To The Members of
HOV Services Limited
Report on the Audit of Standalone Financial Statements
We have audited the accompanying standalone financial statements of HOV ServicesLimited ("the Company") which comprise the Balance Sheet as at March 312020 the Statement of Profit and Loss Other Comprehensive Income Statement of Changesin Equity and the Cash Flow Statement for the year then ended and notes to the standalonefinancial statements including a summary of the significant accounting policies and otherexplanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 (the Act) in the manner so required and give a true and fair view inconformity with the Indian Accounting Standards prescribed under Section 133 of the Actread with Companies (Indian Accounting Standards) Rules 2015 as amended ("IndAS") and other accounting principles generally accepted in India of the state ofaffairs of the Company as at 31st March 2020 its loss other comprehensive incomechanges in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder Section 143(10) of the Act. Our responsibilities under those Standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI) together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion on the standalone financial statements.
Emphasis of Matter :
We draw your attention to note no 31(E) of the standalone financial statements withregards to Management's assessment of inter-alia realisability of Financial investmentsin subsidiaries of Rs. 53911 thousands and recoverability of Trade receivables measuredat amortised cost of Rs.58186 thousands due to COVID 19 pandemic outbreak. It has apartfrom considering the internal and external information upto the date of approval of thesestandalone financial statements also performed sensitivity analysis on the assumptionsused and based on current indicators of future economic conditions and it expects torecover the carrying amount of these assets.
The impact of the global health pandemic may be different from that estimated as at thedate of approval of these standalone financial statements. Considering the continuinguncertainties the management will continue to closely monitor any material changes tofuture economic conditions.
Our Opinion is not modified in respect of this matter
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters.
|Sr. No Key Audit Matters ||Auditors response |
|1.Valuation and Impairment of unquoted equity instruments in subsidiary: || |
|The Company had made investment in a wholly owned subsidiary namely HOVS LLC Rs.53904 Thousands (being carrying value as on March 31 2020 Net of provision of diminution of Rs. 606866 Thousands). HOVS LLC in turn has acquired stake in Exela Technologies Inc. through Business Combination Agreement entered on July 12 2017 and received equity stake in Exela Technologies Inc. ("Exela"-Listed on NASDAQ) through Ex-Sigma LLC a special purpose vehicle formed for this transaction. These investment is classified and measured at fair value through OCI. ||We observed the publicly available quoted prices of the underlying equity instrument representing holding in i.e. Exela Technologies Inc. which is listed on the NASDAQ and also obtained external evidence of existence of investment through publicly available filings on NASDAQ from time to time and obtaining holding statement from the custodian . We analyzed the possible indications of impairment and the forecasted results of the subsidiary i.e HOVS LLC. Based on these tests which reveals impairment and therefore necessary provision for diminution in value of Investment in HOVS LLC has been made. As explained by the management no further impairment is expected in this investment. |
|In view of investments being material we have considered its valuation/impairment to be a significant matter. || |
Information Other than the Standalone Financial Statements and Auditor's report thereon
The Company's Board of Directors is responsible for the preparation of otherinformation. The Other information comprises the information included in the ManagementDiscussion and Analysis Board's Report including Annexures to the Board report CorporateGovernance report and Shareholder's information but does not include the standalonefinancial statement and our auditor's report thereon. Our opinion on the standalonefinancial statements does not cover the other information and we do not express any formof assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we required to report that fact. We have nothingto report in this regard.
Responsibilities of Management and those charged with Governance for the StandaloneFinancial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance OtherComprehensive Income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the accounting Standardsspecified under Section 133 of the Act read with Rule 7 of the Companies (Account) Rules2014.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Companyand for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error. In preparing the financial statements theManagement is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements are free from material misstatement whether due to fraud or error and toissue an auditor's report that includes our opinion. Reasonable assurance is a high levelof assurance but is not a guarantee that an audit conducted in accordance with SAs willalways detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statementswhether due to fraud or error design and perform audit procedures responsive to thoserisks and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error as fraud may involve collusion forgeryintentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under Section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the Company hasadequate internal financial control system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.
Conclude on the appropriateness of Management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the entity'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the entity to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the financial statements may be influenced. We considerquantitative materiality and qualitative factors in
(i) planning the scope of our audit work and in evaluating the results of our work and
(ii) to evaluate the effect of any identified misstatements in the financialstatements.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. Pursuant to the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central
Government of India in terms of sub-section (11) of Section 143 of the Act we give inthe Annexure
"A" a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the bestof our
knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books and records.
(c) The Balance sheet the Statement of Profit & Loss Other Comprehensive IncomeStatement of Changes in Equity and the Cash Flow Statement dealt with by this Report arein agreement with the books of account.
(d) In our opinion the aforesaid standalone financial statements comply with theAccounting
Standards specified under Section 133 of the Act read with Rule 7 of the Companies(Account)
(e) On the basis of the written representation received from the directors as on March31 2020
taken on record by the Board of Directors none of the directors is disqualified as onMarch 31
2020 from being appointed as a Directors in terms of Section 164(2) of the Act.
(f) With respect to the adequacy of the internal financial controls over financialreporting of the
Company and the operating effectiveness of such controls refer to our separate Reportin
(g) With respect to the other matters to be included in the Auditor's Report inaccordance with the
requirements of Section 197(16) of the Act as amended:
In our opinion and to the best of our information and according to the explanationsgiven to us
the managerial remuneration paid by the Company during the year is in accordance withthe
provisions of Section 197 of the Act.
(h) With respect to the matters to be included in the Auditor's report in accordancewith the rule 11
of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best ofour
information and according to the explanations given to us:
i. The Company does not have any pending litigations which would impact its financial
position in its standalone financial statements. [Refer Note 35]
ii. The Company did not have any long-term contracts including derivative contracts forwhich
there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor
Education and Protection Fund by the Company.
Annexure A referred to in Report on Other Legal and RegulatoryRequirements section of our report to the members of HOV Services Limited of evendate:
On the basis of such checks as we considered appropriate and according to theinformation and explanations
given to us during the course of our audit we state that:
1. a) The Company has maintained proper records showing full particulars includingquantitative
details and situation of Property Plant and Equipment (Fixed Assets).
b) Due to COVID -19 physical verification of fixed assets have not been carried outduring the year by the management. However as explained by the management there will notbe any material discrepancies as and when such verification will be carried out.
c) According to the information and explanations given to us and on the basis of ourexamination
of the records of the Company title deeds of the immovable property are held in thename of the Company.
2. The Company does not hold any inventory. Therefore Para 3 (ii) of the Order is notapplicable to the Company.
3. During the year the Company has not granted any loans secured or unsecured tocompanies firms Limited Liability Partnership or other parties covered in the registermaintained under section 189 of the Act. Therefore Para 3 (iii) of the Order is notapplicable to the Company.
4. In our opinion and according to the information and explanations given to us theCompany has not entered into any transactions referred in Section 185 of the Act. TheCompany has complied with the provisions of 186 of the Act with respect to the loans andinvestments made.
5. No deposits within the meaning of directives issued by RBI (Reserve Bank of India)and Sections 73 to 76 or any other relevant provisions of the Act and rules framedthereunder have been accepted by the Company.
6. According to the information and explanations given to us the maintenance of costrecords has not been prescribed by the Central Government under Section 148 (1) of the Actfor any of the activities of the Company
7. a) According to the information and explanations given to us and on the basis of ourexamination of the records the Company is regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income Tax Goods and Service TaxDuty of Customs Duty of Excise Value Added Tax Sales Tax Cess and other materialstatutory dues applicable to the Company with the appropriate authorities. No undisputedamounts in respect of the aforesaid statutory dues were outstanding as at the last day ofthe financial year for a period of more than six months from the date they became payable.
b) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company there are no dues of Income Tax and Goods andService Tax Duty of Customs Duty of Excise Value Added Tax Sales Tax Cess which havenot been deposited on account of any dispute.
8. In our opinion and according to the information and explanations given to us duringthe year the Company has not defaulted in repayment of dues to banks. Further the Companyhas not taken any loan or borrowings from financial institutions government or debentureholders.
9. The Company has utilised the term loan taken from a bank for the purposes for whichit was raised. Further the Company has not raised any money by way of initial public offeror further public offer in the recent past.
10. During the course of our examination of the books and records of the Companycarried out in accordance with the generally accepted auditing practices in India andaccording to the information and explanations given to us we have neither come across anymaterial instance of fraud by or on the Company by its officers or employees noticed orreported during the year nor have we been informed of such case by the management.
11. According to the information and explanations given to us and based on ourexamination of the books and records of the Company it has paid / provided for themanagerial remuneration in accordance with the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Act.
12. In our opinion the Company is not a Nidhi Company. Therefore Para 3 (xii) of theOrder is not applicable to the Company.
13. According to the information and explanations given to us the provision of Section177 and 188 of Act to the extent applicable in respect of transactions with the relatedparties have been complied by the Company and the details have been disclosed in the IndAS Financial Statements as required by the applicable accounting standards (Refer Note37).
14. During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures. Therefore Para 3 (xiv) ofthe Order is not applicable to the Company.
15. According to the information and explanations given to us during the year theCompany has not entered into any non-cash transactions with directors or persons connectedwith him under Section 192 of the Act.
16. The Company is not required to be registered under Section 45 IA of the ReserveBank of India Act 1934.
Annexure B referred to in Report on Other Legal and RegulatoryRequirements section of our report to the members of HOV Services Limited of evendate:
Report on the Internal Financial Controls over Financial Reporting under Clause
(i) of Sub-section 3 of Section 143 of the Act
We have audited the internal financial controls over financial reporting of HOVSERVICES LIMITED ("the Company") as of March 31 2020 in conjunction with ouraudit of standalone financial statement of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing deemed to be prescribedunder Section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls both applicable to an audit of internal financial controls and bothissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that :
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company;
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements and
(4) also provide us reasonable assurance by the internal auditors through theirinternal audit reports given to the Company from time to time.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the best of our information and according to the explanations given tous the Company has broadly in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at March 31 2020 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India
| ||For BAGARIA & CO. LLP |
| ||Chartered Accountants |
| ||FRN - 113447W/W-100019 |
| ||Vinay Somani |
|Place: Mumbai ||Partner |
|Date: July 21 2020 ||M. No. : 143503 |
| ||UDIN:20143503AAAAHT2515 |