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HOV Services

BSE: 532761|NSE: HOVS|ISIN: INE596H01014|SECTOR: Computers - Software Medium & Small
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Directors Report Year End : Mar '16    Mar 15

The Directors are pleased to present the Twenty-Eighth Annual Report on the Business and Operations of HOV Services Limited (the Company or HOVS) together with the Audited Financial Statements for the financial year ended March 31, 2016.

FINANICAL RESULTS AND OPERATIONS:

Particulars

Rs. In Million

Consolidated

Standalone

For the year ended on March 31, 2016

For the year ended on March 31, 2015

For the year ended on March 31, 2016

For the year ended on March 31, 2015

INCOME

Income from Operation

151.51

164.04

135.06

125.45

Other Income

11.16

5.71

13.35

8.17

162.67

169.75

148.41

133.62

EXPENDITURE Staff Cost

104.45

104.21

102.16

100.64

General and Administrative Expenses

44.19

77.90

24.39

33.33

148.64

182.11

126.55

133.97

Profit/ (Loss) before Interest,

14.03

(12.36)

21.86

(0.35)

Depreciation and Tax Less: Interest

6.07

4.11

-

-

Less: Depreciation

9.75

10.13

3.55

4.37

Profit / (Loss) before Tax

(1.79)

(26.60)

18.31

(4.72)

Less: Provisions for taxes Current Tax

5.69

5.69

Deferred Tax

(1.30)

(1.79)

(1.30)

(1.79)

Profit / (Loss) after Tax

(6.18)

(24.81)

13.92

(2.93)

Less: Minority Interest

-

4.70

-

-

Profit/(Loss) after minority interest

(6.18)

(20.11)

13.92

(2.93)

Add: Share of (Loss) from an Associate

(2,750.19)

(1,533.11)

-

-

Net Profit / (Loss)

(2,756.37)

(1,553.22)

13.92

(2.93)

1. RESULTS OF OPERATIONS:

For the financial year ended March 31, 2016 as follows:-Consolidated Financial Performance:

- Consolidated total Income for the current year was Rs. 162.67 million.

- EBIDT for the current year was Rs. 14.03 million.

- Net Profit/ (Loss) was Rs. (2,756.37) million.

- The basic and diluted Earnings Per Share (EPS) was Rs. (220.08) for the year. Standalone Financial Performance

- Total Income for the current year was Rs. 148.41 million.

- EBIDT for the current year was Rs. 21.86 million.

- Net Profit/ (Loss) was Rs. 13.92 million.

- The basic and diluted Earnings Per Share (EPS) is Rs. 1.11 for the year under reporting.

2. Appropriations

(i) Dividend:

Your Company intends to conserve available resources to invest in the growth of the business and pursue strategic growth opportunities, accordingly did not recommend any dividend for the year.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial year ended on March 31, 2016.

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 of America;

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

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

B. Associate Company:

Source HOV Holdings Inc., in which HOVS LLC, wholly owned subsidiary of the Company, has 44.8% stake holding.

Pursuant to shareholders'' approval on November 4, 2014, SourceHOV Holdings Inc. (SourceHOV), a company in which HOVS LLC, wholly owned US subsidiary of HOV Services Limited, holds an investment, completed the merger with BancTec Group LLC. Post-merger the equity ownership of HOVS LLC in SourceHOV increased from 26.1% to 44.8%. The fair value of HOVS LLC investment on November 4, 2014 in SourceHOV has been valued at US$ 95 million (Rs. 58,337.60 lakhs) at the time of aforesaid merger. Accordingly, additional Capital Reserve of Rs 58,240.26 lakhs was recognized being the fair value of investment in the associate over the carrying value of investment. The Company has done the impairment test during the financial year 2015-16 under Accounting Standard 28 Impairment of Assets for the investment and there is no impairment to the Investment Value.

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

4. Significant developments

During the financial year there was no significant development happened in the Company.

5. ADR/GDR

The shareholder''s in their Annual General Meeting dated July 21, 2007 granted approval for proposed 15,000,000 of ADR/ GDR issue. However, so far none of the underlying equity shares were issued by the Company.

6. Share Capital of the Company

During the financial year, the Company had allotted 18,500 equity shares under ESOP Plan 2007. Consequently, after the allotment, the paid up share capital of the Company has gone up from 12,524,522 equity shares of Rs. 10/- each aggregating to Rs. 125,245,220/- to 12,532,522 equity shares of Rs. 10/- aggregating to Rs. 125,325,220/-.

7. Employee Stock Option Plan (ESOP)

Your Company instituted HOVS Stock Option Plan 2007 and HOVS Stock Option Plan 2008 for its employees and for 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

400,000

700,000

1,100,000

HOVS Stock Option Plan 2008

September 30, 2008

0

750,000

750,000

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock 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 exchange earnings and outgo stipulated under Section 13 (3) (m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as ANNEXURE- B to this report.

9. Human Resources

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

The Company has no employees who received remuneration in excess of limits prescribed under 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 the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith 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 the Management Discussion and Analysis Report.

13. Board Meetings

During the financial year 6 (Six) Board Meetings were held the details of which are given in the Corporate Governance Report.

14. Directors and Key Managerial Personnel

Mr. Surinder Rametra, Executive Director, retires by rotation and being eligible has offered himself for re-appointment.

Mr. Baldev Raj Gupta and Mr. Harish Bhasin were appointed in 26th Annual General Meeting held on July 26, 2014 as Independent Directors for a term comprising of two years. Their term is getting over on July 26, 2016. Based on the recommendation of the Nomination and Remuneration Committee the Board of Directors recommended their re-appointment by the shareholders in the ensuing 28th Annual General Meeting as Independent Director for a term comprising of five years from July 26, 2016 to July 25, 2021.

Mr. Sunil Rajadhyaksha, Whole time Director, Mr. Parvinder Chadha, Whole time Director and Mr. Surinder Rametra, Whole time Director of the Company were re-appointed by the shareholders in the 27th Annual General Meeting for a term of 5 years commence on April 1, 2016 till March 31, 2021.

None of the Directors were materially interested in any contract & agreements existing or at the end of the financial year that was significant in relation to the business of the Company.

All Independent Directors of the Company have given declaration under Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as mentioned in the Section 149(6) of the Companies Act, 2013.

15. Meeting of Independent Directors

Independent Directors of the Company met on March 21, 2016, to review the performance of non-independent directors, the Board as a whole and the Chairman of the Company and assess the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

The familiarization program was arranged by the Company for Independent Directors with regard to their roles, rights, responsibilities with the Company, the nature of the industry in which the Company operates and business model of the Company on March 21, 2016. The details of the feminization program was disclosed under Investor Relations section of the Company''s website www.hovsltd.com.

16. Performance Evaluation

During the year the evaluation of Board, its Committees, Independent Directors and other non-independent directors including Chairman of the Board was carried out considering parameters as set by the members of the Board.

For Board and its Committees, the exercise was carried out through a structured evaluation process covering various aspects of the Boards functioning such as composition of the Board & committees, experience & competencies, meeting in legal frame work, time spent on agendas, receiving information from management and having well defined Committees and each Committee having co-operative working environment with the Board. The evaluation of Chairperson was carried out by independent directors on criteria of leadership, promotes participation among all members and ability to manage conflicting situations positively. In case of evaluation of the independent directors by whole board members was carried out based on the criteria of efforts undertaken for understanding the company, brings independent view point in discussion and awareness of roles and responsibilities.

17. Internal Financial Controls

The Company has adopted adequate procedures for ensuring the internal financial controls. The Company adheres to best practices for safeguarding its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable and accurate financial information’s.

18. Related Party Transactions

The transactions entered by the Company with related parties are in ordinary course of business and at arm''s length basis. The particulars of transactions entered with related parties 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 the value of the Company for the stakeholders and abide by the Corporate Governance norms as stipulated under Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Corporate Governance report is annexed as the part of the Director''s report.

20. Management Discussion and Analysis

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

21. Code of Conduct for Board and Senior Management

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

22. Auditors and Auditors'' Report Statutory Auditors

At the Annual General Meeting held on July 26, 2014, M/s. Lodha & Co, Chartered Accountants, Mumbai, were appointed as Statutory Auditors of the Company to hold office till the conclusion of 29thAnnual General Meeting subject to ratification by shareholders at every Annual General Meeting and being eligible have expressed their willingness to continue.

A resolution proposing ratification of their appointment is submitted at the ensuing 28thAnnual General Meeting. The Statutory Auditors'' Report does not contain any qualification, reservation or adverse remark.

Secretarial Audit Report

The Board appointed M/s. J B Bhave& Co., Practicing Company Secretaries, Pune for conducting secretarial audit, the Secretarial Audit Report for FY 2015-16 is annexed herewith as ANNEXURE- F to this report. The Secretarial Auditors'' Report does not contain any qualification, reservation or adverse remark.

23. Extract of Annual Return

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

24. Committees of the Board Audit Committee

The Company has constituted Audit Committee, the details of the same are disclosed in the Corporate Governance Report. The Board accepts all the recommendations of the Audit Committee.

Nomination & Remuneration Committee

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration.

Stakeholders Relationship Committee

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

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

25. Whistle Blower Policy

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

26. General

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

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

i. There was no loan, guarantees and investment 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 or tribunals which impacted the going concern status and operation of the Company;

iv. Issue of equity shares with differential rights as to dividend, voting or otherwise;

v. Issue of sweat equity shares;

vi. None of the whole-time directors of the Company received any remuneration or commission from the subsidiaries of the Company.

27. Acknowledgement

Your Directors place on record their appreciation for co-operation and support received from the Government of India, Government of Maharashtra, Reserve Bank of India, Software Technology Parks of India, Registrar of Companies, Pune, other local governmental bodies, NASSCOM, the National Stock Exchange, the Bombay Stock Exchange, Bankers of the Company and Shareholders during the financial year.

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

For and on behalf of the Board of Directors

Sunil Rajadhyaksha

Date: May 13, 2016 Chairman & Executive Director

(DIN- 00011683)

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