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HOV Services Ltd.

BSE: 532761 Sector: IT
NSE: HOVS ISIN Code: INE596H01014
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OPEN 274.00
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VOLUME 1518
52-Week high 350.50
52-Week low 91.10
P/E 281.41
Mkt Cap.(Rs cr) 339
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 274.00
CLOSE 271.45
VOLUME 1518
52-Week high 350.50
52-Week low 91.10
P/E 281.41
Mkt Cap.(Rs cr) 339
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

HOV Services Ltd. (HOVS) - Director Report

Company director report

Your Directors are pleased to present the Twenty-Ninth Annual Report on the Businessand Operations of HOV Services Limited (the "Company" or "HOVS")together with the Audited Financial Statements for the financial year ended March 312017.

FINANICAL RESULTS AND OPERATIONS:

Particulars Rs. In Million
Consolidated Standalone
For the year ended For the year ended
March 31 2017 March 31 2016 March 31 2017 March 31 2016
INCOME
Income from Operation 154.32 151.51 136.45 135.06
Other Income 9.57 11.16 10.61 13.35
163.89 162.67 147.06 148.41
EXPENDITURE
Staff Cost 100.15 104.45 99.15 102.16
General and Administrative Expenses 52.44 44.19 28.49 24.39
152.59 148.64 127.64 126.55
Profit / (Loss) before Interest 11.30 14.03 19.42 21.86
Depreciation and Tax
Less: Interest 6.23 6.07 - -
Less: Depreciation 8.54 9.75 1.79 3.55
Profit / (Loss) before Tax (3.46) (1.79) 17.64 18.31
Less: Provisions for taxes
Current Tax 5.90 5.69 5.90 5.69
Deferred Tax 0.13 (1.30) 0.13 (1.30)
Profit / (Loss) after Tax (9.49) (6.18) 11.61 13.92
Less: Minority Interest - - - -
Profit/(Loss) after minority interest (9.49) (6.18) 11.61 13.92
Add: Share of (Loss) from an Associate (1445.79) (2750.19) - -
Net Profit / (Loss) (1455.28) (2756.37) 11.61 13.92

1. RESULTS OF OPERATIONS

For the financial year ended March 31 2017 as follows:-

Consolidated Financial Performance :

• Consolidated total Income for the current year was Rs. 163.89 million.

• EBIDT for the current year was Rs. 11.30 million.

• Net Profit/ (Loss) was Rs. (1455.28) million.

• The basic and diluted Earnings Per Share (EPS) was Rs. (116.12)for the year.

Standalone Financial Performance :

• Total Income for the current year was Rs. 147.06 million.

• EBIDT for the current year was Rs. 19.42 million.

• Net Profit/ (Loss) was Rs. 11.61 million.

• The basic and diluted Earnings Per Share (EPS) is Rs. 0.92 for the year underreporting.

2. Appropriations (i) Dividend:

Your Company intends to conserve available resources to invest in the growth of thebusiness and pursue strategic growth opportunities accordingly did not recommend anydividend for the year.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial year ended on March 31 2017.

3. Subsidiary companies and Associate company

A. Subsidiary Companies :

i) HOVS LLC incorporated in Delaware under the laws of Unites States of America;

ii) HOV Environment LLC incorporated in Nevada State under the laws of United States ofAmerica;

iii) HOVS Holdings Limited incorporated under the Companies Ordinance of Hong Kong; and

iv) HOV Environment Solutions Private Limited incorporated in Maharashtra under IndianCompany Laws.

B. Associate Company :

SourceHOV Holdings Inc. in which HOVS LLC wholly owned subsidiary of the Company has44.8% stake holding.

A report on the performance and financial position of Subsidiaries Associate Companyas per the Companies Act 2013 is annexed in the financial statements.

4. Significant developments

The Board of Directors vide its meeting held on February 22 2017 considered andapproved the business combination. The Board of Directors of your Company had soughtapproval from its members through postal ballot by way of special resolutions as statedin the Notice of Postal Ballot dated March 8 2017. The voting results were declared onApril 8 2017 whereby the members' of the Company had approved the resolutions withrequisite majority of 99.999%. The business combination is subject to such termsconditions or modifications if any as may be prescribed by any authority (whether inIndia or United States of America).

5. ADR/GDR

The shareholder's in their Annual General Meeting dated July 21 2007 granted approvalfor proposed 15000000 of ADR/GDR issue. However so far none of the underlying equityshares were issued by the Company.

6. Share Capital of the Company

During the financial year there was no change in share capital the share capital ofthe Company is 12532522 equity shares of Rs. 10/- aggregating to Rs. 125325220/-.

7. Employee Stock Option Plan (ESOP)

Your Company instituted "HOVS Stock Option Plan 2007" for its employees andfor employees of its subsidiary companies as detailed below:

Plan Shareholder's Approval Date No. of Options for employees of the Company No. of Options for employees of subsidiary companies Total
"HOVS Stock Option Plan 2007" July 21 2007 400000 700000 1100000

The information to be disclosed as per SEBI (Employees Stock Option Scheme and EmployeeStock Purchase Scheme) Guidelines 1999 is annexed herewith as "ANNEXURE- A"to this report.

8. Conservation of Energy Technology Absorption and Foreign Exchange

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 13 (3) (m) of the Companies Act 2013 readwith Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as "ANNEXURE-B" to this report.

9. Human Resources

The Company periodically arranges Rewards and Recognitions programs at the right timefor the right resource. During their tenure at the Company employees are motivatedthrough various skill development and volunteering programs.

All employees are aligned under our value system which propagates and practices beingopen transparent and honest collaborative honoring commitments and demanding excellenceamong them. During the year the Company had maintained cordial relations with all itsemployees and has taken utmost care of its employees deployed.

The Company has no employees who received remuneration in excess of limits prescribedUnder Section 197 of the Companies Act 2013 read with the Companies (Appointment &Remuneration of Managerial Personnel) Rules 2014.

10. Disclosure as per Section 197 (12) of the Companies Act 2013 and Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedherewith as "ANNEXURE- C" to this report.

11. Directors Responsibility Statement

Information as per Section 134(5) of the Companies Act 2013 is annexed herewith as

"ANNEXURE- D" to this report.

12. Financial Summary and Highlights

The Company's current year financial summary and highlights are mentioned in theManagement Discussion and Analysis Report.

13. Board Meetings

During the financial year 5 (Five) Board Meetings were held the details of which aregiven in the Corporate Governance Report.

14. Directors and Key Managerial Personnel

Mr. Sunil Rajadhyaksha Chairman and Executive Director retires by rotation and beingeligible has offered himself for re-appointment.

Mr. Vikram Negi with recommendation of the Nomination and Remuneration Committee wasappointed as an additional director by the Board of Directors on February 13 2017 subjectto the approval from shareholders at their ensuing Annual General Meeting.

Mr. Parvinder S Chadha resigned from his office of Executive Directorship and the Boardaccepted his decision effective May 29 2017 placing on record its deep sense ofappreciation for his unmatched business acumen strategic vision strong leadership ableguidance outstanding contribution and valuable support extended to the Company at alltimes during his tenure as Executive Director of the Company.

Mr. Sriram Iyengar Chief Financial Officer had held his office until February 3 2017and was relieved effective that date.

None of the Directors were materially interested in any contract & agreementsexisting or at the end of the financial year that was significant in relation to thebusiness of the Company. All the Independent Directors of the Company have givendeclaration for meeting the criteria of independence as required under Section 149(7) ofthe Companies Act 2013.

15. Meeting of Independent Directors

Independent Directors of the Company met on February 13 2017 to review the performanceof the Board as a whole its committees non-independent directors independent directorsand the Chairman of the Company and assessed the quality quantity and timeliness of flowof information between the Company management and the Board that is necessary for theBoard to effectively and reasonably perform their duties.

The familiarisation program was arranged by the Company on February 13 2017 forIndependent Directors with regard to their roles rights responsibilities with theCompany the nature of the industry in which the Company operates and business model ofthe Company. The details of the familiarisation program were disclosed under InvestorRelations section of the Company's website www.hovsltd.com.

16. Performance Evaluation

During the year the evaluation of Board its Committees Independent Directors andother Non-independent directors including Chairman of the Board was carried outconsidering parameters as set by the members of the Board.

For Board and its Committees the exercise was carried out through a structuredevaluation process covering various aspects of the Boards functioning such as compositionof the Board & committees experience & competencies meeting in legal frame worktime spent on agendas receiving information from management and having well definedCommittees and each Committee having co-operative working environment with the Board. Theevaluation of Chairperson was carried out by independent directors on criteria ofleadership promotes participation among all members and ability to manage conflictingsituations positively. In case of the independent directors the evaluation by whole boardmembers was carried out based on the criteria of efforts undertaken for understanding thecompany brings independent view point in discussion and awareness of roles andresponsibilities.

17. Internal Financial Controls

The Company has adopted adequate procedures for ensuring the internal financialcontrols. The Company adheres to best practices for safeguarding its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and timely preparation of reliable and accurate financial information.

18. Related Party Transactions

The transactions entered by the Company with related parties are in ordinary course ofbusiness and at arm's length basis. The particulars of transactions entered with relatedparties is annexed herewith as "ANNEXURE- E" to this report.

19. Corporate Governance Report

The Company believes in good corporate governance which are essential to enhance thevalue of the Company for the stakeholders and abide by the Corporate Governance norms asstipulated under Securities Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015. The Corporate Governance report is annexed as the part ofthe Directors' report.

20. Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review as stipulatedunder Securities Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 is presented as a separate section forming part of the Directors'report.

21. Code of Conduct for Board and Senior Management

The Company has adopted Code of Conduct for the Directors and Senior Management andsame is available on the Company's website http://hovsltd.com/code_of_conduct.html. AllDirectors and Senior Management personnel have affirmed their compliance with the saidCode. A declaration signed by the Whole-time Director to this effect is annexed as part ofthe Directors' report.

22. Auditors and Auditors' Report Statutory Auditors :

M/s. Lodha & Co Chartered Accountants Mumbai were appointed as StatutoryAuditors of the Company at the Annual General Meeting held on July 26 2014 in pursuancewith the applicability of the new Companies Act 2013. In terms of appointment they willhold office till the conclusion of 29th Annual General Meeting and would retire thereat.Accordingly the Board with recommendation from the Audit Committee recommends theresolution to the shareholders for appointment of M/s BAGARIA & Co. CharteredAccountants to be appointed as auditors for a period of 5 years commencing from theconclusion of this 29th AGM till the conclusion of the 34th AGM to be held in year 2022.

The Statutory Auditors' Report does not contain any qualification reservation oradverse remark.

Secretarial Audit Report:

The Board appointed M/s. J B Bhave & Co. Practicing Company Secretaries Pune forconducting secretarial audit. The Secretarial Audit Report for FY 2016-17 is annexedherewith as "ANNEXURE- F" to this report. The SecretarialAuditors' Report does not contain any qualification reservation or adverse remark.

During the year under review there were no instances of frauds committed in theCompany by its officers or employees which requires reporting by the Statutory Auditorsand the Secretarial Auditor.

23. Extract of Annual Return

Extract of Annual Return is annexed herewith as "ANNEXURE- G" to thisreport.

24. Committees of the Board Audit Committee:

The Company has constituted above Committee the details of the same are disclosed inthe Corporate Governance Report. The Board accepts all the recommendations of the AuditCommittee.

Nomination & Remuneration Committee:

The Company has constituted above Committee the details of the same are disclosed inthe Corporate Governance Report. The Board has on the recommendation of the Nomination& Remuneration Committee framed a policy for selection and appointment of DirectorsSenior Management and their remuneration. The nomination and remuneration policy has beenannexed as "Annexure H" forming a part of this report.

Stakeholders Relationship Committee:

The Company has constituted the above committee to resolve the grievances of theshareholders the details of the same are disclosed in the Corporate Governance Report.

The details of the committees along with their charters are annexed as part of thisBoard's Report.

25. Particulars of Loans Advances and Investments

The particulars as required pursuant to Section 186 (4) of the Companies Act 2013read with Companies ( Meetings of Board and its Powers) Rules 2014 and pursuant toRegulation 34(3) and Schedule V Part A of SEBI LODR 2015 the full particulars arementioned in the Notes to Account to the Financial Statements.

The particulars of loans are mentioned in Note No. 20.6 & 22.6 respectively ofStandalone and Consolidated Notes to Accounts; the particulars of Guarantees are mentionedin Note No. 20.2 & 22.2 respectively of Standalone and Consolidated Notes toAccounts; and the particulars of Investment are mentioned in Note No. 21.6 of ConsolidatedNotes to Accounts.

26. Whistle Blower Policy

The Board of Directors had adopted the Vigil Mechanism/Whistle Blower Policy in orderto establish a mechanism for directors and employees to report genuine concerns orgrievances about unethical behavior actual or suspected frauds or violation of theCompany's Code of Conduct. It provides necessary safeguards for protection of employeesfrom reprisals or victimization for whistle-blowing in good faith. In line with thecommitment of Company to the highest possible standards of ethical moral and legalbusiness conduct and its commitment to open communication and made provisions for directaccess to the Chairperson of the Audit Committee in appropriate and exceptional cases.During the year there was no instances reported under the Policy.

27. General a. The statement relating to risk management policy and identificationof risk elements are covered under Management Discussion and Analysis Report as annexedwith this Report. b. On following points no reporting or disclosure is required as therewere no transactionson these items during the financial year under review: i. There was noloan guarantees and investment made; ii. Details relating to deposits covered underChapter V of the Companies Act 2013; iii. No significant and material orders passed bythe regulators or courts or tribunals which impacted the going concern status andoperation of the Company; iv. Issue of equity shares with differential rights as todividend voting or otherwise; v. Issue of sweat equity shares; and vi. None of thewhole-time directors of the Company received any remuneration or commission from thesubsidiaries of the Company.

28. Acknowledgement

Your Directors place on record their appreciation for co-operation and support receivedfrom the Government of India Government of Maharashtra Reserve Bank of India SoftwareTechnology Parks of India Registrar of Companies Pune other local governmental bodiesNASSCOM the National Stock Exchange the Bombay Stock Exchange Bankers of the Companyand Shareholders during the financial year.

Your Directors express their sincere appreciation for the efforts made by employees atall levels for their hard work co-operation and support extended to your Company duringthe financial year.

For and on behalf of the Board of Directors

Sunil Rajadhyaksha

Chairman & Executive Director

(DIN: 00011683)

Date: May 29 2017

DECLARATION REGARDING CODE OF CONDUCT

We hereby confirm that for the financial year ended March 31 2017 the Directors andSenior Management Personnel have complied with the Code of Conduct of the Company asapplicable to them.

Sunil Rajadhyaksha

Chairman & Executive Director

(DIN- 00011683)

Date- May 29 2017