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HOV Services Ltd.

BSE: 532761 Sector: IT
NSE: HOVS ISIN Code: INE596H01014
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OPEN 36.80
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VOLUME 100
52-Week high 74.50
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P/E 19.89
Mkt Cap.(Rs cr) 46
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Buy Qty 1.00
Sell Price 37.00
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OPEN 36.80
CLOSE 36.91
VOLUME 100
52-Week high 74.50
52-Week low 35.25
P/E 19.89
Mkt Cap.(Rs cr) 46
Buy Price 36.10
Buy Qty 1.00
Sell Price 37.00
Sell Qty 2.00

HOV Services Ltd. (HOVS) - Director Report

Company director report

The Board of Directors present the 34th Annual Report of HOV ServicesLimited (the "Company" or "HOVS") along with audited FinancialStatements for the financial year ended March 31 2022.

FINANICAL RESULTS AND OPERATIONS:

Rs. in Lakhs

Particulars Consolidated Standalone
Year Ended Year Ended
March 31 2022 March 31 2021 March 31 2022 March 31 2021
INCOME
Revenue from operations 1005.81 965.51 1005.81 965.51
Other income 134.33 154.24 134.33 96.28
Total Income 1140.14 1119.75 1140.14 1061.79
Expenses
Employee Benefits Expense 626.35 581.15 626.35 581.15
Finance Costs 9.07 11.76 9.07 11.76
Depreciation and Amortisation Expense 62.30 62.37 62.30 62.37
Other Expenses 141.41 150.01 141.41 150.01
Total Expenses 839.13 805.29 839.13 805.29
Profit before exceptional items from continuing operations 301.01 314.46 301.01 256.50
Exceptional items: Reversal / (Provision) for Diminution in Value of Investment in subsidiary (6607.70) 6068.66
Profit/(Loss) after exceptional items from continuing operations 301.01 314.46 (6306.69) 6325.16
Tax Expense :
Current Tax (82.80) (71.00) (82.80) (71.00)
Deferred Tax (4.03) (2.62) (4.03) (2.62)
Relating to earlier years - (1.41) - (1.41)
Profit/(Loss) after tax for the period from continuing operations 214.18 239.43 (6393.52) 6250.13
Discontinued Operations
Profit/(Loss) from discontinued operations before tax 1.53 17.81 - -
Tax expense of discontinued operations (0.81) - - -
Profit/(Loss) after tax from continuing & discontinued operations 214.90 257.24 (6393.52) 6250.13
Other Comprehensive Income / (Loss)
Items that will not be reclassified subsequently to Profit or loss :
Remeasurement of net defined benefit plans (2.14) 3.28 (2.14) 3.28
Changes in fair value of FVOCI equity instruments (7667.51) 6596.66 - -
Tax impact of Items that will not be reclassified subsequently to Profit or loss 609.33 (591.16) 0.59 (0.91)
Total Other Comprehensive Income / (Loss) (7060.32) 6008.78 (1.55) 2.37
Total Comprehensive Income / (Loss) For The Period (6845.42) 6266.02 (6395.07) 6252.50

1. Results of Operations

For the financial year ended March 31 2022 as follows:-

Consolidated Financial Performance:

• Consolidated total Income for the current year was Rs. 1140.14 Lakhs.

• Profit/(Loss) from continuing operations was Rs. 214.18 Lakhs.

• Profit/(Loss) from discontinued operations was Rs. 0.72 Lakhs.

• Profit/(Loss) from continuing & discontinued operations was Rs. 214.90Lakhs.

• Total Comprehensive Income/(Loss) for the current year was Rs. (6845.42) Lakhs.

• The basic and diluted Earnings Per Share (EPS) for the current year from :

Continued Operations was Rs. 1.70

Discontinued Operations was Rs. 0.01 Continued and Discontinued Operations was Rs. 1.71

Standalone Financial Performance:

• Total Income for the current year was Rs. 1140.14 Lakhs.

• Provision for Diminution in Value of Investment in subsidiary provided underexceptional items was Rs. (6607.70) Lakhs.

• Net Profit/ (Loss) for the current year was Rs. (6393.52) Lakhs.

• Total Comprehensive Income/(Loss) for the current year was Rs. (6395.07) Lakhs.

• The basic and diluted Earnings Per Share (EPS) for the current year from :

Before exceptional item was Rs. 1.70

After exceptional item was Rs. (50.78)

2. Appropriations

(i) Dividend:

Keeping in view the performance of the Company during the year under review and alsowith a view to conserve resources to meet the business requirements your Directorsexpresses their inability to recommend any dividend for the financial year 2021-22.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial year ended on March 31 2022.

3. Subsidiary companies

The Company has below subsidiaries as on March 31 2022 and there has been no materialchange in these subsidiaries with respect to the nature and structure. Your Company hasprovided the audited Consolidated Financial Statements for the year ended March 31 2022together with Auditors' Report and a statement containing salient features of thefinancial statements of Company's subsidiaries (in Form AOC-1) is forming part of thisAnnual Report which includes financial information of all the subsidiaries of theCompany.

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.

4. Policy on Material Subsidiaries

The Company's wholly owned subsidiary HOVS LLC is a material subsidiary in accordancewith the thresholds laid down under the SEBI Listing Regulations 2015 as amended from timeto time.

The Company had adopted the policy for determining material subsidiary pursuant to theSEBI (Listing Obligation and Disclosure Requirements) (Amendment) Regulations 2018. Thesaid policy has been displayed on the website of the Company athttp://hovsltd.com/Policies Disclosures.html

5. Investment

The Company's wholly owned subsidiary HOVS LLC holds 5734490 shares (representing1.1% of Exela Technologies Inc. NASDAQ listed) free from any encumbrances/lien andhaving fair value of Rs 1809.28 lakhs as on March 31 2022. During the quarter and yearended March 31 2022 fair value of investment has fallen below the carrying cost ofinvestment and accordingly provisions for diminution in its value is recognised in thestandalone financial results.

The Board of your Company with recommendations of the Audit Committee on April 262022 had approved to exchange HOVS LLC common stock held in Exela Technologies Inc.("Exela" NASDAQ listed) in Exchange Offer announced by Exela on April 18 2022wherein for each 20 shares of Common Stock tendered stock holder of Exela will receiveone share of Series B1 Preferred Stock with cumulative dividends at the rate of 6.00% perannum of the $25.00 liquidation preference per share of the Series B1 Preferred Stock tobe listed on NASDAQ Capital Market. Accordingly HOVS LLC tendered 5712120 shares ofCommon Stock and received 285606 Series B1 Preferred Stock in the said Exchanges Offer.

6. 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.

7. Share Capital of the Company

The paid up share capital of the Company as on March 31 2021 has 12588972 equityshares of '10 aggregating to Rs. 125889720/-. During the year 6000 equity shares wereallotted pursuant to the HOVS ESOPL Plan 2007. Accordingly the equity paid up sharecapital of the Company has gone up from equity shares 12588972 of Rs. 10 eachaggregating to Rs. 125889720/- to equity shares 12594972 of Rs. 10/- each aggregatingto Rs. 125949720/-.

8. 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 provided herewith as "ANNEXURE-A" to this report.

9. 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 provided herewith as "ANNEXURE-B" to this report.

10. Human Resources

The Human Resource department of the Company follows the philosophy to maintain cordialrelations with all its employees and the Company value its human resources and takesutmost care of its employees deployed. It encourages all employees to strike a perfectwork life balance. During the reported financial year the Company had maintained constantcommunication to the employees in work from home during lockdown environment and there wasno complaint received to the Committee constituted under the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013.

The Company adopted a Policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal Act 2013) and the Rules made thereunderfor prevention and redressal of complaints of sexual harassment at workplace.

11. Particular of Employees and Related Disclosures

During the year under review there was no employee/s who received remuneration inexcess of limits prescribed Under Section 197 of the Companies Act 2013 read with theCompanies (Appointment & Remuneration of Managerial Personnel) Rules 2014. Thedisclosure required in terms of provisions of Section 197 (12) of the Companies Act 2013and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is provided herewith as "ANNEXURE- C" to this report.

12. Directors Responsibility Statement

The Directors Responsibility Statement in terms of Section 134(5) of the Companies Act2013 is provided herewith as "ANNEXURE- D" to this report.

13. Financial Summary and Highlights

The Company's current financial summary and highlights are presented under theManagement Discussion and Analysis Report part of the Annual Report.

14. Meetings of the Board

During the financial year 4 (Four) Board Meetings were held. The details of meetings ofBoard of Directors are provided in the Report on Corporate Governance that forms a part ofthis Annual Report. The maximum interval between any two meetings did not exceed 120 daysas prescribed under the Companies Act 2013 and as per relaxation provided thereunder inlockdown situations. Other provisions related to Board and its Committees are stated inthe Corporate Governance Report forming part of this Annual Report.

15. Directors and Key Managerial Personnel

Mr. Surinder Rametra Executive Director is liable to retire by rotation at the 34thAnnual General Meeting. Mr. Surinder has confirmed his eligibility and willingness forre-appointment.

Mrs. Lakshmi Kumar Independent Director completed her first term as a womenindependent director on July 21 2020. The shareholders' in their 32nd Annual GeneralMeeting held on September 22 2020 further appointed her for 2nd term of five years periodfrom July 22 2020 until July 21 2025 as an Independent Director.

Mr. Surinder Rametra Executive Director whose existing term of five years as WholeTime Director was getting complete on March 31 2021. As required the shareholders' inits 32nd Annual General Meeting held on 22nd September 2020 had passed the specialresolution for his appointment as Whole Time Director for further period of 5 years witheffect from April 1 2021 to March 31 2026. Mr. Sunil Rajadhyaksha Executive Directorexisting term of Whole Time Director got over on March 31 2021. The shareholders' intheir 32nd Annual General Meeting held on September 22 2020 appointed him as a Whole-timeDirector with the designation as Executive Director of the Company for a further term offive years period commencing from April 1 2021 till March 31 2026. The CentralGovernment approval for appointment of Mr. Sunil Vasant Rajadhyaksha as Whole TimeDirector for his term from April 1 2021 till March 31 2026 is duly obtained by theCompany.

Mr. Ajay Puri with recommendations of Nomination and Remuneration Committee wasappointed as an Additional Director effective July 26 2021 by the Board of Directors. Mr.Ajay was appointed as an Independent Director of the Company for his 1st term of fiveyears period from September 22 2021 up to September 21 2026 in 33rd Annual GeneralMeeting held on Sept 22 2021.

Mr. Vikram Negi was appointed as the Whole-time Director designated as ExecutiveDirector of the Company for a period of five years from September 1 2017 until August 312022. His term will get over on August 31 2022. The Board of Directors withrecommendations of the Nomination and Remuneration Committee recommend the appointment ofMr. Vikram Negi a further term of five years from September 1 2022 until August 22 2027subject to the shareholders in ensuing 34th Annual General Meeting.

Key Managerial Personnel

In accordance with the provisions of Section 203 of the Act Mr. Vikram NegiWhole-time Director; Mr. Surinder Rametra Whole-time Director; Mr. Sunil RajadhyakshaWhole-time Director; Mr. Nilesh Bafna Chief Financial Officer; and Mr. Bhuvanesh SharmaCompany Secretary are the Key Managerial Personnel of the Company as on March 31 2022.There is no change in Company Secretary and Chief Financial Officer of the Company duringthe year.

16. Declarations from Independent Directors

The independent directors have submitted declarations that each of them meet thecriteria of independence as provided in Section 149(6) of the Act along with Rules framedthereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been nochange in the circumstances affecting their status as independent directors of theCompany.

17. Meeting of Independent Directors

Independent Directors of the Company met on February 11 2022 to review the performanceof non independent directors the Board as a whole and the Chairman of the Company wasevaluated taking into account the views of executive directors and non-executivedirectors. The Independent Director's also assessed the quality quantity and timelinessof flow of information between the Company management and the Board that is necessary forthe Board to function effectively.

18. Familiarisation Programme

The Management of the Company as and when required keeps updating to the entire Boardincluding Independent Directors on the Company's operations and were also briefedregularly and or quarterly basis the changes in applicable statutes and regulations. TheBoard members are provided with necessary documents/ brochures reports and internalpolicies to enable them to familiarise with the Company's procedures and practices.

The familiarisation programme was arranged by the Company during the year on February11 2022 for its Independent Directors with regard to their roles rightsresponsibilities with the Company. The details of the familiarisation program wasdisclosed under Investor Relations section of the Company's website www.hovsltd.com.

19. Internal Financial Controls

The Company has adequate procedures for ensuring the internal financial controls andthe same are in place with reference to financial statements. The internal audit functionmonitors the adequacy and effectiveness of internal controls and provides assurance of theadequacy and effectiveness of the internal controls to the Audit Committee and the Boardof Directors. The Management of the Company review the internal control system withperiodic overview by the Audit Committee. The internal financial controls are tested byInternal Auditors of the Company and no reportable material weaknesses were observedtherein for the reportable year.

20. Related Party Transactions

All transaction entered into by the Company with related parties are at arm's lengthand are in the ordinary course of business. All Related Party Transactions are beingplaced before the Audit Committee for approval. Omnibus approvals are also obtained fortransactions which are of repetitive nature. Such transactions are placed before the AuditCommittee and Board (as required) for periodical review and approval.

The information on transactions with related parties pursuant to Section 134(3)(h) ofthe Act read with Rule 8(2) of the Companies (Accounts) Rules 2014 are provided herewithas "ANNEXURE- E" to this report. The disclosure of Related PartyTransactions as per Ind AS 24 with related parties have been provided in Notes to theStandalone & Consolidated Financial Statements respectively forming part of thisAnnual Report.

The policy on Related Party Transactions as updated by the Board keeping in view ofSEBI (Listing Obligations and Disclosure) Regulations 2015 has been displayed on theCompany's website at:

http://www.hovsltd.com/docs/Policies/2022/HOVS%20RPTs%20Policy-April%202022.pdf

21. Corporate Governance Report

The Company adheres to Corporate Governance guidelines to fulfil its responsibilitiesto all its stakeholders i.e. investors customers vendors government employees. Companybelieves that good corporate governance enhances accountability and increases shareholdervalue. The report on Corporate Governance is annexed as the part of the Director's report.

22. 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 Director'sreport.

23. Code of Conduct for Board and Senior Management

The Company has adopted Code of Conduct for the Directors and Senior Management and theCode 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 Director's Report.

24. Auditors and Auditors' Report Statutory Auditors:

M/s BAGARIA & Co. Chartered Accountants were appointed as Statutory Auditors for aperiod of 5 years in 29th Annual General Meeting held on September 1 2017 till theconclusion of the 34th AGM to be held in year 2022. Accordingly M/s. BAGARIA & Co.shall retire at the conclusion of 34th AGM of year 2022.

The Board of Directors with recommendations of the Audit Committee recommend to theshareholders for appointment of M/s Lodha & Company Chartered Accountants asStatutory Auditors of the Company for a period of five years commencing from theconclusion of ensuing 34th Annual General Meeting till the conclusion of 39th annualgeneral meeting to be held in year 2027. Accordingly the resolution is being proposed forappointment of new statutory auditors at the ensuing AGM.

The Statutory Auditors' Report of M/s BAGARIA & Co. Chartered Accountants for FY2021-22 does not contain any qualification reservation or adverse remark. The StatutoryAuditors of the Company have given their Unmodified Opinion(s) on the Audited StandaloneFinancial Results for the 4th Quarter and Year ended March 31 2022 and on the AuditedConsolidated Financial Results of the Company for financial Year ended March 31 2022.

Secretarial Audit Report:

M/s. J B Bhave & Co. Practicing Company Secretaries Pune were appointed toconduct secretarial audit for the year and the Secretarial Audit Report for FY 2021-22 isannexed herewith as "ANNEXURE- F" to this report. The SecretarialAuditors' Report for 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. Annual Secretarial Compliance Report:

Pursuant to requirements of Regulation 24A of SEBI (Listing Obligations and DisclosureRequirements) (Amendment) Regulations 2018 the Secretarial Auditors of the Company wereengaged to issue the Annual Secretarial Compliance Report for year ended March 31 2022.

No Disqualification certificate from the Company Secretary in Practice:

None of the directors of the Company have been debarred or disqualified from beingappointed or continuing as directors of companies by the SEBI Board/MCA or any suchstatutory authority. The Company has complied with the requirement in terms of Schedule VPart C of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 as amended of taking a certificate to that effect fromthe Secretarial Auditor of the Company.

25. Extract of Annual Return

As per the requirements of Section 92(3) of the Act and Rules framed thereunder theAnnual Return of the Company as on March 31 2022 is available on the Company's websiteand can be accessed at http://www.hovsltd.com/docs/ir/Quarterly/2021-22/MGT7%202022.pdf

26. Board Evaluation

The Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("the Listing Regulations") stipulate the evaluation of theperformance of the Board its Committees Individual Directors and the Chairperson. Theperformance evaluation has been carried out on directors individually working of theCommittees and Board's performance.

Independent Directors met separately to evaluate the Non-Independent Directors andChairman of the Board. The performance evaluation of Board its Committees IndependentDirectors Non independent directors and including Chairman of the Board was carried outduring the year considering parameters as set by the members of the Board. The evaluationof the independent directors by all board members was carried out based on the criteria ofefforts undertaken by them brings independent view point in discussion and awareness oftheir roles and responsibilities.

The evaluation of Chairperson was carried out by independent directors on criteria ofleadership promotes participation among all members and ability to manage conflictingsituations positively.

The evaluation of the Board and its Committees was carried out through a structuredevaluation process covering various aspects of the Boards functioning and having welldefined Committees and each Committee having co-operative working environment with theBoard.

27. Policy on directors and senior management appointment and remuneration

The Board of Directors has framed the Nomination and Remuneration Policy which laysdown the framework in relation to remuneration to Directors Key Managerial Personnel andSenior Management of the Company. The Policy lays down criteria for selection andappointment of Board Member and also sets the criteria for selection of candidateseligible to be appointed in the senior management and other employees of the Company andalso member on the Board of Directors and the Executive Directors of the Company. Thenomination and remuneration policy is provided herewith as "Annexure- G"to this report. The said policy is also available on the Company's websitehttp://www.hovsltd.com/docs/Policies/2019/Nomination%20&%20Remuneration%20Policy.pdf

28. Risk Management

The Board of Directors of the Company overview the implementation and monitor the riskmanagement for the Company with Audit Committee having additional oversight in the area offinancial risks and controls. The major risks identified by the businesses and functionare addressed through mitigating actions on a continuing basis. The details of riskmanagement has been covered in the Management Discussion and Analysis and Notes to theFinancial Statements which forms part of this report.

29. Committees of the Board

The details pertaining to all the committees of the Board are disclosed in section ofthe Corporate Governance Report which is part of this Board Report.

30. 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 are mentioned in the Notes toAccount to the Financial Statements of the Annual Report. The particulars of loansguarantees and investments as per Section 186 of the Act by the Company have beendisclosed in the financial statements.

31. Secretarial Standards

The proper systems are in place to ensure compliance with applicable SecretarialStandards issued by the Institute of Company Secretaries of India and that such systemsare adequate and operating effectively.

32. Whistle Blower Policy

The Company has a Vigil Mechanism/Whistle Blower Policy in order to establish amechanism for directors and employees to report genuine concerns or grievances aboutunethical behaviour actual or suspected frauds or violation of the Company's Code ofConduct. The Policy provides for a mechanism to report such concerns to the AuditCommittee through specified channels. This mechanism provides safeguards againstvictimisation of employees who report under the said mechanism. During the year underreview the Company has not received any complaints under the said mechanism. The WhistleBlower Policy of the Company is available on the Company's website. The details of thepolicy have been disclosed in the Corporate Governance Report which is a part of thisreport.

33. Reconciliation of Share Capital Audit

The reconciliation of equity share capital is carried out on quarterly basis by anindependent external auditor with a view to reconcile the total share capital admittedwith National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL) and held in physical form with the issued and listed capital. The externalAuditor's Certificate in regard to the same is submitted to BSE Limited and National StockExchange of India Limited and is also placed before Stakeholders' Relationship Committeeand the Board of Directors of the Company.

34. General

a) The statement relating to risk management policy and identification of risk elementsare covered under Management Discussion Analysis Report as annexed with this Report.

b) There are no adverse material changes or commitments occurred after March 31 2022which may affect the financial position of the Company or may require disclosure.

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

(i) There were no loans guarantees and investments made;

(ii) Details relating to deposits covered under Chapter V of the Companies Act 2013;

(iii) No significant and material orders passed by the regulators or courts ortribunals which impacted the going concern status and operation of the Company;

(iv) Issue of equity shares with differential rights as to dividend voting orotherwise;

(v) Issue of sweat equity shares; and

(vi) None of the whole-time directors of the Company received any remuneration orcommission from the subsidiaries of the Company.

35. Acknowledgement

Your Directors would like to place on record their thanks to the Government of IndiaGovernment of Maharashtra Reserve Bank of India Software Technology Parks of IndiaRegistrar of Companies Pune other local governmental bodies the National StockExchange the Bombay Stock Exchange Bankers of the Company and Shareholders during thefinancial year.

Your Directors would also express their appreciation for the efforts made by employeesat all levels for their hard work co-operation and support extended to your Companyduring the year and acknowledge their support in continued COVID-19 pandemiccircumstances.

.