The Directors are pleased to present the Company''s Twenty-Seventh
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, 201S.
The financial statements are prepared for the year comprising of the 12
(Twelve) months period ended on March 31, 201S and are not comparable
to the financial statements of previous year comprising of 1S (Fifteen)
months ended March 31, 2014, as the financial year was changed from
calendar year to financial year as per the Companies Act, 2013.
FINANCIAL RESULTS AND OPERATIONS:
Rs. In Million
Twelve Fifteen Twelve Fifteen
Particulars months months months months
period period period period
ended ended ended ended
on on on on
March March March March
31, 2015 31, 2014 31, 2015 31, 2014
Income from Operation 164.04 1 73.26 12S.45 159.24
Other Income 5.71 10.14 8.17 12.74
169.75 183.40 133.62 171.98
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 (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) - -
minority interest (20.11) (24.28) (2.93) -
Add: Share of Profit/
Loss) from an Associate (1,S33.11) (464.S0) - -
Profit / (Loss) for
the year/period (1,553.22) (488.78) (2.93) 8.53
1. Results of Operations
Consolidated Financial Performance
* Consolidated total Income for the current year was Rs. 169.75
* 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 current year.
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
current year under reporting.
Your Company intends to conserve available resources to invest in the
growth of the business and pursue strategic growth opportunities and
also in view of losses during the financial year 2014-15 the Board of
Directors, 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, 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 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 Law.
SourceHOV Holdings Inc., in which HOVS LLC, wholly owned subsidiary of
the Company, has 44.8% stake holding.
A report on the performance and financial position of Subsidiaries,
Associate companies as per the Companies Act, 2013 is annexed to the
4. Significant developments
A) Merger transaction
On November 4, 2014 the SourceHOV Holdings Inc. (SourceHOV), a
company in which HOVS LLC, wholly owned US subsidiary, holds an
investment, has completed the merger with BancTec Group LLC. The
shareholders'' approval was obtained through notice of postal ballot
dated September 30, 2014. The result of postal ballot was declared on
November 4, 2014 wherein the shareholders had approved with requisite
majority. Post-merger the stake holding 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 dated September 30, 2014 conducted a postal ballot process for
taking shareholders'' approval seeking in-principle approval for sale of
Company''s investment in SourceHOV vide the notice of postal ballot
dated September 30, 2014. The result of postal ballot was declared on
November 4, 2014 wherein the shareholders had approved with requisite
ii) Certain group of shareholders had filed on November 3, 2014 a
petition before Mumbai Bench of the Hon''ble Company Law Board (CP No.
101/397-398/CLB/ MB/2014), against the three resolutions put before the
shareholders vide the notice of postal ballot dated September 30, 2014.
As part of the hearing process with the Mumbai Bench of the Hon''ble
Company Law Board, all necessary documents including the valuation
report and fairness report 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,
201S disposed- off the petition by permitting the objecting
shareholders, on the request of objecting shareholders, to withdraw the
petition. The Company had filed necessary disclosure regarding the
outcome of the hearing with the Hon''ble Company Law Board vide its
intimation dated February 19, 201S to BSE Limited and National Stock
Exchange of India Limited.
iv) The proposed sale transaction did not consummate on account of the
prevailing situation including shareholder litigation and transaction
delays. The Company had immediately communicated to the shareholders
vide intimations filed with the BSE Limited and National Stock Exchange
of India Limited on April 20, 201S.
The shareholder''s in their Annual General Meeting dated July 21, 2007
granted approval for proposed 1S,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 has allotted twice equity shares
under ESOP Plan 2007 to its employee''s on May 21, 2014 and on December
19, 2014 allotted 3,000 and 10,S00 equity shares respectively.
Consequently, after the allotment, the paid up share capital of the
Company has gone up from 12,499,S22 equity shares of Rs. 10/- each
aggregating to Rs. 124,99S,220/- to 12,S14,022 equity shares of Rs.
10/- aggregating to Rs. 12S,140,220/-
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 No. of No. of Total
Approval Options Options
Date for for
of the of
HOVS Stock Option
Plan 2007 July 21, 2007 400,000 700,000 1,100,000
HOVS Stock Option
Plan 2008 September 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
During the financial year the Company had maintained cordial relations
with all its employees and has taken utmost care of its employees
deployed. All employees are aligned under our value system which
propagates and practices open, transparent and honest, collaborative,
honoring commitments and demanding excellence among them.
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)
10. Disclosure as per Section 197 (12) of the Companies Act, 2013 and
Rule S of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 is annexed herewith as ANNEXURE - ''C'' to this
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 8 (Eight) Board Meetings were held the details of
which are given in the Corporate Governance Report.
Mr. Sunil Rajadhyaksha, Executive Director, retires by rotation and
being eligible has offered himself for re-appointment.
Mrs. Lakshmi Kumar was appointed as an Additional Director of the
Company by the Board of Directors pursuant to the Section 161 of the
Companies Act, 2013, who shall hold office till the conclusion of the
ensuing 27th Annual General Meeting. In terms of provisions of Section
149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement,
her appointment is proposed for further period as an Independent
Director, who shall hold office for five years (from July 22, 201S 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 Director and Mr. Sunil Rajadhyaksha, Executive Director were
appointed as whole-time directors of the Company for a period of five
years from April 1, 2011 to March 31, 2016 by the Shareholders'' in
their 23rd Annual General Meeting held on August 3, 2011. The tenure of
their office as whole-time director will be ending on March 31, 2016.
Pursuant to the provisions of the Sections 196, 197 read with Schedule
V of the Companies Act, 2013 the approval of the Shareholders'' of the
Company is being sought for their re-appointment as whole-time
directors for a further term of five years from April 1, 2016 to March
Mr. Prakash Shukla, Independent Director ceased to be director w.e.f.
from July 26, 2014.
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 Director 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 and Clause 49 of the Listing Agreement.
15. Meeting of Independent Directors
Independent Directors of the Company met on March 21, 201S, 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 familiarisation program was arranged by the Company to 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, 201S. The details of the
familization program is disclosed on the Company''s website http://www.
16. Performance Evaluation
The evaluation of Independent Directors, Board, Committees and other
non-independent directors was carried out as per criteria such as
objective, attendance, contribution, interactive, experience,
integrity, disclosures provided, ability to monitor corporate
governance, domain expertise, strategic vision, industry knowledge,
participation in discussions etc., prescribed by the Nomination and
Remuneration Committee. The details of the same are as mentioned below.
Board: The Board regularly spent quality time in reviewing performance
of the Company and has working environment which is congenial and
co-operative. It has appropriate committees and skill sets to enable
its working. It receives timely information from the management to
fulfill its role.
Committees: The Board Committees are appropriately constituted with
clear charter which is 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 Board and its various committees. Each one
expresses his views on the matter of discussion in the Board/
Committee. All directors keep abreast of the updated issues that are
likely to be taken up at the Board level. They are committed to
fulfillment of director obligation and fiduciary responsibilities.
17. Key Managerial Personnel
During the financial year Company has appointed Mr. Sriram Iyengar, as
a Chief Financial Officer w.e.f. April I, 2014 pursuant to the
provision of Section 203 of the Companies Act, 2013. Mr. Bhuvanesh
Sharma resigned from the post of Company Secretary and Compliance
Officer of the Company w.e.f. July 30, 2014 and the Board re-appointed
him from January 1, 201S as VP-Corporate Affairs and Company Secretary
and Compliance Officer of the Company.
18. Internal Financial Controls
The Company has adopted adequate procedures for ensuring the internal
financial controls. The Company adheres 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 informations.
19. Related Party Transactions
The transactions entered with related parties are in ordinary course of
business and on arm''s length basis of the Company. The particulars of
transactions entered with related parties 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 the value of the Company for the stakeholders and abide by
the Corporate Governance norms as stipulated under Clause 49 of the
Listing Agreement with the Stock Exchanges. The Corporate 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
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges is presented as a separate section forming part of the
22. Code of Conduct for Board and Senior Management
The Company has adopted Code of Conduct for the Directors and Senior
Management and the same 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 the said Code.
A declaration signed by the Whole-time Director to this effect is
annexed as part 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 &
Co, Chartered Accountants, Mumbai, were appointed as Statutory Auditors
of the Company to hold office till the conclusion of 29th Annual
General Meeting subject to ratification for their appointment by
shareholders at every Annual General Meeting and being eligible have
expressed their willingness to continue.
A resolution proposing ratification for their appointment is submitted
at the ensuing 27th Annual General Meeting.
The Statutory Auditors'' Report does not contain any qualification,
reservation or adverse remark.
Secretarial Audit Report
The Board appointed M/s. JDNASSA & Associates, Pune for conducting
secretarial audit, the Secretarial Audit Report for FY 2014-1S is
annexed herewith as ANNEXURE - ''F'' to this report.
The Secretarial Auditors'' Report does not contain any qualification,
reservation or adverse remark.
24. Extract of Annual Return
Extract of Annual Return is annexed herewith as ANNEXURE- ''G'' to this
25. Committees of the Board Audit Committee
The Company has constituted Audit Committee, the details of the same
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. 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 the shareholders.
The details of the committees along with their charters is annexed as
part of this Board''s report.
26. 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 behaviour, actual
or suspected frauds or violation of the Company''s Code of Conduct. It
provides necessary safeguards for protection of employees from
reprisals or victimisation, 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 make provisions for direct access to the Chairman of
the Audit Committee in appropriate and exceptional cases. The said
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 of Insider Trading and Fair disclosure of Unpublished Price
Sensitive Information. The Code of Conduct for Prevention of Insider
Trading is to regulate, monitor, govern and report trading in
securities of the Company by insiders and compliance of the SEBI
(Prohibition of Insider Trading) Regulations, 201S. The said Code is
annexed as part of this Board''s report.
On following points no reporting or disclosure is required as there
were no transactions on these items during the financial year under
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 tribunals which impacting the going concern status and
operations of the Company;
iii. Issue of equity shares with differential rights as to dividend,
voting or otherwise;
iv. Issue of sweat equity shares;
v. None of the whole-time directors of the Company received any
remuneration or commission from the subsidiaries of the Company.
Your Directors'' place on record their appreciation for co-operation and
support received from the, 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 BSE Limited, 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
Place: Mumbai Sunil Rajadhyaksha
Date: May 22, 201S Chairman & Executive Director