The Directors are pleased to present the Companys Twenty- Third
Annual Report on the Business and Operations of HOV Services Limited
(the Company or HOVS) together with the Audited Statement of
Accounts for the year end March 31, 2011.
HOVS is one of the largest end-to-end BPO Company, providing
healthcare, finance and accounting, e-content management, document
lifecycle, presentment, HR assist, and strategic consulting services
across key verticals such as BFSI, Healthcare, Government, Telco,
Publishing, Retail, Commercial and Industrial Manufacturing industries.
FINANICAL RESULTS AND OPERATIONS:
In the financial year 2010-11, your Company has recorded consolidated
revenue of Rs. 7092.53 million and profit after tax was Rs. 537.30
million. The brief financial highlights with comparison of previous
year are as below:
Particulars For the year end March 31,
Rs. In Million
Consolidated Standalone
2011 2010 2011 2010
INCOME
Income from Operation 7,092.53 8,483.93 247.40 74.91
Other Income 15.65 14.74 2.28 2.82
7,108.18 8,498.67 249.68 77.73
EXPENDITURE
Staff Cost 3.607.22 4,474.60 56.31 32.05
General and Administrative
Expenses 2,374.87 4,133.09* 22.57 7.61
5,982.09 8,607.69 78.88 39.66
Profit / (Loss) before
Interest, Depreciation
and Tax 1,126.09 (109.02) 170.80 38.07
Less: Interest 292.75 336.25 - -
Less: Depreciation 291.64 252.17 3.72 3.51
Profit / (Loss) before Tax 541.70 (697.44) 167.08 34.56
Less: Provisions for taxes
Current Tax 3.88 48.78 0.38 6.35
Deferred Tax 0.52 15.10 0.52 (1.02)
Profit / (Loss) after Tax 537.30 (761.32) 166.18 29.23
Less: Minority Interest - (2.92) - -
Profit / (Loss) after Tax &
Minority Interest 537.30 (758.40) 166.18 29.23
*Includes Exceptional items of Rs. 1327.64 Million.
1. RESULTS OF OPERATIONS:
Consolidated Financial Performance for the Fiscal Year (FY) ended March
31, 2011
FY 2010-11 was the pivoting point for the industry – the current US
Economy and Federal & State Budgets being at impasse caused drop in
Revenues and EBIDTA, but the management is confident that their actions
being taken will result in solid growth in the coming years.
The performance of the year ended March 31, 2011 highlighted as
follows:
- Consolidated total Income for the current FY decreased 16.40% to Rs.
7,092.54 million from Rs 8,483.94 million for the corresponding last
fiscal year 2009-10
- EBIDTA decreased by 7.8% for the FY to Rs. 1,110.4 million from Rs.
1,203.9 million over the corresponding last fiscal year 2009-10
- Net Profit was Rs. 537.3 million versus a Net Loss of Rs. 758.4
million reported in the prior year.
- The basic and diluted Earnings per share (EPS) were Rs 23.40 for the
Year ended March 31, 2011.
Standalone Financial Performance for the Year ended March 31, 2011
- Total Income for the current FY increased 230.26% to Rs. 247.40
million from Rs 74.91 million for the corresponding last fiscal year
2009-10
- EBIDTA increased by 379.15% for the FY to Rs 168.47 million from Rs
35.17 million over the corresponding last fiscal year 2009-10
- Net Profit was Rs. 166.13 million versus a Net Profit of Rs. 29.24
million reported in the prior year
- The basic and diluted Earnings per share (EPS) are Rs 13.30 for the
Year ended March 31, 2011.
2. SIGNIFICANT DEVELOPMENTS:
(a) Key Highlights during the year were:
- Added new business with over US .0 million in total contract value
in the fourth quarter FY 2010-11.
- Top 100 clients represent over 78% of total revenues with the largest
customer representing only 19% of total revenues.
- Company maintained strong liquidity position with –
a. DSO (Debt Sale Outstanding) of 56 days
b. Debt to Equity Ratio of 1.39
c. Net Bank Debt of US$ 113.6 million at March 31, 2011 as against US$
102.8 million at March 31, 2010.
(b) Key Accomplishment and Noteworthy Items:
- International Association of Outsourcing Professionals (IAOP) ranked
us:
a. Best 20 Leaders by Industry Focus: Health Care;
b. Best 10 Companies by Service Offered: Document Management;
c. Best 10 Leaders by Service Offered: Financial Management;
d. Best 20 Leaders by Region Served: India;
e. Best 20 Leaders by Region Served: Canada;
- Global Presence and experienced team with over 8,357 associates,
strategically located across the globe: India 5,851, North America
1,440, China 655 and Mexico 411
- HOVS is also nominated with the following recognition / awards during
the year 2010-2011:
1) Nasscom Annual Survey 2010 has ranked HOV Services amongst the Top
15 BPO Exporters 2009- 10 in India.
2) 2010 Global Services 100 (GS 100) Survey has awarded HOV Services as
a Top BPO provider in three categories namely, Industry Specific BPO
Vendors, Top BPO Vendors and Top FAO Vendors list.
3) Government of Maharashtra has honoured HOV Services with
Maharashtra Information Technology Support Services- BPO /KPO award
2010.
(c) Appropriations:
(i) Dividend:
Your Board of Directors at the meeting held on May 27, 2011 recommended
a final dividend of Rs. 2 per fully paid up equity share of Rs. 10/-
each for the financial year 2010-11.
Earlier, during the year under review, your Board had declared an
interim dividend of Rs. 2/- per equity share of Rs. 10/- each of the
Company for every quarter as detailed below;
Quarter ended Interim dividend Record date Payment Date
FY 2010-11 declared
Q1 1st August 21, 2010 August 27, 2010
Q2 2nd November 3, 2010 November 18, 2010
Q3 3rd February 2, 2011 February 21, 2011
For the financial year 2010-11 the Company does not have any unpaid
dividend meant to be transferred to the Investor Education Protection
Fund under Section 205C of the Companies Act, 1956.
(ii) Transfer to Reserve: Your Company proposes to transfer Rs
16,617,943/- to the general reserve.
3. Re structuring of subsidiary companies
During the year under review your Board of Directors has consented the
steps taken by HOV Services LLC for restructure of its subsidiary
companies in order to maximize business operations efficiencies. The
details of restructuring steps taken are as herein below:
i) The Board of Directors in its meeting held on February 27, 2011
accorded consent to incorporate a HOV SPV LLC in Delaware under the
laws of Unites States of America as a wholly owned subsidiary of the
Company.
And, HOV SPV LLC in turn incorporated HOVS Corp., a Nevada corporation
under the laws of Unites States of America as a step down subsidiary of
the Company.
Subsequently, the HOV SPV LLC name was changed to HOVS LLC on March 17,
2011;
ii) Thereafter, the Board of Directors of the Company in its meeting
held on March 9, 2011 approved the merger of HOV Services LLC with HOVS
Corp (a Nevada corporation and wholly owned subsidiary of HOVS LLC, a
Delaware company as discussed in paragraph (i)
above). As a result of the merger HOV Services LLC continued as the
surviving entity and as a wholly-owned subsidiary of HOVS LLC.
4. Joint Venture (JV)
On March 12, 2011 the Board of Directors of HOVS accorded consent for
the merger of its indirect subsidiary of the company HOV Services LLC
incorporated under the laws of Delaware, (HOV Services) with
SOURCECORP, Inc., a portfolio company of Apollo Management V, L.P.
incorporated under the laws of Delaware (SOURCECORP), a Texas-based
BPO services and specialty consulting Services Company (the
Transaction).
Shareholders of HOV Services and SOURCECORP will each control 50% of
the combined entity, i.e. SOURCEHOV, Inc., (SOURCEHOV), a Delaware
corporation. The merger brings together two highly recognized companies
and created one of the largest global business process outsourcing and
professional consulting services entities in the world. The management
team of SOURCEHOV has over 25 years of expertise in the Industry, with
a proven track record of seamlessly integrating core M&A components and
continuously innovating new technologies to create end-to-end services
and new value for its customers.
The new company SOURCEHOV, with approximately 0 million in revenue,
is one of the largest pure play BPO and specialty consulting companies
in the industry, serving customers in more than half of the Fortune
100® with deep domain expertise, including document centric
applications, in Healthcare Payer and Provider, Finance and Banking,
Public Sector, Publishing, Legal, Insurance, Manufacturing and
Commercial industries, including specialized consulting services for
construction management, tax benefits, legal claims settlements and
economic consultancy. With this combination, the Companys global
workforce is now more than 14,200 employees operating from
approximately 80 delivery centers in 6 countries viz U.S., Mexico,
Canada, India, China and Philippines.
As of April 29, 2011, the HOV Services completed previously announced
merger of its indirect subsidiary HOV Services LLC (HOV Services)
with SOURCECORP, Inc. The new name of the combined company is SourceHOV
Inc., reflecting the union of our two companies and our expanded
capabilities.
Subsequent to aforesaid merger the Companys head office is relocated
to 3rd Floor, Sharda Arcade, Pune Satara Road, Bibwewadi, Pune-411 037.
5. Class A preferred Units by HOV Services LLC
Effective April 29, 2011, by virtue of the closure of the merger of its
indirect subsidiary HOV Services LLC (HOV Services) with SOURCECORP,
Inc. (SOURCECORP), the 10,467,532 Class A preferred Units issued by
HOV Services LLC and outstanding as of March 31, 2011, have ceased to
exist. Therefore, effective May 2, 2011 the fully diluted outstanding
share capital of the Company on consolidated basis comprised of 12,
491, 022 equity shares of Rs 10/- each only.
6. ADR/GDR
In the earlier proposed 15,000,000 of ADR/GDR issue by the Company,
none of the underlying equity shares are issued.
7. Employee Stock Option Plan (ESOP)
a) The 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 Shareholders No. of Options for No. of Options Total
Approval Date employees of the for employees
Company of subsidiary
companies
HOVS Stock
Option Plan July 21, 2007 400,000 700,000 1,100,000
2007
HOVS Stock
Option Plan September 30,
2008 0 750,000 750,000
2008
Options were issued to employees at an exercise price not less than
closing price of the stock exchange where there is highest trading
volume, prior to the date of meeting of the Compensation & Remuneration
Committee in which options were granted. The options will vest in a
phased manner within five years as 10% in each first to four years and
balance 60% at the end of fifth year.
No options have been granted under Plan 2008.
i) The details of options granted and lapsed under Plan 2007 are as
below:
Plan 2007
Employees of the Employees of
Company the subsidiary Total
Companies
Approved Options 400,000 700,000 1,100,000
Grant in 2007 141,500 526,000 667,500
Grant in 2008 28,150 217,900 246,050
Total Grant 169,650 743,900 913,550
Options Lapsed as
of April 1, 2011 155,150 217,900 373,050
Options in force 14,500 526,000 540,500
Balance options available 385,500 174,000 559,500
ii) Information of grant made to directors and employees:
Options granted date Directors Other than Total (A+B)
Directors
(A) (B)
July 21,2007 7,500 640,000 647,500
25-Oct-07 0 20,000 20,000
30-Jul-08 7,500 183,550 191,050
8-Oct-08 0 55,000 55,000
Total number of
Options Granted 15,000 898,550 913,550
Options lapsed as of
April 1, 2011 10000 363,050 373,050
Options outstanding 5,000 535,500 540,500
iii) The details of options granted under the two plans are given in
the table.
As of March 31, 2011
Plan 2007 Plan 2008
a. Options Granted: 9,13,550 Nil
b. The Pricing formula: Closing price of the
stock exchange
where there is highest
trading volume, prior
to the date of the Nil
meeting of the
Compensation &
Remuneration Committee
in which options are
granted.
c. Options Vested: Nil Nil
d. Options Exercised: Nil Nil
e. Total number of shares
arising as a result of 9,13,550 Nil
exercise of options:
f. Options lapsed: 3,73,050 Nil
g. Variation of terms of
option: NA NA
h. Money realized by
exercise of options: NA NA
i. Total number of options
in force: 5,40,500 Nil
j. Employee wise details of Nil
Options granted to:
i. Senior Management 5,40,500
personnel:
ii. Employee receiving 5% Nil
or more of the total
number of options
granted during the year:
iii. Employee granted 1% Nil
or more of the issued
capital:
k. Diluted EPS on issue of
shares on exercise calculated NA NA
in accordance with AS 20.
b) The Compensation & Remuneration Committee in its meeting held on May
27, 2011 have granted options out of the ESOP Plan 2007 as per detailed
below:
Grant Date Independent Employees of Employee of Total
Directors the Company the subsidiary
company
May 27, 2011 30,000 22,500 10,000 62,500
c) The Compensation and Remuneration Committee and the Board of
Directors in their respective meetings held on May 27, 2011 consented,
in the best interest of employees of HOV Services LLC which is merged
with SOURCECORP, to continue the options of all such employees whom the
options were granted out of the HOVS ESOP Plan 2007 during the year
2007 and 2008.
8. Conservation of Energy, Technology Absorption, and Foreign
Exchange:
Particulars furnished pursuant to Companies (Disclosures of Particulars
in the Report of Board of Directors) Rules, 1998:
Conservation of Energy: The operation of Company is not energy
intensive. The Company conducted energy audit in some of the units and
has implemented recommendations. This has resulted in reduction of
energy consumption during this financial year.
Research and Development: The Company has not undertaken any R&D
activity in any specific area during the year under review, and hence
no cost has been incurred towards the same. However, the Company
believes technology is strategic to its growth and has invested heavily
in hosted platforms, automation, capture, presentation and analytics.
The Company has development teams in US, India and Mexico implementing
this vision.
Technology Absorption, Adaptation and Innovation: The Company has been
focused on providing state-of-the-art end-to-end BPO services to
Clients. In carrying out this mission, HOVS has invested heavily in
technology innovation, while leveraging its global footprint that is no
longer confined by traditional borders through the use of a globally
stable and secure network infrastructure that conforms to the highest
international standards including ISO, HIPAA and SAS70. The Company has
adopted Six Sigma practices and LEAN techniques in a majority of its
centers and processes; a significant number of our team member have
gone through Six Sigma training and are certified at higher levels of
competency. The Company is constantly developing and adopting modern
technologies and standards to grow its competitive advantage, to better
serve its clients, retain employees and improve productivity and
performance.
Foreign Exchange Earnings and Outgo: Almost the entire earnings of the
Company are from the export of services since the Company has no
domestic business. The foreign exchange earnings and outgo is contained
in the Note number 16(b) of schedule 14B to the Accounts of the Annual
Report.
9. Particulars of Employees:
The Company has no employees drawing remuneration in excess of limits
specified under Section 217(2A) of the Companies Act, 1956 read with
the Companies (Particulars of Employees) Rules, 1975, as amended.
10. Human Resources:
During the year the Company has taken utmost care of its employees
deployed in wide- ranging cultures across the globe. The Company has
well defined Human Resource Policies,
excellent training facilities and a well established, healthy working
environment. The Company organizes regular health checkups through
recognized medical centers and the relationship of HOVS with its
employees remained cordial throughout the year.
11. Directors Responsibility Statement:
As stipulated in Section 217(2AA) of Companies Act, 1956, your
Directors subscribe to the Directors Responsibility Statement and
confirm as under:
a) that in preparation of Annual Accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures; and
b) that the directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year and of the
profit and loss account of the Company for that period; and
c) that the directors have taken proper and sufficient care of the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities; and
d) that the directors have prepared the annual accounts on a going
concern basis.
12. Fixed Deposit
The Company has not accepted any deposits from the public within the
meaning of Section 58A of the Companies Act, 1956, during the year
under review.
13. Corporate Governance
A separate section on Corporate Governance forming part of the
Directors Report and the Certificate from the Companys Auditors
confirming compliance of Corporate Governance norms as stipulated under
Clause 49 of the Listing Agreement with the Stock Exchanges is included
as a separate section in this Annual Report.
14. Management Discussion and Analysis
Management Discussion and Analysis Report for the year under review, as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges is presented as a separate section forming a part of this
report.
15. Auditors
The Statutory Auditors M/s Lodha & Co, Chartered Accountants, Mumbai,
hold office till the conclusion of ensuing Annual General Meeting and
have expressed their willingness and being eligible to continue, if
re-appointed. You are requested to consider their re-appointment.
16. Directors
There is no change in the Board of Directors during the year under
review. Mr. B R Gupta, Director retires by rotation at ensuing Annual
General Meeting and being eligible offers himself for reappointment.
The Board of Directors in their meeting held on May 27, 2011 had
subject to the approval of Central Government, approved re-appointment
of Mr. Parvinder S Chadha, Mr. Sunil Rajadhyaksha and Mr. Surinder
Rametra as whole-time directors of the Company w.e.f April 1, 2011 for
a period of five years.
17. Subsidiary companies and consolidation of Accounts
As per Section 212 of the Companies Act, 1956, the Company is required
to attach the directors report, balance sheet, and profit and loss
account of the subsidiary companies. The application was made to the
Central Government of India for an exemption from such attachment as
the Company presents the audited consolidated financial statements in
the Annual Report. The Government of India has granted exemption to the
Company from complying with section 212 for all the subsidiary
companies vide its approval letter dated January 25, 2011. Pursuant to
the conditions of Government of India approval the statement thereto is
annexed to the Annual Report.
Accordingly, the Annual Report does not contain the financial
statements of the subsidiary companies. We will make available the
audited annual accounts and related information of subsidiary
companies, where applicable, upon request by any of our investors.
These documents will also be available for inspection during business
hours at our registered office.
18. Acknowledgement
Your Directors express their appreciation for assistance and
co-operation received from employees, shareholders, customers,
suppliers, bankers and government authorities for their continued
support to the Company during the year.
For and on behalf of the Board of Directors
Parvinder S Chadha
Chairman & Executive Director
Place: Mumbai
Date : May 27, 2011
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