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Notes to Accounts of HOV Services Ltd.

Mar 31, 2015

1 Rights of Equity Shareholders

The Company has only one class of equity shares having a par value of Rs. 10 each. Each shareholder has right to vote in respect of such share, on every resolution placed before the Company and his voting right on a poll shall be in proportion to his share of the paid -up equity capital of the Company. In the event of liquidation, the equity shareholders are entitled to receive the remaining assets of the Company after payments to preferential amounts secured and unsecured creditors, if any, in proportion to their shareholding.

2 Shares reserved for issue under options:

a. Employees Stock Option Plan (Plan 2007):

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 had approved to issue 1,100,000 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 plan, 400,000 options were reserved for employees of the Company and 700,000 for employees of subsidiary companies. 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 are 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.

3. Contingent Liabilities and Commitment:

a) Contingent Liabilities not provided for in respect of:

(i) Pending Litigations: (Amount in Rs)

Sr. Particulars As at March As at March No. 31. 2015 31. 2014

(i) Disputed Income Tax Matters is in 10,259,390 10,259,390 relation to the A.Y. 2007-08 and 2009-10 and company has paid Rs. 2,446,738 (Previous Year Rs. 2,446,738) under protest (including interest upto the date of demand)

The Company''s pending litigation is in respect of proceedings pending with Tax Authorities. The Company has reviewed all its pending litigations and proceedings and has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial statements.

(ii) Other contingent liabilities: (Amount in Rs.)

Sr. No. Particulars As at March As at March 31, 2015 31, 2014

(i) Fixed Deposit pledged for 72,436,320 57,336,320 issue of bank guarantee/loan on behalf of a step down subsidiary

(ii) Other bank guarantee 216,000 216,000

4. a) In the opinion of the management assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

b) The accounts of certain Trade Receivables, Trade Payables and Loans & Advances are however, subject to formal confirmations/reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current period''s financial statements on such reconciliation/adjustments.

5. The appointment and remuneration payable to all three whole time directors of the Company were approved by the shareholders in their 23rd Annual General Meeting held on August 3, 2011. The Central Government approved the appointment for period of five years from April 1, 2011 to March 31, 2016 but the remuneration payable approved was Rs. 48 lacs per year for each whole time director for a period of three years from April 1, 2011 to March 31, 2014 vide letter dated October 13, 2011. The Company filed an application on March 21, 2014 to the Central Government seeking approval to allow for the remuneration payable for remaining period of two years from April 1, 2014 to March 31, 2016 to be Rs 48 lacs per year for each whole time director. The Ministry of Corporate Affairs directed the Company by a letter dated July 31, 2014 to comply with the provisions of the Companies Act, 2013, for payment of remuneration to whole time directors. During the current year, the Company has provided managerial remuneration of Rs. 96 lacs based on shareholders'' approval upto March 31, 2016. The requisite approval from the Shareholders and Central Government will be obtained for remaining period of 2 years from April 1, 2014 to March 31, 2016 of their term.

6. There are no Micro, Small and Medium Enterprises as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly, no additional disclosures have been made.

7. As per Accounting Standard (AS) 17 "Segment Reporting", segment information has been provided in the notes to Consolidated Financial Statements.

8. Pursuant to the Companies Act, 2013 ("the Act") coming in to effect from April 1, 2014, the Company has realigned the remaining useful life of its fixed assets in accordance with the provisions prescribed under Schedule II to the Act. , Consequently in case of assets which have completed their useful life, the carrying value (net of residual value) as at April 1, 2014 amounting to Rs. 863,920 has been adjusted to Reserves. Also, carrying value of the other assets (net of residual value) is being depreciated over the revised remaining useful lives. Consequently, the depreciation and amortization expense for the year ended March 31, 2015 is higher by Rs. 648,117 (net of deferred tax Rs. 311,274).

9. The Company has given advance of Rs. 17,820,038 (Previous year Rs. 16,348,659) to and pledged Fixed Deposit of Rs. 72,436,320 (Previous year Rs. 57,336,320) for issue of bank guarantee/loan taken by HOV Environment Solutions Private Limited (a step down subsidiary). Which has accumulated losses far in excess of its paid up capital and reserves and surplus. The Company is hopeful at recovering/realising the same in due course of time in view of expected revival of activities/developments in the said subsidiary and therefore, no provision have been made.

10. Loans given to, Investments made and pledged fixed deposits as guarantee for loan taken by the subsidiary covered under section 186(4) of the Companies Act, 2013 was utilised for business purpose.

11. a) The current financial year comprises 12 months period ended March 31, 2015 as against previous financial year comprising of 15 months period ending March 31, 2014 therefore, figures of the current year are not comparable with those of the previous period.

b) Figures of the previous period have been regrouped / rearranged, wherever considered necessary to conform to the current year''s presentation.


Mar 31, 2014

A) Rights of Equity Shareholders

The Company has only one class of equity shares having a par value of Rs. 10 each. Each shareholder has right to vote in respect of such share, on every resolution placed before the Company and his voting right on a poll shall be in proportion to his share of the paid -up equity capital of the Company. In the event of liquidation, the equity shareholders are entitled to receive the remaining assets of the Company after payments to preferential amounts secured and unsecured creditors, if any, in proportion to their shareholding.

b) Shares reserved for issue under options:

a. Employees Stock Option Plan (Plan 2007):

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 had approved to issue 1,100,000 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 plan, 400,000 options were reserved for employees of the Company and 700,000 for employees of subsidiary companies. 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 are 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.

b. Employees Stock Option Plan (Plan 2008):

The shareholders in its Twentieth Annual General meeting held on September 30, 2008 approved additional 750,000 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, 750,000 options were reserved for employees of the subsidiary companies of the Company, working in India or out of India. 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 are 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 are granted under ESOP Plan 2008.

1. Contingent Liabilities and Commitment:

a) Contingent Liabilities not provided for in respect of: (Amount in Rs.)

Sr. No. Particulars As at March As at December 31, 2014 31, 2012

(i) Corporate Guarantees outstanding in respect NIL 59,013,519 of loans taken by an Associate

(ii) Fixed Deposit pledged for issue of bank guarantee/ 57,336,320 56,000,000 loan on behalf of a step down subsidiary

(iii) Disputed Income Tax Matters(including 10,259,390 5,352,170 interest upto date of demand)

b) Other Commitment:

(i) Operating Lease: The Company has acquired certain premises under lease arrangements which are renewable /cancellable at the Company''s and/or lessors'' option as mutually agreed. The future lease rental payments that the Company is committed to make in respect of these are as follows:

2.a) In the opinion of the management assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

b) The accounts of certain Trade Receivables, Trade Payables and Loans & Advances are however, subject to formal confirmations/reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current period''s financial statements on such reconciliation/adjustments.

3. There are no Micro, Small and Medium Enterprises as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly, no additional disclosures have been made.

4. As per Accounting Standard (AS) 17 "Segment Reporting", segment information has been provided in the notes to Consolidated Financial Statements.

5. a) In view of change in calendar year to financial year resulting in current period figures being for fifteen months and are accordingly, not comparable with that of previous year comprising of twelve months.

b) Figures of the previous year have been regrouped / rearranged, wherever considered necessary to conform to the current period''s presentation.


Dec 31, 2012

A) Rights of Equity Shareholders

The Company has only one class of equity shares having a par value of Rs. 10 each. Each shareholder has right to vote in respect of such share, on every resolution placed before the Company and his voting right on a poll shall be in proportion to his share of the paid -up equity capital of the Company. In the event of liquidation, the equity shareholders are entitled to receive the remaining assets of the Company after payments to preferential amounts secured and unsecured creditors, if any, in proportion to their shareholding.

b) Shares reserved for issue under options:

a. Employees Stock Option Plan (Plan 2007):

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 had approved to issue 1,100,000 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 plan, 400,000 options were reserved for employees of the Company and 700,000 for employees of subsidiary companies. 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 are 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.

b. Employees Stock Option Plan (Plan 2008):

The shareholders in its Twentieth Annual General meeting held on September 30, 2008 approved additional 750,000 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, 750,000 options were reserved for employees of the subsidiary companies of the Company, working in India or out of India.

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 are 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 are granted under ESOP Plan 2008.

1.1. Contingent Liabilities and Commitment:

a) Contingent Liabilities not provided for in respect of:

(Amount in Rs.)

Sr. No. Particulars As at As at December 31, 2012 December 31, 2011

(i) Corporate Guarantees outstanding in respect of loans taken by an Associate* 59,013,519 89,850,674

(ii) Fixed Deposit Pledged for issue of bank guarantee on behalf of subsidiary company 56,000,000 32,200,000

(iii) Disputed Excise Matter (Service Tax), excluding interest, if any Nil 557,079

(iv) Disputed Income Tax Matter (including interest up to date of demand) 5,352,170 5,352,170

* Since released

b) Commitment:

Operating Lease: The Company has acquired certain premises under lease arrangements which are renewable /cancellable at the Company''s and/or lessons'' option as mutually agreed. The future lease rental payments that the Company is committed to make in respect of these are as follows:

1.2 a) In the opinion of the management assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

b) The accounts of certain Trade Receivables, Trade Payables and Loans & Advances are however, subject to formal confirmations/reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current period''s financial statements on such reconciliation/adjustments.

1.3 Related Party Transactions

Related party disclosures as required by AS-18 "Related Party Disclosures" are given below: A) Name of the related parties:

a) The Parties where Control exists:

(i) Subsidiaries

*Upto April 29, 2011

a) Related party relationship is as identified by the management and relied upon by the auditors.

b) No amounts in respect of related parties have been written off/ written back during the period, nor has any provision been made for doubtful debts/ receivable except as disclosed above.

1.4 There are no Micro, Small and Medium Enterprises as defined in the Micro, Small, Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly, no additional disclosures have been made.

1.5 As per Accounting Standard (AS) 17 "Segment Reporting", segment information has been provided in the notes to Consolidated Financial Statements.

1.6 Remittance in foreign currencies for dividends:

The Company has remitted Rs. NIL (Previous Year Rs. 61,850,776) in foreign currency on account of dividends paid during the period. The particulars of dividend paid to nonresident shareholders during the period are as under:

1.7 Merger of Indirect Subsidiary:

The Board of Directors of the Company in their meeting held on March 12, 2011 had given approval to combine its wholly owned subsidiary HOV Services LLC with CorpSource Finance Holdings, LLC. On April 29, 2011, the combination between CorpSource Finance Holdings LLC (its direct subsidiary) (now known as Source HOV LLC), together with its subsidiary SOURCECORP, Incorporated ("SRCP"), a Delaware corporation, and HOV Services, LLC ("HOVS"), a Nevada limited liability company was completed.

Pursuant to service agreements entered into with the aforesaid combined entity, the rates for the services rendered by the Company have been revised impacting Profit of the Company.

1.8 a) Current year figures are comprises of twelve months and with that of previous year comprises of nine months and hence not comparable.

b) Figures of the previous year have been regrouped / rearranged, wherever considered necessary to conform to the current period''s presentation.


Dec 31, 2011

1. Contingent Liabilities and Commitment:

a) Contingent Liabilities not provided for in respect of:

Amount in Rs.

Particulars As at As at December 31, 2011 March 31, 2011

Bank Guarantees outstanding in respect of loans taken by

- Subsidiaries NIL 1,674,375,000

- Associates 89,850,674 111,019,644

Others 216,000 216,000

Fixed Deposit Pledged for issue of bank guarantee on behalf of subsidiary company 32,200,000 NIL

Disputed Excise Matter (Service Tax), excluding interest, if any 557,079 557,079

Disputed Income Tax Matter (including interest up to date of demand) 5,352,170 NIL

b) Commitment Operating Lease

(i) The Company has acquired certain premises under lease arrangements which are renewable/cancelable at the Company's and/or lessors' option as mutually agreed. The future lease rental payments that the Company is committed to make in respect of these are as follows:

2. a) In the opinion of the management assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated.

b) The accounts of certain Trade Receivables, Trade Payables and Loans & Advances are however, subject to formal confirmations/reconciliations and consequent adjustments, if any. The management does not expect any material difference affecting the current period's financial statements on such reconciliation/adjustments.

a) Related party relationship is as identified by the management and relied upon by the auditors.

b) No amounts in respect of related parties have been written off/ written back during the period, nor has any provision been made for doubtful debts/ receivable except disclosed above.

3. The Company has not received any intimation from the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year-end together with interest paid/ payable as required under the said Act have not been given.

4. The Company is engaged in the BPO business of Finance and Accounting Sector. Accordingly there are no separate reportable segments as per Accounting Standard 17 on "Segment Reporting" prescribed by the Companies (Accounting Standards) Rules, 2006.

5. Remittance in foreign currencies for dividends:

The Company has remitted Rs. 15,462,694 (Previous Year Rs. 61,850,776) in foreign currency on account of dividends paid during the period. The particulars of dividend paid to non resident shareholders during the period are as under:

6. Merger of Indirect Subsidiary:

The Board of Directors of the Company in their meeting held on March 12, 2011 had given approval to combine its wholly owned subsidiary HOV Services LLC with CorpSource Finance Holdings, LLC. On April 29, 2011, the combination between CorpSource Finance Holdings LLC (its direct subsidiary) (now known as SourceHOV LLC), together with its subsidiary SOURCECORP, Incorporated ("SRCP"), a Delaware corporation, and HOV Services, LLC ("HOVS"), a Nevada limited liability company was completed.

Pursuant to service agreements entered into with the aforesaid combined entity, the rates for the services rendered by the Company have been revised impacting Profit of the Company.

7. a) In view of change in financial year end to calendar year resulting in current year's figures being for nine months and are accordingly, not comparable with that of previous year comprising of twelve months.

b) Figures of the previous year have been regrouped / rearranged, wherever considered necessary to conform to the current period's presentation.


Mar 31, 2010

1. Contingent Liabilities not provided for in respect of:

(Amount in Rs.) As at March 31, 2010 As at March 31, 2009

Bank Guarantees outstanding

on behalf of Subsidiaries 1,692,750,000 1,910,625,000

on behalf of Associates 135,561,059 154,344,886

Others 216,000 216,000

2. a) In the opinion of the Board, the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated. Provision for all known and determined liabilities and depreciation is adequate and not in excess.

b) Accounts of sundry debtors, sundry creditors and advances given are, however, subject to confirmations and adjustments, if any. In the opinion of the management, adjustments as may be required on such confirmations would not be significant.

3. Leases:

a. Operating Lease:

The Company has taken various commercial premises under cancelable operating leases. The lease agreements are usually renewable by mutual consent on mutually agreeable terms .The rental expenses in respect of operating leases are charged as rent under Schedule 13.

b. Financial Lease:

There were no financial leases entered into by the Company.

4. Related Party Transactions

Related party disclosures as required by AS-18 "Related Party Disclosures" are given below: A) Name of the related parties:

a) The Parties where Control exists: (i) Subsidiaries

1 HOV Services, LLC (also by way of management control)

2 HOVS Holdings Limited

(ii) Subsidiaries of Subsidiarys 1 HOV Services (Beijing) Limited

2 HOV Enterprise Services, Inc.

3 Meridian Consulting Group, LLC

4 Rustic Canyon III, LLC

5 Lason, Inc.

6 Lason India Pvt. Limited

7 Vetri Software (I) Pvt. Limited

8 Trac Holding, LLC*

9 Bay Area Credit Service, LLC*

10 HOV AR Management Services Pvt. Limited*

11 Superior Asset Management Holding, LLC*

12 Superior Asset Management, Inc*.

13 Tracmail AR Services Pvt. Limited*

14 HOV GPM, LLC*

* Up to December 31, 2009, thereafter Associates

b) Associates:

Sr. No Name

1 HOF 4, Limited

2 HandsOn Venture, LLC

3 Trac Holding, LLC

4 Bay Area Credit Service, LLC

5 HOV AR Management Services Pvt. Limited.

6 Superior Asset Management Holding, LLC

7 Superior Asset Management, Inc.

8 Tracmail AR Services Pvt. Limited

9 HOV GPM, LLC

10 Tracmail India Pvt. Limited

c) Directors/Key Managerial Personnel and their relatives:

Sr. No. Name

1 Mr. Parvinder S Chadha (Chairman and Executive Director)

2 Mr. Surinder Rametra (Executive Director)

3 Mr. Sunil Rajadhyaksha (Executive Director)

4 Mr. Karan Negi (President ARM Business)

5 Mr. Anil Rajadhyaksha (Relative of Mr. Sunil Rajadhyaksha)

1) Related party relationship is as identified by the management and relied upon by the auditors.

2) No amounts in respect of related parties have been written off/ written back during the year, nor has any provision been made for doubtful debts/ receivable.

5. Employees Stock Option Plan (Plan 2007):

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 has approved to issue 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 plan, 4,00,000 options were reserved for employees of the Company and 7,00,000 for employees of subsidiary companies. 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 are 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.

6. Employees Stock Option Plan (Plan 2008):

The shareholders 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 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 are 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 are granted under ESOP Plan 2008.

7. Buy Back of Shares:

Pursuant to the approval of the Board of Directors of the Company, for buy back of Equity Shares under Section 77A of the Companies Act, 1956 upto 10% of the paid up Equity Share Capital and free reserves of the Company subject to maximum of Rs.5 Crore, at a maximum price of Rs. 50 per share, the Company has bought back 20,000 (Previous year 43,023) equity shares up to March 31, 2010 through open market transactions for an aggregate amount of Rs. 6.52 lacs, by utilizing Securities Premium account to the extent of Rs. 4.55 lacs. Further, the Capital Redemption Reserve account has also been created out of Securities Premium account for Rs. 2.00 lacs being the nominal value of shares bought back in terms of Section 77A of the Companies Act, 1956.

8. The Company has not received any intimation from the suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/ payable as required under the said Act have not been given.

9. The Company is engaged in the BPO business of Finance and Accounting Sector. Accordingly there are no separate reportable segments as per Accounting Standard 17 on "Segment Reporting" prescribed by Companies (Accounting Standarded) Rules, 2006.

10. a) Other Information:

The Company is engaged in the Service Sector providing IT Enabled Services and Software development. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give quantitative details of sale and information as required under paragraph 3, 4C and 4D of Part II of Schedule VI of the Companies Act, 1956.

11. Figures of the previous year have been regrouped / rearranged, wherever considered necessary to conform to the current years presentation.

 
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