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Directors Report of HOV Services Ltd.

Mar 31, 2015

Dear Members,

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

Consolidated Standalone

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

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

EXPENDITURE

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 & Tax

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) - -

Profit/(Loss) after 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 million.

* 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.

2. Appropriations

(i) Dividend:

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.

B. Associate

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 financial statements.

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 majority.

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.

5. ADR/GDR

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 employees employees of the of Company subsidiary ompanies

"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 30, 2008

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) Rules, 2014.

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 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 8 (Eight) Board Meetings were held the details of which are given in the Corporate Governance Report.

14. Directors

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 31, 2021.

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. hovsltd.eom/Policies_Disclosures.html#

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 Director''s report.

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 report.

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.

28. General

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

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.

29. Acknowledgement

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 (DIN- 00011683)


Mar 31, 2014

Dear members,

The Directors are pleased to present the Company''s Twenty- Sixth Annual Report on the Business and Operations of HOV Services Limited (the "Company" or "HOVS") together with the Audited Statement of Accounts for the fifteen months period ended March 31, 2014.

The financial year was changed from calendar year to fiscal year i.e. April to March from April 1, 2014. Accordingly, the current financial statements are prepared for 15 (Fifteen) months period from January 1, 2013 up to March 31, 2014 and therefore, are not comparable to the financial statements of previous year which comprises of the 12 (Twelve) months year ended on December 31, 2012.

FINANCIAL RESULTS AND OPERATIONS: Rs. In Million

Consolidated Standalone

Fifteen Twelve Fifteen Twelve Particulars months months months months period year period year ended on ended on ended ended on March 31, December on March December 2014 31, 2012 31, 2014 31, 2012

INCOME

Income from Operations 173.26 140.20 159.24 113.60

Other Income 10.14 15.58 12.74 14.73

183.40 155.78 171.98 128.33

EXPENDITURE

Purchase for resale - 21.20 - -

Staff Cost 128.50 96.59 122.17 87.61

General and Administrative Expenses 69.92 36.59 31.72 15.43

198.42 154.38 153.89 103.04

Profit/ (Loss) before Interest, Depreciation and Tax (15.02) (1.40) 18.09 25.29

Less: Interest 1.60 - -

Less: Depreciation 9.74 4.99 4.03 3.42

Profit / (Loss) before Tax (26.36) (3.59) 14.06 21.87

Tax pertaining to earlier years 0.04 0.70 0.04 0.70 Less: Provisions for taxes

Current Tax 6.23 7.77 6.23 7.77

Deferred Tax (1.94) (0.83) (0.74) (0.83)

Profit / (Loss) after Tax (30.69) (11.23) 8.53 14.23

Less: Minority Interest (6.41) (8.80) - -

Profit/(Loss) after minority interest (24.28) (2.43) - -

Add: Share of Profit/(Loss) from an Associate (464.50) 51.23 -

Profit / (Loss) after Tax & Share of Profit/(Loss) from an Associate (488.78) 48.80 8.53 14.23

1. RESULTS OF OPERATIONS:

Consolidated Financial Performance

* Consolidated total Income for the current fifteen months period was Rs. 183.40 million.

* EBIDT for the current fifteen months period was Rs. (15.02) million.

* Net Profit / (Loss) was Rs. (488.78) million.

* The basic and diluted Earnings per share (EPS) for the fifteen months period is Rs. (39.13). Standalone Financial Performance

* Total Income for the current fifteen months period was Rs. 171.98 million.

* EBIDT for the current fifteen months period was Rs. 18.09 million.

* Net Profit was Rs. 8.53 million.

* The basic and diluted Earnings per share (EPS) is Rs. 0.68 for the period 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 your Directors do not recommend any dividend for the period.

For the fifteen months period ended March 31, 2014 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:

No amount was transferred to Reserve during the financial period ended on March 31, 2014.

3. Subsidiary companies

The Company has the following 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.

4. Significant developments

i) On March 19, 2013, Citi Venture Capital International ("CVCI Private Equity") invested in the SourceHOV as a new equity partner wherein CVCI Private Equity purchased all of the ownership interests of affiliates of Apollo Global Management, LLC ("Apollo") and certain minority holders'' in SourceHOV. This new partnership positioned SourceHOV for accelerated growth through industry leading advisory formed by a tenured investment team with specialized technology and service industry experience. The HOVS owns an equity interest in SourceHOV.

ii) On September 6, 2013 HOV Environment Solutions Private Limited ("HOV ESPL") was made subsidiary of HOV Environment LLC, a subsidiary company of HOVS LLC. HOV ESPL earlier was indirect subsidiary of HOV Services Limited through HOVS Holdings Limited a wholly owned subsidiary (WOS) of HOV Services Limited. The change was made in order to streamline & strengthen execution of operations and work related to environmental projects. Post the change HOV ESPL will continue to be an indirect subsidiary of the Company through HOVS LLC.

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 quarter ended March 31, 2014 pursuant to the options exercised, 8,500 equity shares were allotted. Consequently after the allotment, the paid up share capital of the Company has gone up from 12,491,022 equity shares of Rs. 10/- each aggregating to Rs. 124,910,220/- to 12,499,522 equity shares of Rs. 10/- each aggregating to Rs.124,995,220/- Consequently the fully diluted outstanding share capital of the Company as at period ended March 31, 2014, on consolidated basis comprise of 12,499,522 equity shares of Rs. 10/- (Ten only) each.

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 Options No. of Options Total Approval for employees for employees Date of the Company of subsidiary companies

"HOVS Stock Option July 21, 2007 400,000 700,000 1,100,000 Plan 2007"

"HOVS Stock Option September 30, 0 750,000 750,000 Plan 2008" 2008

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is annexed to this report.

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: Your Company''s operations involve low energy consumption. The Company strives to conserve energy on continuous basis.

Research and Development: The Company has not undertaken any R&D activity in any specific area during the period under review, and hence no cost has been incurred towards the same.

Technology Absorption, Adaptation and Innovation: 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, however during the period no such activities been carried out.

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 20.10 of Notes to the Financial Statements 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 period 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 being open, transparent and honest, collaborative, honoring commitments and demanding excellence among them.

11. Directors Responsibility Statement:

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the report.

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 period under review.

13. Corporate Governance Report

The Company adheres to Corporate Governance guidelines to fulfill its responsibilities to all its stakeholders i.e. investors, customers, vendors, government, employees. Company believes that good corporate governance enhances accountability and increases shareholder value.

The Company complies with the corporate governance norms as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges and a report thereto is included in annexure to the Directors'' report.

14. Management Discussion and Analysis

Management Discussion and Analysis Report for the period 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. Statutory 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. Your directors recommend their re-appointment. A resolution proposing their appointment at remuneration to be fixed by the Board of Directors is submitted at the Annual General Meeting.

16. Directors

The Company had, pursuant to the provisions of clause 49 of the Listing Agreements entered into with Stock Exchanges, appointed Mr. B R Gupta, Mr. Harish Bhasin and Mr. Prakash Shukla as Independent Directors of the Company.

As per section 149(4) of the Companies Act, 2013 (Act), which came into effect from April 1, 2014, every listed public company is required to have at least one-third of the total number of directors as Independent Directors. In accordance with the provisions of section 149 of the Act, Mr. B R Gupta and Mr. Harish Bhasin, are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of 26th Annual General Meeting (AGM) of the Company. Mr. Prakash Shukla intends not to seek for his appointment.

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

None of the Director was materially interested in any contracts or arrangements existing during or at the end of the financial period that was significant in relation to the business of the Company.

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, auditors'' report, balance sheet, and statement of profit and loss, schedules to account and notes to the account of subsidiaries of your Company along with the balance sheet of your Company. However general exemption is granted in terms of General Circular No. 2/ 2011 and No. 5/12/2007-C1-III dated February 8, 2011, issued by the Ministry of Corporate Affairs under section 212(8) of the Companies Act, 1956 granting general exemption. Your Company is in compliance of the section read with the provisions of the circular and will not be attaching the accounts of the subsidiaries.

The audited annual accounts and related information of subsidiary companies, where applicable, will be kept in the registered office and will be available for inspection, upon request by any of shareholders of the holding and subsidiary companies. A statement showing details on the subsidiary companies as prescribed vide general circular is attached in separate section of this Annual Report.

18. Acknowledgement

Your Directors'' place on record their appreciation for co-operation and support received from the Software Technology Parks of India, the Government of India, Government of Maharashtra, Reserve Bank of India, other governmental agencies and NASSCOM and the National Stock Exchange and the Bombay Stock Exchange and, bankers and shareholders during the 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 year.

For and on behalf of the Board of Directors

Place: Mumbai Sunil Rajadhyaksha Date: May 21, 2014 Chairman & Executive Director


Dec 31, 2012

The Directors are pleased to present the Company''s Twenty- Fifth 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 December 31, 2012.

The financial statements are prepared for the year comprising of the 12 (Twelve) months period ended on December 31, 2012 and are not comparable to the financial statements of previous year comprising of 9 (Nine) months ended December 31, 2011, as the financial year was changed to the calendar year ended December 31 in 2011.

FINANICAL RESULTS AND OPERATIONS:

Rs. In Million

Consolidated Standalone Twelve months Nine months Twelve months Nine months Particulars ended on ended on ended on ended on December December December December 31, 2012 31, 2011 31, 2012 31, 2011

INCOME

Income from Operation 140.20 105.42 113.60 94.10

Other Income 15.58 9.88 14.73 10.01

155.78 115.30 128.33 104.11

EXPENDITURE

Purchase for resale 21.20 - - -

Staff Cost 96.59 57.58 87.61 57.65

General and Administrative Expenses 36.59 35.05 15.43 19.75

154.34 92.63 103.04 77.40

Profit / (Loss) before Interest, Depreciation and Tax (8.59) 22.67 25.29 26.71

Less: Interest - - - -

Less: Depreciation 4.99 2.76 3.42 2.76

Profit / (Loss) before Tax (3.60) 19.91 21.87 23.95

Tax pertaining to earlier years 0.70 0.21 0.70 0.21

Less: Provisions for taxes

Current Tax 7.77 8.38 7.77 8.38

Deferred Tax (0.83) (0.64) (0.83) (0.64)

Profit / (Loss) after Tax (11.24) 11.96 14.23 16.00

Less: Minority Interest (8.80) - - -

Profit/(Loss) after minority interest (2.43) - - -

Add: Share of Profit/ (Loss) from an Associate 51.23 (104.33) - -

Profit/ (Loss) after Tax & Share of Profit/ (Loss) from an Associate 48.80 (92.37) 14.23 16.00

1. RESULTS OF OPERATIONS:

Consolidated Financial Performance for the Year ended December 31, 2012

- Consolidated total Income for the current twelve month period was Rs. 140.20 million.

- EBIDT for the current twelve month period was Rs. 1.38 million.

- Net Profit was Rs. 48.80 million.

- The basic and diluted Earnings per share (EPS) for the twelve months period is 3.91. Standalone Financial Performance:

- Total Income for the current twelve month period was Rs. 113.60 million.

- EBIDT for the current twelve month period was Rs. 25.29 million.

- Net Profit was Rs. 14.23 million.

- The basic and diluted Earnings per share (EPS) is Rs 1.14 for the Year under reporting.

2. SIGNIFICANT DEVELOPMENTS:

During the year following developments took place;

i) In April 2012, HOVS LLC (the WOS of the Company) invested in a new company named "HOV Environment LLC", having equity interest of 61.10%; and

ii) In October 2012, the Company had acquired building property admeasuring 13,243 Square feet area situated at Vashi InfoTech Park, Vashi, Navi Mumbai.

3. Appropriations

(i) Dividend:

Your Company intends to conserve available resources to invest in the growth of the business and pursue strategic growth opportunities. Accordingly your Directors do not recommend any dividend for the year.

For the financial year 2012 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: No amount was transferred to Reserve during the financial year ended December 31, 2012.

4. Subsidiary companies

The Company has the following subsidiary companies:

i) HOVS LLC incorporated in Delaware under the laws of United States of America;

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

iii) HOV Environment LLC incorporated in Nevada under the laws of United States of America; and

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

5. ADR/GDR

In the earlier proposed 15,000,000 of ADR/GDR issue by the Company none of the underlying equity shares were issued.

6. Share Capital of the Company

The fully diluted outstanding share capital of the Company on consolidated basis comprise of 12,491,022 equity shares of Rs. 10/- (Ten Only) each.

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 Options No. of Options Approval Date for employees of for employees Total the Company of subsidiary companies

"HOVS Stock Option July 21, 2007 400,000 700,000 1,100,000 Plan 2007"

"HOVS Stock Option September 0 750,000 750,000 Plan 2008" 30, 2008

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is annexed to this report.

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: Your Company''s operations involve low energy consumption. The Company strives to conserve energy on continuous basis.

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.

Technology Absorption, Adaptation and Innovation: 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, however during the year no such activities been carried out.

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 20.4 of Notes 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 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 being open, transparent and honest, collaborative, honoring commitments and demanding excellence among them.

11. Directors Responsibility Statement:

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the report.

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 Report

The Company adheres to corporate governance guidelines to fulfill its responsibilities to all its stakeholders i.e. investors, customers, vendors, government, employees. Company believes that good corporate governance enhances accountability and increases shareholder value.

The Company complies with the corporate governance norms as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges and a report thereto is included in annexure to the Director''s 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. Statutory 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. Your directors recommend their re-appointment. A resolution proposing their appointment at remuneration to be fixed by the Board of Directors is submitted at the Annual General Meeting.

16. Directors

There is no change in the Board of Directors during the year under review. Mr. Prakash Shukla, Director is to retire by rotation at ensuing 25th Annual General Meeting. Mr. Prakash Shukla confirmed his eligibility and willingness to continue the directorship of the Company, if appointed. It is considered prudent that Company should continue to avail the services of Mr. Prakash Shukla and therefore the Board recommends approving the proposed resolution relating to his re-appointment.

None of the Director was materially interested in any contracts or arrangements existing during or at the end of the financial year that was significant in relation to the business of the Company.

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, auditors'' report, balance sheet, and profit and loss account, schedules to account and notes to the account of subsidiaries of your Company along with the balance sheet of your Company. However, general exemption is granted in terms of General Circular No. 2/2011 and No. 5/12/2007-Cl-III dated February 8, 2011, issued bt the Ministry of Corporate Affairs under section 212(8) of the Companies Act, 1956 granting general exemption. Your Company is in compliance of the section read with the provisions of the circular and will not be attaching the accounts of the subsidiaries.

The audited annual accounts and related information of subsidiary companies, where applicable, will be kept in the head office and will be available for inspection, upon request by any of shareholders. These documents will also be available for inspection during business hours at our registered office. A statement showing details on the subsidiary companies as prescribed vide general circular is attached in separate section of this Annual Report.

18. Acknowledgement

Your Directors'' place on record their appreciation for co-operation and support received from the Software Technology Parks of India, the Government of India, Governments of Maharashtra, Reserve Bank of India, other governmental agencies and NASSCOM and the National Stock Exchange and the Bombay Stock Exchange and, bankers and shareholders during the 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 year.

For and on behalf of the Board of Directors

Place: Mumbai Sunil Rajadhyaksha

Date: February 27, 2013 Chairman & Executive Director


Dec 31, 2011

The Directors are pleased to present the Company's Twenty- Fourth 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 December 31, 2011.

During the reported year the Company i) completed merger of its indirect subsidiary HOV Services LLC with SOURCECORP Inc., creating Source HOV LLC, reflecting the union of our two companies and our expanded capabilities; and ii) entered into environment protection business through its subsidiary HOV Environment Solutions Private Limited ("HOV ESPL").

The financial year was changed to a calendar year ended December 31 therefore the current financial year is comprised of 9 (Nine) months ended on December 31, 2011. Accordingly, the financial statements are prepared for the 9 (Nine) months ended December 31, 2011 and are not comparable to the financial statements of previous year comprising of the 12 (Twelve) month period ended on March 31, 2011.

FINANICAL RESULTS AND OPERATIONS:

In the financial year 2011, your Company has recorded consolidated revenue of Rs. 105.42 million and loss after tax was Rs. (92.37) million. The brief financial highlights with comparison of previous year are as below:

Rs. In Million

Consolidated Standalone Particulars Nine months FY 2010-11 Nine months FY 2010-11 ended on ended on ended on ended on December 31, March 31, December 31, March 31, 2011 2011 2011 2011

INCOME

Income from Operation 105.42 7,092.53 94.10 247.40

Other Income 9.88 15.65 10.01 2.28

115.30 7,108.18 104.11 249.68

EXPENDITURE

Staff Cost 57.58 3,607.22 57.65 56.31

General and Administrative Expenses 35.05 2,374.87 19.75 22.57

92.63 5,982.09 77.40 78.88

Profit / (Loss) before Interest, Depreciation and Tax 22.67 1,126.09 26.71 170.80

Less: Interest - 292.75 - -

Less: Depreciation 2.76 291.64 2.76 3.72

Profit / (Loss) before Tax 19.91 541.70 23.95 167.08

Tax pertaining to earlier years 0.05 0.05

Less: Provisions for taxes

Current Tax 8.54 3.88 8.54 0.38

Deferred Tax (0.64) 0.52 (0.64) 0.52

Profit / (Loss) after Tax 11.96 537.30 16.00 166.18

Less: Share of Profit/(Loss) from an Associate (104.33) - - -

Profit / (Loss) after Tax & - - - -

Share of Profit/ (Loss) from an Associate (92.37) 537.30 16.00 166.18

1. RESULTS OF OPERATIONS:

Consolidated Financial Performance for the Fiscal Year ended December 31, 2011 FY 2011 have been the pivoting point and a new beginning for the Company- wherein the merger of Source HOV LLC occurred and the Company also entered through its subsidiary-HOV Environment Solutions Private Limited ("HOV ESPL") in the business of environmental protection solutions. The detailed information is provided under the separate section of this Annual Report.

The management is confident that the actions being taken will result in growth and added value in the coming years.

The performance of the nine months period ended December 31, 2011 highlighted as follows:

- Consolidated total Income for the current nine month period ended on December 31, 2011 is Rs. 105.42 million.

- EBIDTA for the current nine month period ended on December 31, 2011 Rs. 12.79 million.

- Net Loss was Rs. 92.37 million.

- The basic and diluted Earnings per share (EPS) were Rs (7.4) for the nine months period ended December 31, 2011.

Standalone Financial Performance for the nine months period ended December 31, 2011:

- Total Income for the current nine month period ended on December 31, 2011 is Rs. 94.10 million.

- EBIDTA for the current nine month period ended on December 31, 2011 Rs 16.70 million.

- Net Profit was Rs. 16.00 million.

- The basic and diluted Earnings per share (EPS) were Rs 1.28 for the Year ended December 31, 2011.

2. HOVS Corporate Strategy

a) Operates Businesses as Investment Portfolios:

- We organize our portfolio companies by industry and by sector with forward-looking goals for combination based on the ultimate benefit to the target customer base and to HOVS. Part of our investment strategy for each deal is to initially, complete a thorough analysis of the industry and its respective segments, prior to making a platform acquisition. Post acquisition, we continue to allow the companies to operate autonomously before building scale. Through inorganic growth, we scale our investments by acquiring products and services in the industry/sector. Our goal is to become a leading, diversified player in every industry we enter increasing the overall benefit to our clients and our shareholders.

- By maintaining our portfolio companies as autonomous entities, we are able to execute strategic combinations or divestitures whenever the opportunity for an advantageous transaction arises.

b) Operates Businesses as a diversified services organization:

- We facilitate appropriate opportunities for each HOVS portfolio company to cross-sell its services to the major clients of each other HOVS portfolio company.

- We manage delivery of services based on best practices and contribution to profits from our global platform to our portfolio companies.

- We identify, in coordination with portfolio company senior management, strategic M&A opportunities, and we make those opportunities happen.

- We help our portfolio companies maintain and improve their cash flow and liquidity, and we identify opportunities for portfolio companies to take advantage of our relationships with lending institutions and other financial partners.

- In this way, our portfolio companies receive support services similar to what they would receive as business units of a diversified services corporation.

3. SIGNIFICANT DEVELOPMENTS:

(a) Source HOV - Merger

On April 29, 2011, the Company completed the merger of its indirect subsidiary HOV Services LLC with SOURCECORP, Inc., a portfolio company of Apollo Management V, L.P. The merged entity called Source HOV LLC ("Source HOV"), reflecting the union of the two companies and our expanded capabilities.

Source HOV is a provider of end-to-end business process outsourcing solutions with highly customized services as well as specialized knowledge-based processing and consulting solutions. The company offers clients in information-intensive industries, such as healthcare, financial services, legal, public sector, and transportation, the solutions to manage their information and document intensive business processes and the solutions to fulfill certain specialized knowledge- based processing and consulting requirements, enabling these organizations to concentrate on their core competencies. As a global business process solutions and knowledge process outsourcing provider, the company operates approximately 87 operating and sales locations throughout the United States, India, China, Canada, the Philippines and Mexico, with approximately 12,531 employees at December 31, 2011. The Company serves a diverse client base where enterprises can outsource many of their information management, distribution, certain knowledge based processing and specialized consulting needs to us due to the breadth of our capabilities and subject matter expertise.

The combination transaction was accounted for using the equity method in terms of Accounting Standard 23 "Accounting for Investments in Associates in Consolidated Financial statements". The Company has a 27.2% equity interest in Source HOV LLC., Management believes HOVS has significant influence as they have a 50% vote of the Board of Directors, but not control over the financial and operating policies.

Current year results are not comparable to prior year as in FY 2010-11 HOV Services LLC was a consolidated subsidiary of the Parent, where in current year it is treated as an associate investment accounted for under the equity method due to the combination discussed above.

(b) HOV ESPL

The HOV ESPL is an indirect subsidiary of HOV Services Limited (the "HOVS") through HOVS Holdings Limited, (the "HOVS HK") a Hong Kong based wholly owned subsidiary of the HOVS. HOV ESPL had undertaken business in environment protections.

4. Appropriations:

(i) Dividend:

Your Company intends to conserve available resources to invest in the growth of the business and pursue strategic growth opportunities. Accordingly your Directors do not recommend any dividend for the year.

During the Financial year ended as on December 31, 2011 the Company paid on August 22, 2011 Final dividend of FY 2010-11 as approved by the shareholders in their Annual General Meeting held on August 3, 2011.

For the financial year 2011 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:

No amount was transferred to Reserve during the financial year ended on December 31, 2011.

5. Subsidiary companies

The Company has the following subsidiary companies:

i) HOVS LLC incorporated in Delaware under the laws of United States of America;

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

iii) HOV Environment Solutions Private Limited incorporated in Maharashtra under Indian Company Law.

6. ADR/GDR

In the earlier proposed 15,000,000 of ADR/GDR issue by the Company none of the underlying equity shares were issued.

7. Class A Preferred Units by HOV Services LLC

By virtue of the merger of its indirect subsidiary HOV Services LLC ("HOV Services") with SOURCECORP, Inc., the 10,467,532 Class A Preferred Units issued by HOV Services have ceased to exist. Effective May 2, 2011 the fully diluted outstanding share capital of the Company on consolidated basis comprise of 12,491,022 equity shares of Rs.10 each only.

8. 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 Shareholder's No. of Options No. of Options Total Approval Date for employees for employees of the Company of subsidiary companies

"HOVS Stock Option July 21, 2007 400,000 700,000 1,100,000 Plan 2007"

"HOVS Stock Option September 30, 0 750,000 750,000 Plan 2008" 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 during the year are as below :

Plan 2007 Employees of Employees of Total the Company the subsidiary 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

Grant in 2011 52,500 10,000 62,500

Total Grant 222,150 753,900 976,050

Options Lapsed as of December 2011 155,150 325,400 480,550

Options in force 67,000 428,500 495,500

Balance options available 333,000 271,500 604,500

ii) Information of grant made to directors and employees:

Options granted date Directors Other than Total Directors (A) (B) (A B)

July 21, 2007 7,500 640,000 647,500

October 25, 2007 0 20,000 20,000

Junly 30, 2008 7,500 183,550 191,050

October 8, 2008 0 55,000 55,000

May 27, 2011 30,000 32,500 62,500

Total Granted 45,000 931,050 976,050

Options lapsed 10,000 470,550 480,550

Options outstanding 35,000 460,500 495,500

iii) The details of options granted under the two plans are given in the table.

As of December 31, 2011

Plan 2007 Plan 2008

a. Options Granted: 976,050 Nil

b. The Pricing formula: Closing price of the stock exchange where there is highest trading volume, prior to the date of the meeting of the Compensation & Remuneration Committee in which options are granted. Nil

c. Options Vested: Nil Nil

d. Options Exercised: Nil Nil

e. Total number of shares would be 976,050 Nil arising as a result of exercise of options:

f. Options lapsed: 480,550 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: 495,500 Nil

j. Employee wise details of Options Nil granted to:

i. Senior Management personnel: 495,500

ii. Employee receiving 5% or more Nil of the total number of options granted during the year:

iii. Employee granted 1% or more of the issued capital: Nil

k. Diluted EPS on issue of shares on exercise calculated in accordance with AS 20. NA NA

b) 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 now part of Source HOV LLC, 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.

9. 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 strives to conserve energy on continuous basis and conducted energy audit and implemented desired 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.

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 SSAE 16. The Company has adopted Six Sigma practices and LEAN techniques in its centers and processes; a 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 19 (11) of Notes to the Accounts of the Annual Report.

10. 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.

11. 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.

12. 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.

13. 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.

14. Corporate Governance

A separate section on Corporate Governance forming part of the Directors' Report and the Certificate from the Company's 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.

15. 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.

16. 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.

17. Directors

There is no change in the Board of Directors during the year under review. Mr. Harish Bhasin, Director retires by rotation at ensuing Annual General Meeting and being eligible offers himself for reappointment.

The 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.

18. Subsidiary companies and consolidation of Accounts

As per Section 212 of the Companies Act, 1956, the Company is required to attach the directors' report, auditors' report, balance sheet, and profit and loss account, schedules to account and notes to the account of subsidiaries of your Company along with the balance sheet of your Company.

In accordance with terms of general Circular No. 2/2011 and No. 5/12/2007-Cl-III dated February 8, 2011, the Ministry of Corporate Affairs has issued a direction under section 212(8) of the Companies Act, 1956 granting general exemption to all the companies having subsidiaries and which required exemption from attaching the prescribed documents as mentioned in section 212(1) of the Companies Act, 1956. Such exemption would be available to all the companies after fulfilling certain conditions prescribed in the aforesaid general circular.

Accordingly, the Board of Directors of the Company has consented vide its resolution dated May 2, 2012 for not attaching the balance sheet of the subsidiary companies of the Company.

The audited annual accounts and related information of subsidiary companies, where applicable, will be kept in the head office and will be available for inspection, upon request by any of shareholders of the holding and subsidiary companies. These documents will also be available for inspection during business hours at our registered office. A statement showing details on the subsidiary companies as prescribed vide general circular is attached in separate section of this Annual Report.

19. Acknowledgement

Your Directors' place on record the co-operation and assistance received from different government authorities, customers, suppliers, bankers and shareholders during the 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 year.

For and on behalf of the Board of Directors

Place: Mumbai Sunil Rajadhyaksha

Date : May 2, 2012 Chairman & Executive Director


Mar 31, 2009

The Directors are pleased to present their Twenty-First Annual Report on the Business and Operations of HOV Services Ltd. (the "Company" or "HOVS") together with Audited Statement of Accounts for the year ended March 31, 2009.

1. FINANCIAL RESULTS AND OPERATIONS:

The particulars of the Company and its Subsidiaries Consolidated financials statements are as below:

For the year ended March 31, Particulars Rs. In Million

Consolidated Standalone

2009 2008 2009 2008

INCOME

Income from Operations 8,970.72 8,335.11 43.77 62.28

Other Income 21.72 744.87 2.99 0.29

8,992.44 9,079.98 46.76 62.57

EXPENDITURE

Staff Cost 4,518.83 4,220.09 37.27 24.31

General and Administrative 3,325.84 3,329.45 17.77 25.68 Expenses

7,844.67 7,549.54 55.04 49.99

Profitless) before Interest, 1,144.77 1,530.44 (8.28) 12.58

Depreciation and Tax

Less: Interest 444.78 509.26 0.14 0.13

Less: Depreciation 236.53 169.78 3.78 1.65

Profit/(Loss) before Tax 466.46 851.4 (12.20) 10.8

Tax pertaining to earlier years NIL (0.08) (0.01) -

Less: Provisions for taxes Current Tax 13.86 27.77 NIL 1.2

DeferredTax (15.85) 0.14 3.30 0.01

Fringe Benefit Tax 4.92 1.56 0.26 0.3

Profit/(Loss) after Tax 463.53 822.01 (15.75) 9.29

Less: Minority Interest (0.34) 277.59 NIL -

Profit/(Loss) after Tax After Minority Interest 463.87 544.42 (15.75) 9.29

2. RESULTS OF OPERATIONS

Performance on consolidated basis:

- Consolidated total Income for the current FY increased by 7.6% to Rs. 8,970.7 million from Rs. 8,335.1 million for the corresponding last fiscal year 2007-08.

- EBITDA increased by 7.39% for the FY to Rs.1,176.44 million from Rs.1,095.5 million over the corresponding last fiscal year 2007-08.

- Net Profit decreased by 14.8% for the current FY to Rs. 463.9 million from Rs.544.4 million over the corresponding last fiscal year.

- Rupee depreciation against the USD resulted in decrease of the companys Net Profit to the tune of Rs 80.6 million.

- The basic and diluted Earnings per share (EPS) is Rs 36.96 for the FY.

3. Significant Developments:

i) Highlights of Business Performance:

- Added over $17.5 million in customer contracts in the 4th Fiscal Quarter with $12.5 million from existing customers.

- Substantial savings from integration and rationalization of global operations helped defray overall increases in costs in India with 11,419 associates across over 40 delivery centers in India, China, Mexico, U.S. & Canada.

- By right shoring we were able to successfully transition some key business processes from US to our near shore and off Shore operations in Mexico, India and China.

- Diversified Client Base with low Customer Concentration with and minimal exposure to financial services companies.

- Top 100 clients represent over 79% of total revenues with the largest customer representing only 16% of total revenues.

- Over 50% of leading FORTUNE 100® companies as reference-able clients in our core Service offerings.

ii) Key Accomplishments and Noteworthy Items:

- Company maintained strong liquidity position with DSO of 51.6 days, Debt to Equity Ratio of 1.33 and Net Bank Debt of $110.9 million at March 31, 2009;

- Successfully continue to leverage Companys Top Tier BPO Service Provider with established reputation for Reliable, High Quality and Secure services;

- International Association of Outsourcing Professionals (IAOP) ranked the Company:

- Best 20 Leaders by Industry Focus: Health Care;

- Best 10 Companies by Service Offered: Document Management;

- Best 10 Leaders by Service Offered: Financial Management;

- Best 20 Leaders by Region Served: India;

- Best 20 Leaders by Region Served: Canada;

iii) Material transaction proposal:

The proposal was received by the Company in June 2008 and was reported in Annual Report of 2007- 08. The Board of Directors in their meeting held on October 8, 2008 keeping in view the market conditions, proposed to postpone considering the Transaction in the best interest of the shareholders.

iv) Issue of ADR/GDR

The Shareholders in their Annual General meeting held on July 21, 2007 approved the issue of up to 15,000,000 number of Global Depository Receipts (GDRs), American Depository Receipts (ADRs). Foreign Currency Convertible Bonds (FCCBs), and / or Equity Shares through Depository Receipt Mechanism (hereinafter referred to as ("DR") per SEBI guidelines and subject to all rules and regulations. The Company also received In-Principal approval from Bombay Stock Exchange Limited vide its letter dated November 29, 2007 and from National Stock Exchange Limited vide its letter dated November 29, 2007 for issue and allotment of equity shares not exceeding 15,000,000 to be allotted towards the proposed DRs. The Company has not issued any of the aforesaid equity shares post approval.

v) Buyback of Equity Shares:

During the year under review the Board of Directors approved buy back of equity shares of the Company through open market stock exchanges route. The details of the same are as follows:

Structural details of the buyback program:

Date of Board Resolution approving January 13, 2009 Buyback

Date of Public Notice cum Public January 13, 2009, Published on January 15, 2009 Announcement

Maximum Offer size 10,00,000 Equity Shares

Minimum Offer size 2,50,000 Equity Shares

Maximum Offer Price: Rs. 50/- Per Equity Share (Aggregate Amount Not more than Rs. 5.00 Crore).

Date of Opening of the Buy back: February 2, 2009

Duration of the program: Up to January 12, 2010 (12 months from the date of Board resolution) Number of shares bought back:

As on March 31, 2009 43,023 Equity Shares

As on June 26, 2009 63,023 Equity Shares

Details of the shares bought back:

As on March 31, 2009 43,023 Equity Shares were bought back at average rate of Rs. 28.67 per equity share.

As on June 26, 2009 63,023 Equity Shares were bought back at average rate of Rs. 29.65 per equity share.

Execution method: Open Market Purchases through Stock Exchanges.

Buyback price and the aggregate amount paid on buyback:

As on March 31, 2009 43,023 Equity Shares bought back @ Rs. 28.67,aggregating amount Rs. 12,33,279/-

As on June 26, 2009 63,023 Equity Shares bought back @ Rs. 29.65,aggregating amount Rs, 18,85,680/-

Sources from which buyback is financed: Share Capital And Free Reserves Account

Amount by which the share capital and Total share capital and free free reserves including share reserves including share premium premium are reduced on Premium are reduced by account of buyback of the shares Rs.4,30,230/- and 8,09,572/- respectively.

Un-cancelled shares: Total equity shares bought back as on March 31,2009 were 43,023 out of which 35,620 shares were extinguished; remaining equity shares of 7,763 extinguished in April, 2009.

Amount transferred to Capital Redemption An amount of Rs. 4,30,230/- Reserve Account transferred to Capital Redemption Reserve Account.

4. Appropriations:

Dividend

Your Company intends to conserve available resources to invest in the growth of the business and pursue strategic growth opportunities. Accordingly your Directors do not recommend any dividend for the year.

Transfer to Reserve

Pursuant to the Section 77AA of the Companies Act, 1956 a sum equal to nominal value of the shares bought back is required to transfer to Capital Redemption Reserve account. The Company as of March 31, 2009 had bought back 43,023 equity shares. Therefore an amount of Rs. 4,30,230/- is transferred to Capital Redemption Reserve Account.

5. 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 the recommendations in a phased manner. 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. The Company believes technology deployment is strategic to its growth and has invested heavily in automation, capture, presentation and analytics. The Company has development teams in US, India and Mexico implementing its vision.

Technology Absorption, Adaptation and Innovation: The Company has been focused on providing end- to-end BPO services to Clients. The Company has heavily invested in technology innovation and is leveraging its global footprint to take advantage of shrinking distances and blurry traditional borders bypassed by global, stable, secure network infrastructure all while conforming to 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 and go through Six Sigma training as well and many are certified at various levels.The Company is constantly pursuing and adopting modern technologies and standards to grow its competitive advantages, 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 15(c) to the Accounts of the Annual Report.

6. Particulars of Employees

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, and forming part of the directors report for the year ended March 31, 2009 is set out in the Annexure I to the Directors Report.

7. Human Resources

The relationship of your Company with its employees remained cordial throughout the year.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. Directors

Mr. Rajeev Gupta, Director who retires by rotation prior to the Annual General Meeting notified his inability to continue his directorship due to pre-occupation. His notice was placed before the Board in its meeting held on June 4, 2009 and the same was accepted by the Board. The Board of Directors place on record their appreciation for the support rendered by him during the tenure as Director of the Company.

During the year under review Mr. Hansh P Bhasin was inducted as an additional director w.e.f March 24. 2009 and holds office up to the date of ensuing Annual General Meeting. His appointment requires the approval of members at the ensuing Annual General Meeting. The Company has received a notice in writing from a member pursuant to Section 257 of the Companies Act, 1956 proposing the candidature of Mr. Hansh P Bhasin for the office of Director, liable to retire by rotation.

Brief resume of the Director proposed to be appointed, as stipulated in Clause 49 of the Listing agreement with the stock exchanges is provided in section of Notice of the Annual General Meeting.

14. Particulars Required Under Section 212 of the Companies Act, 1956

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. We believe that the consolidated accounts present a full and fair picture of the state of affairs and the financial conditions. The Government of India has granted exemption to the Company from complying with section 212 for all the subsidiary companies vide its letter dated February 4, 2009. 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 in Pune, India.

15. Employee Stock Option Plan (ESOP)

The Company has instituted "HOVS Stock Option Plan 2007" and "HOVS Stock Option Plan 2008" for its employees and for employees of its subsidiary companies.

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 approved 11,00,000 equity shares of a face value of Rs. 10 each with each such option conferring a right upon the employee to opt for one equity share of the Company, in terms of HOVS ESOP Plan 2007. Under the 2007 plan, 4,00,000 options were reserved for employees of the Company and 7,00,000 for employees of subsidiary companies.

The shareholders also, in its Twentieth Annual General meeting held on September 30, 2008 approved additional 7,50,000 equity shares of a face value of Rs.10 each with each such option conferring a right upon the employee to opt for one equity share of the Company, in terms of HOVS ESOP Plan 2008. Under the 2008 plan, 7, 50,000 options were reserved for employees of the subsidiary companies of the Company, working in India or out of India.

Options were granted to employees at an exercise price not less than closing price of the stock exchange having highest trading volume, prior to the date of meeting ofthe Compensation & Remuneration Committee. Such 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.

i) The details of Plan 2007 and Plan 2008 are as below:

Plan 2007

Parent Subsidiary Total

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 - 80,000 80,000

Options in force 169,650 663,900 833,550

Balance available 230,350 36,100 266,450

Plan 2008

Parent Subsidiary Total Approved Options - 750,000 750,000

Grant in 2008 - - -

Total Grant - - -

Options Lapsed - - -

Options in force - - -

Balance available - 750,000 750,000

ii) Information of grant made to directors and employees:

Options granted date Directors Employees Total (A+B) (A) (B)

July 21,2007 7,500 640,000 647,500

October 25,2007 0 20,000 20,000

July 30,2008 7,500 183,550 191,050

October 8,2008 0 55,000 55,000

Total Granted 15,000 898,550 913,550

Options lapsed 0 80,000 80,000

Options outstanding 15,000 818,550 833,550

iii) The details of options granted under the two plans are given in the table.

As of March 31,2009 Plan 2007 Plan 2008

a. Options Granted: 9,13,550 Nil b. The Pricing formula: Closing price of the stock Closing price of exchange with highest tra- the stock exchange ding volume,prior to the with highest trad- date of the meeting of the ing volume,prior compensation & Remuneration to the compensation Committee in which options & Remuneration are granted Committee in which options are granted

c. Options Vested: 59,550 Nil

d. Options Exercised: Nil Nil

e. Total number of shares 9,13,550 Nil arising as a result of exercise of options:

f. Optioned lapse: 80,000 Nil

g. Variation of terms of NA NA

option:

h. Money realized by NA NA

exercise of options:_

i. Total number of options 8,33,550 Nil in force:

j. Employee wise details of Options granted to: Nil

i. Senior Management personnel; 8,33,550

ii. Employee receiving 5% or more of the total number of options granted during the year; Nil

iii.Employee granted 1% or more of the issued capital Nil

k. Diluted EPS on issue of shares on exercise calculated in accordance with AS 20. NA NA

16. Acknowledgement

The Board wishes to convey their appreciation to its employees, shareholders, customers, suppliers, bankers and Government authorities for the continued support given by them to the Company during the year.

For and on behalf of the Board of Directors

Place: Mumbai Sunnder Rametra

Date: June 4, 2009 Chairman & Executive Director

 
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