty liability on these properties will vary state by state, and typically ranges from 8% to 12% in most states. We expect that we will be able to set off a portion of our stamp duty payments in states other than Maharashtra against the stamp duty payable in Maharashtra.

In addition, other obligations such as payment of income tax claims arising as a result of the transfer of the assets outside India may be payable by TCS Limited. For example, in the United States, TCS America would have to make a payment on account of deemed dividend tax to the United States Government as a result of the Transfer. We believe that this tax liability is approximately US$ 10 million. Under U.S. taxation rules, TCS America would be required to withhold and remit the actual tax. Similarly, the profits of the TCS branch in the United States would also be subject to tax on the Transfer. The transfer of the branch assets to TCS Limited will result in branch tax liability of approximately, US$ 5.7 million to Tata Sons. Under the provisions of the Scheme, these tax liabilities will be for the account of TCS Limited.

In the United Kingdom, income tax at the rate of 30% of the market value of the branch assets, including the goodwill value inherent in the branch, is payable on a transfer. However there is an exemption provided in the case of a transfer between group companies having common ownership of 75% and if this 75% common ownership continues for a period of six years. Therefore, so long as there is ownership of 75% of TCS Limited by Tata Sons and its group companies for six years from the Transfer, no tax liability arising from the Transfer would be attracted. Although we have not made a market valuation of the UK branch assets for this purpose, such tax liability may be material if the common ownership test is not satisfied in any period within six years from the Transfer. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations in accordance with U.S. GAAP” for a discussion of certain other taxes and charges that may be incurred in connection with the Transfer.

Conditions

The effectiveness of the Scheme is subject to the following:

• approval by the requisite majority of the various classes of shareholders and creditors of TCS Limited and Tata Sons and the order of the High Court of Judicature at Bombay being obtained. The approval of the various classes of shareholders and creditors of both companies was obtained on January 28, 2003. The Scheme was sanctioned by the High Court of Judicature at Bombay by its order dated May 9, 2003 and April 7, 2004;

• other sanctions and approvals required to be obtained by law, including the sanction of any Government authority or creditor, being obtained;

• certified copies of the court order in respect of the Scheme being filed with the Registrar of Companies, Maharashtra at Mumbai. The court order was filed with RoC on April 21, 2004; and

• execution of a legally binding underwriting agreement in relation to the Offer, in form and substance satisfactory to Tata Sons.

As on the date of this Draft Red Herring Prospectus the first three conditions as stated above have been fulfilled and upon the execution of the underwriting agreement among the Company, the Selling Shareholders and the Underwriters, the Scheme will become effective and all the assets and liabilities of the TCS Division will legally vest in TCS Limited. The Underwriting Agreement will be signed after closure of the Bidding and prior to the filing of the Prospectus with the RoC. Hence, as on the date of the Prospectus, all the assets and liabilities of the TCS Division would have legally vested in TCS Limited.

The board of directors of Tata Sons and the Company have the right to waive any of the above conditions (other than those required to be complied with by law) and the waiver of any such condition shall not affect the effectiveness of the Scheme.

After vesting, TCS Limited will apply to the appropriate authorities for formal transfer of various consents approvals, licenses in its name. TCS Limited has already received in-principle approval from STP authorities for transfer of various STPs of the TCS Division to TCS Limited. Such STP approvals are listed in the section “Approvals and Consents”. TCS Limited will make applications to Registrar of Trademarks for assignment of various trademarks in its name. Major customers and suppliers have been notified about the Transfer and steps have been initiated for the transfer of their contracts in the name of TCS Limited.

After the vesting of all the assets and liabilities of TCS Division in TCS Limited, the assets and liabilities of TCS Division will become assets and liabilities of TCS Ltd and the specified subsidiaries of Tata Sons Limited included in the TCS Division will become our subsidiaries. The corporate structure of TCS Limited after the Transfer is set forth under “Our Subsidiaries and Affiliates” on page [●] of this Draft Red Herring Prospectus

The TCS Division has several branch offices outside India, including in the United States, United Kingdom and Australia. These branch offices have assets that include computers, furniture and office equipment. These branches also have employees. The process of transferring the assets located overseas has been initiated. The actual transfer of the assets will occur when the Scheme becomes effective. We expect that the regulatory approvals and filings required to complete the overseas transfers will occur contemporaneously with the Transfer.

Transfer of CMC Limited

Tata Sons’ entire holding of 51.12% of the equity share capital of CMC Limited was transferred to TCS Limited on March 29, 2004, prior to the effectiveness of the Scheme, by agreement of the parties. The total consideration paid by TCS Limited to the TCS Division for this transfer was Rs. 3,799.0 million. The TCS Division made a loan of Rs. 3,750.0 million to TCS Limited. This loan was utilised by TCS Limited for acquiring the CMC shares. This loan will be extinguished upon effectiveness of the Scheme.