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HOV Services Ltd.

BSE: 532761 Sector: IT
NSE: HOVS ISIN Code: INE596H01014
BSE LIVE 15:40 | 16 Aug 242.90 9.85
(4.23%)
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NSE 15:31 | 16 Aug 242.40 9.60
(4.12%)
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HIGH

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OPEN 238.00
PREVIOUS CLOSE 233.05
VOLUME 13300
52-Week high 350.50
52-Week low 91.10
P/E 261.18
Mkt Cap.(Rs cr) 304
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 238.00
CLOSE 233.05
VOLUME 13300
52-Week high 350.50
52-Week low 91.10
P/E 261.18
Mkt Cap.(Rs cr) 304
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 Company's Twenty-Seventh Annual Report on theBusiness and Operations of HOV Services Limited (the "Company" or"HOVS") together with the Audited Financial Statements for the financial yearended March 31 2015.

The financial statements are prepared for the year comprising of the 12 (Twelve) monthsperiod ended on March 31 2015 and are not comparable to the financial statements ofprevious year comprising of 15 (Fifteen) months ended March 31 2014 as the financialyear was changed from calendar year to financial year as per the Companies Act 2013.

FINANCIAL RESULTS AND OPERATIONS:

Rs. In Million

Consolidated

Standalone

Particulars Twelve months period ended on March 31 2015 Fifteen months period ended on March 31 2014 Twelve months period ended on March 31 2015 Fifteen months period ended on March 31 2014
INCOME
Income from Operation 164.04 173.26 125.45 159.24
Other Income 5.71 10.14 8.17 12.74
169.75 183.40 133.62 171.98
EXPENDITURE
Staff Cost 104.21 128.50 100.64 122.17
General and Administrative Expenses 77.90 69.92 33.33 31.72
182.11 198.42 133.97 153.89
Profit / (Loss) before Interest Depreciation 8 Tax (12.36) (15.02) (0.35) 18.09
Less: Interest 4.11 1.60 - -
Less: Depreciation 10.13 9.74 4.37 4.03
Profit / (Loss) before Tax (26.6) (26.36) (4.72) 14.06
Tax pertaining to earlier years - 0.04 - 0.04
Less: Provisions for taxes - - - -
Current Tax - 6.23 - 6.23
Deferred Tax (1.79) (1.94) (1.79) (0.74)
Profit / (Loss) after Tax (24.81) (30.69) (2.93) 8.53
Less: Minority Interest 4.70 (6.41) - -
Profit/(Loss) after minority interest (20.11) (24.28) (2.93) -
Add: Share of Profit/(Loss) from an Associate (1533.11) (464.50) - -
Profit / (Loss) for the year/period (1553.22) (488.78) (2.93) 8.53

1. Results of Operations Consolidated Financial Performance

• Consolidated total Income for the current year was Rs. 169.75 million.

• EBIDT for the current year was Rs. (12.36) million.

• Net Profit/ (Loss) for the current year was Rs. (1553.22) million.

• The basic and diluted Earnings per share (EPS) is Rs. (124.20) for the currentyear. Standalone Financial Performance

• Total Income for the current year was Rs. 133.62 million.

• EBIDT for the current year was Rs. (0.35) million.

• Net Profit/(Loss) for the current year was Rs. (2.93) million.

• The basic and diluted Earnings Per Share (EPS) is Rs. (0.23) for the currentyear under reporting.

2. Appropriations

(i) Dividend:

Your Company intends to conserve available resources to invest in the growth of thebusiness and pursue strategic growth opportunities and also in view of losses during thefinancial year 2014-15 the Board of Directors accordingly did not recommend any dividendfor the year.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial year ended on March 31 2015.

3. Subsidiary companies and Associate

A. The Company has following subsidiary companies:

i) HOVS LLC incorporated in Delaware State 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 Law.

B. Associate

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 companiesas per the Companies Act 2013 is annexed to the financial statements.

4. Significant developments

A) Merger transaction

On November 4 2014 the SourceHOV Holdings Inc. ("SourceHOV") a company inwhich HOVS LLC wholly owned US subsidiary holds an investment has completed the mergerwith BancTec Group LLC. The shareholders' approval was obtained through notice of postalballot dated September 30 2014. The result of postal ballot was declared on November 42014 wherein the shareholders had approved with requisite majority. Post-merger the stakeholding of HOVS LLC in SourceHOV has increased from 26.1% to 44.8% in the combined entity.

B) Proposed sale transaction

i) The Board of Directors of the Company vide its notice of postal ballot datedSeptember 30 2014 conducted a postal ballot process for taking shareholders' approvalseeking in-principle approval for sale of Company's investment in SourceHOV vide thenotice of postal ballot dated September 30 2014. The result of postal ballot was declaredon November 4 2014 wherein the shareholders had approved with requisite majority.

ii) Certain group of shareholders had filed on November 3 2014 a petition beforeMumbai Bench of the Hon'ble Company Law Board (CP No. 101/397-398/CLB/MB/2014) againstthe three resolutions put before the shareholders vide the notice of postal ballot datedSeptember 30 2014. As part of the hearing process with the Mumbai Bench of the Hon'bleCompany Law Board all necessary documents including the valuation report and fairnessreport were submitted for due consideration by the Hon'ble Company Law Board.

iii) The Hon'ble Company Law Board vide its order dated January 29 2015 disposed-offthe petition by permitting the objecting shareholders on the request of objectingshareholders to withdraw the petition. The Company had filed necessary disclosureregarding the outcome of the hearing with the Hon'ble Company Law Board vide itsintimation dated February 19 2015 to BSE Limited and National Stock Exchange of IndiaLimited.

iv) The proposed sale transaction did not consummate on account of the prevailingsituation including shareholder litigation and transaction delays. The Company hadimmediately communicated to the shareholders vide intimations filed with the BSE Limitedand National Stock Exchange of India Limited on April 20 2015.

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 the Company has allotted twice equity shares under ESOP Plan2007 to its employee's on May 21 2014 and on December 19 2014 allotted 3000 and 10500equity shares respectively. Consequently after the allotment the paid up share capitalof the Company has gone up from 12499522 equity shares of Rs. 10/- each aggregating toRs. 124995220/- to 12514022 equity shares of Rs. 10/- aggregating to Rs. 125140220/7.

Employee Stock Option Plan (ESOP)

Your Company instituted "HOVS Stock Option Plan 2007" and "HOVS StockOption Plan 2008" for its employees and for employees of its subsidiary companies asdetailed 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
"HOVS Stock Option Plan 2008" September 30 2008 0 750000 750000

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

9. Human Resources

During the financial year the Company had maintained cordial relations with all itsemployees and has taken utmost care of its employees deployed. All employees are alignedunder our value system which propagates and practices open transparent and honestcollaborative honoring commitments and demanding excellence among them.

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 8Remuneration 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 8 (Eight) Board Meetings were held the details of which are givenin the Corporate Governance Report.

14. Directors

Mr. Sunil Rajadhyaksha Executive Director retires by rotation and being eligible hasoffered himself for re-appointment.

Mrs. Lakshmi Kumar was appointed as an Additional Director of the Company by the Boardof Directors pursuant to the Section 161 of the Companies Act 2013 who shall hold officetill the conclusion of the ensuing 27th Annual General Meeting. In terms of provisions ofSection 149 of the Companies Act 2013 and Clause 49 of the Listing Agreement herappointment is proposed for further period as an Independent Director who shall holdoffice for five years (from July 22 2015 to July 21 2020) subject to the shareholders'approval in the ensuing 27th Annual General Meeting of the Company.

Mr. Parvinder S Chadha Executive Director and Mr. Surinder Rametra Executive Directorand Mr. Sunil Rajadhyaksha Executive Director were appointed as whole-time directors ofthe Company for a period of five years from April 1 2011 to March 31 2016 by theShareholders' in their 23rd Annual General Meeting held on August 3 2011. The tenure oftheir office as whole-time director will be ending on March 31 2016. Pursuant to theprovisions of the Sections 196 197 read with Schedule V of the Companies Act 2013 theapproval of the Shareholders' of the Company is being sought for their re-appointment aswhole-time directors for a further term of five years from April 1 2016 to March 312021.

Mr. Prakash Shukla Independent Director ceased to be director w.e.f. from July 262014.

None of the Directors were materially interested in any contract 8 agreements existingor at the end of the financial year that was significant in relation to the business ofthe Company.

All Independent Director of the Company have given declaration under Section 149(7) ofthe Companies Act 2013 stating that they meet the criteria of independence as mentionedin the Section 149(6) of the Companies Act 2013 and Clause 49 of the Listing Agreement.

15. Meeting of Independent Directors

Independent Directors of the Company met on March 21 2015 to review the performanceof non-independent directors the Board as a whole and the Chairman of the Company andassess the quality quantity and timeliness of flow of information between the Companymanagement and the Board that is necessary for the Board to effectively and reasonablyperform their duties.

The familiarisation program was arranged by the Company to Independent Directors withregard to their roles rights responsibilities with the Company the nature of theindustry in which the Company operates and business model of the Company on March 212015. The details of the familization program is disclosed on the Company's website http://www. hovsltd.com/Policies_pisclosures.html5

16. Performance Evaluation

The evaluation of Independent Directors Board Committees and other non-independentdirectors was carried out as per criteria such as objective attendance contributioninteractive experience integrity disclosures provided ability to monitor corporategovernance domain expertise strategic vision industry knowledge participation indiscussions etc. prescribed by the Nomination and Remuneration Committee. The details ofthe same are as mentioned below.

Board: The Board regularly spent quality time in reviewing performance of the Companyand has working environment which is congenial and co-operative. It has appropriatecommittees and skill sets to enable its working. It receives timely information from themanagement to fulfill its role.

Committees: The Board Committees are appropriately constituted with clear charter whichis effective interactive and decisive.

Directors: All the directors invest time in understanding Company and its requirements.They bring external knowledge and participate during discussion in the meeting of Boardand its various committees. Each one expresses his views on the matter of discussion inthe Board/ Committee. All directors keep abreast of the updated issues that are likely tobe taken up at the Board level. They are committed to fulfillment of director obligationand fiduciary responsibilities.

17. Key Managerial Personnel

During the financial year Company has appointed Mr. Sriram Iyengar as a ChiefFinancial Officer w.e.f. April 1 2014 pursuant to the provision of Section 203 of theCompanies Act 2013. Mr. Bhuvanesh Sharma resigned from the post of Company Secretary andCompliance Officer of the Company w.e.f. July 30 2014 and the Board re-appointed him fromJanuary 1 2015 as VP-Corporate Affairs and Company Secretary and Compliance Officer ofthe Company.

18. Internal Financial Controls

The Company has adopted adequate procedures for ensuring the internal financialcontrols. The Company adheres best practices for safeguarding its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and timely preparation of reliable and accurate financial informations.

19. Related Party Transactions

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

20. 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 Clause 49 of the Listing Agreement with the Stock Exchanges. TheCorporate Governance report is annexed as the part of the Director's report.

21. Management Discussion and Analysis

Management Discussion and Analysis report for the year under review as stipulatedunder Clause 49 of the Listing Agreement with the Stock Exchanges is presented as aseparate section forming part of the Director's report.

22. Code of Conduct for Board and Senior Management

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

23. Auditors and Auditors' Report Statutory Auditors

At the 26th Annual General Meeting held on July 26 2014 M/s. Lodha 8 Co CharteredAccountants Mumbai were appointed as Statutory Auditors of the Company to hold officetill the conclusion of 29th Annual General Meeting subject to ratification for theirappointment by shareholders at every Annual General Meeting and being eligible haveexpressed their willingness to continue.

A resolution proposing ratification for their appointment is submitted at the ensuing27th Annual General Meeting.

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

Secretarial Audit Report

The Board appointed M/s. JDNASSA 8 Associates Pune for conducting secretarial auditthe Secretarial Audit Report for FY 2014-15 is annexed herewith as ANNEXURE - 'F' tothis report.

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

24. Extract of Annual Return

Extract of Annual Return is annexed herewith as ANNEXURE- 'G' to this report.

25. Committees of the Board Audit Committee

The Company has constituted Audit Committee the details of the same disclosed in theCorporate Governance Report. The Board accepts all the recommendations of the AuditCommittee.

Nomination 8 Remuneration Committee

The Board has on the recommendation of the Nomination 8 Remuneration Committee frameda policy for selection and appointment of Directors Senior Management and theirremuneration. The said Policy is annexed as part of the Director's report.

Stakeholders Relationship Committee

The Company has constituted the above committee to resolve the grievances of theshareholders.

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

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 behaviour actual or suspected frauds or violation of theCompany's Code of Conduct. It provides necessary safeguards for protection of employeesfrom reprisals or victimisation 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 make provisions for directaccess to the Chairman of the Audit Committee in appropriate and exceptional cases. Thesaid policy is annexed as part of this Board's report.

27. Prevention of Insider Trading

The Board of Directors has adopted new internal Code of Conduct for Prevention ofInsider Trading and Fair disclosure of Unpublished Price Sensitive Information. The Codeof Conduct for Prevention of Insider Trading is to regulate monitor govern and reporttrading in securities of the Company by insiders and compliance of the SEBI (Prohibitionof Insider Trading) Regulations 2015. The said Code is annexed as part of this Board'sreport.

28. General

On following points no reporting or disclosure is required as there were notransactions on these items during the financial year under review:

i. Details relating to deposits covered under Chapter V of the Companies Act 2013;

ii. No significant and material orders passed by the regulators or courts or tribunalswhich impacting the going concern status and operations of the Company;

iii. Issue of equity shares with differential rights as to dividend voting orotherwise;

iv. Issue of sweat equity shares;

v. None of the whole-time directors of the Company received any remuneration orcommission from the subsidiaries of the Company.

29. Acknowledgement

Your Directors' place on record their appreciation for co-operation and supportreceived from the the Government of India Government of Maharashtra Reserve Bank ofIndia Software Technology Parks of India Registrar of Companies Pune other localgovernmental bodies NASSCOM the National Stock Exchange the BSE Limited Bankers of theCompany and 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
Place: Mumbai Sunil Rajadhyaksha
Date: May 22 2015 Chairman 8 Executive Director
(DIN- 00011683)

DECLARATION UNDER CLAUSE 49 OF THE LISTING AGREEMENT

As required under Clause 49 of the Listing Agreement with Stock Exchanges we herebyconfirm that for the financial year ended March 31 2015 the Directors and SeniorManagement Personnel have complied with the Code of Conduct of the Company as applicableto them.

Place: Mumbai Sunil Rajadhyaksha
Date: May 22 2015 Chairman 8 Executive Director
(DIN- 00011683)

CERTIFICATE FOR 12 MONTHS FINANCIAL YEAR ENDED ON MARCH 31 2015 UNDER CLAUSE 49 (IX)

The Board of Directors HOV Services Limited

We to the best of our knowledge and belief certify that :

a) We have reviewed financial statements and the cash flow statement of the Company fortwelve (12) months financial year ended on March 31 2015 and that:

i. these statements do not contain any materially untrue statement or omit any materialfact or contain statements that might be misleading;

ii. these statements together present a true and fair view of the Company's affairs andare in compliance with existing accounting standards applicable laws and regulations.

b) To the best of our knowledge and belief there are no transactions entered into bythe Company during the year which are fraudulent illegal or violative of the Company'scode of conduct.

c) We accept responsibility for establishing and maintaining internal controls forfinancial reporting and that we have evaluated the effectiveness of internal controlsystems of the Company pertaining to financial reporting and we have disclosed to theAuditors and the Audit Committee deficiencies in the design or operation of such internalcontrols if any of which we are aware and the steps we have taken or propose to take torectify these deficiencies.

d) We have indicated to the Auditors and the Audit Committee that :

i. there was no changes in internal control over financial reporting during the year;

ii. there was no significant changes in accounting policies during the year required tobe disclosed in the notes to the financial statements; and

iii. there was no instances of significant fraud of which we have become aware and theinvolvement therein if any of the management or an employee having a significant role inthe Company's internal control system over financial reporting.

Sd/- Sd/-
Sriram Iyengar Sunil Rajadhyaksha
Chief Financial Officer Chairman 8 Executive Director
(DIN- 00011683)
Date - May 22 2015
Place - Mumbai