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Notes to Accounts of HOV Services Ltd.

Mar 31, 2018

1. Company Information:

The Company was incorporated in 1989 under the Companies Act, 1956 as Codec Communication Pvt. Ltd with registration number 25-14448. The Company commenced its operations on January 10, 1989. In March, 2006 the Company changed its name to HOV Services Limited as a part of its plans to create brand recognition among its customers. The Company is engaged in providing IT and IT Enabled Services such as Data Entry Services, Software Development and Support Services

Terms/rights attached to Equity shares :

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,

In the Period of five years immediately preceding March, 2018:

The Company has not allotted any equity shares as fully paid up without payment being received in cash or as Bonus Shares or Bought back any equity shares.

Shares reserved for issue under options:

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.

2. Financial Instruments

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

3. Risk Management

Financial risk management objectives and policies

The Company''s financial risk management is an integral part of how to plan and execute its business strategies. The company''s activity expose it to market risk, liquidity risk, commodity risk and credit risk. In order to minimise any adverse effects on the financial performance of the company, the Company''s financial risk management policy is set by the Managing Director and governed by overall direction of Board of Directors of the Company. Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.

A. Credit risk

Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual credit period and limits are set accordingly.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information to decide on this such as:

i) Actual or expected significant adverse changes in business

ii) Actual or expected significant changes in the operating results of the counterparty

iii) Financial or economic conditions that are expected to cause a significant change to the counterparty''s ability to meet its obligations

iv) Significant increase in credit risk on other financial instruments of the same counterparty.

The company categorises financial assets based on the assumptions, inputs and factors specific to the class of financial assets into High-quality assets, negligible credit risk; Quality assets, low credit risk; Standard assets, moderate credit risk; Substandard assets, relatively high credit risk; Low quality assets, very high credit risk; Doubtful assets, credit-impaired.

Financial assets are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorises a loan or receivable for write off when a debtor fails to make contractual payments greater than one year past due.

Where loans or receivables have been written off, the Company continues engage in enforcement activity to attempt to recover the receivable due.

Where recoveries are made, these are recognized in profit or loss.

B. Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time, or at a reasonable price. The Company''s liquidity, funding as well as settlement management processes policies and such related risk are overseen by management. Management monitors the Company''s net liquidity position through rolling forecasts on the basis of expected cash flows.

C. Market risk-interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates.

In order to optimize the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, Company performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

D. Market risk-foreign currency risk

The Company accrue all of its revenue in US Dollars and its expenditure is incurred in the Indian Rupees. Therefore. there is risk exposure due to adverse fluctuation of exchange rate between the US Dollar and the Indian Rupees. In order to mitigate the risk the management tracks foreign currency movement closely.

Derivative financial instruments

The Company has not entered into any derivative financial instruments during the current year and previous year.

4. Capital risk management

A The Company''s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders maintain an optimal capital structure to reduce the cost of capital. The Company monitors capital on the basis of the following debt equity ratio:

Company believes in conservative leverage policy. Its debt equity ratio is lower than the industry average.

Company''s moderate capex plan over the medium term shall be largely funded through internal accruals and suppliers credit. The Company is committed to become virtual debt free company in couple of years which shall further improve its capital structure.

B The Group follows the policy as decided by Board of directors considering financial performance, available resources, other internal and external factors and upon recommendation from Audit Committee for the declaration of dividend.

5. First-time adoption of Ind AS

The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from April 1, 2016, with a transition date of April 1, 2016. The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements for the year ended March 31, 2018, be applied retrospectively and consistently for all financial years presented. However, in preparing these Ind AS financial statements, the Company has availed of certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the financial statements as at the transition date under Ind AS and Previous GAAP have been recognised directly in equity (retained earnings or another appropriate category of equity). Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A. Optional exemptions

a) Deemed cost

Ind AS 101 permits to measure all its property, plant & equipments at their previous GAAP carrying value i.e. being deemed cost represented by Gross Block reduced by accumulated depreciation on April 1, 2016.

b) Investments in subsidiaries

The Company present separate financial statement wherein Ind AS 27 requires it to measure its investment in subsidiaries and associate either at cost or in accordance with the Ind AS 109. The Company at first time adoption has measured such investment at cost in accordance with the Ind AS 27, wherein it has option to measure the investments in its separate opening Ind AS balance sheet at cost as determined in accordance with Ind AS 27 or deemed cost. Deemed cost shall be fair value at the entity''s date of transition to Ind AS in its separate financial statement or previous GAAP carrying amount as on that date. The Company has adopted deemed cost being previous GAAP carrying amount as on date of transition.

c) Investments in property

Ind AS 101 permits to measure all its investment property at their previous GAAP carrying value i.e. being deemed cost represented by Gross Block reduced by accumulated depreciation on April 1, 2016.

B. Mandatory exceptions

a) Estimates

An entity''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies). Ind AS estimates as at April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

-Investment in equity instruments carried at FVTPL or FVOCI; and -Impairment of financial assets based on expected credit loss model.

b) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

c) Transition to Ind AS - reconciliations

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:

I. Reconciliation of Balance sheet as at April 1, 2016 and March 31, 2017

II. Reconciliation of Statement of Profit and Loss for the year ended March 31, 2017

III. Reconciliation of Equity as at April 1, 2016 and March 31, 2017

The presentation requirements under Previous GAAP differs from Ind AS and hence Previous GAAP information has been regrouped for ease of reconciliation with Ind AS.

The Regrouped Previous GAAP information is derived from the Financial Statements of the Company prepared in accordance with Previous GAAP.

Notes to first time adoption

Note 1: Remeasurements of post employment benefit obligations

Under the previous GAAP, cost relating to post employment benefit obligations including actuarial gain/losses were recognised in Profit & Loss. Under Ind AS, actuarial gain/losses on the net defined benefit liability are recognised in other comprehensive income instead of profit & loss.

Note 2: Security deposit

Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of lease term) are recorded at transaction price. Under Ind AS All financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued the security deposits and the difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent.

Note 3: Borrowings

Ind AS 109 requires transaction costs incurred towards borrowings to be deducted from the transaction value on initial recognition. These cost are recognised in profit & loss over the tenure of borrowings as a part of the interest expense by applying effective interest rate method.

Note 4: Deferred taxes

Under previous GAAP, deferred taxes were recognised based on Profit & loss approach i.e. tax impact on difference between the accounting income and taxable income. Under Ind AS, deferred tax is recognised by following balance sheet approach i.e. tax impact on temporary difference between the carrying value of asset and liabilities in the books and their respective tax base.

6. Disclosure pursuant to Ind as - 19 "employee benefits"

i) Gratuity: In accordance with the applicable laws, the company provides for gratuity, a defined benefit retirement plan ("The Gratuity Plan") covering eligible employees. The gratuity plan provides for a lump sum payment to vested employees on retirement (subject to completion of five years of continuous employment), death, incapacitation or termination of employment that are based on last drawn salary and tenure of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation on the reporting date and the company makes annual contribution to the gratuity fund administered by life Insurance companies under their respective group gratuity schemes.

D. Assumptions

With the objective of presenting the plan assets and plan liabilities of the defined benefits plans at their fair value on the balance sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

ii) Compensated Absences: The company permits encashment of compensated absence accumulated by their employees on retirement, separation and during the course of service. The liability in respect of the company, for outstanding balance of leave at the balance sheet date us determined and provided on the basis of actuarial valuation as at the balance sheet date performed by an independent actuary.

7. Commitments

a) 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

Notes:

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

b)* During the year the company has made provision of Rs. 99,089 thousands towards loan receivable including interest thereon from a subsidiary (HOV Environment Solutions Private Limited) in view of the substantial slow down in its business activities.

c) No amounts in respect of related parties have been written off/ written back during the year or has not made any provision been made for doubtful debts/ receivable except as disclosed above.

8. In terms of Ind As 108 "Operating Segments", segment information has been provided in the notes to Consolidated Financial Statements.

9. In the opinion of the management, assets other than fixed assets and non-current investments have a value on realization in the ordinary course of business at least equal to the amount at which they are stated. The Accounts of certain Trade Receivables, Trade Payables, Non-operative Banks / Lenders 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 year''s financial statements.

10. * "Exceptional Items" for the year ended March 31,2018 represents provision made towards receivable including interest thereon from a subsidiary in view of the substantial slow - down in its business activities.


Mar 31, 2016

1. Contingent Liabilities and Commitment:

a) Contingent Liabilities not provided for in respect of:

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.

2. a) In the opinion of the management assets other than fixed assets and non-current investments have a value on realization 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 year''s financial statements on such reconciliation/adjustments.

3. There are no Micro, Small and Medium Enterprises as defined in the Micro, Small and 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. Pursuant to the Companies Act, 2013 ("the Act") coming in to effect from 1st April,2014, the Company had 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 had completed their useful life the carrying value (net of residual value) as at April 1, 2014 amounting to Rs. 863,920 had been adjusted to Reserves. Also, carrying value of the other assets (net of residual value) is being depreciated over the revised remaining useful lives.

6. a) The Company has given an advance of Rs. 11,369,203 (Previous Year Rs. 17,820,038) to and pledged Fixed Deposit of Rs. 85,820,439 (Previous Year Rs. 72,436,320) 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 & surplus. As explained, the management is hopeful of recovering the advance in due course of time in view of positive developments / restructuring in the said subsidiary and therefore, no provision has been made.

b) Loans given to and pledged fixed deposits as guarantee for loan taken by the subsidiary have been given/ utilized for business purposes.

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


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, 2011

1. Contingent Liabilities not provided for in respect of:

(Amount in Rs.) As at March 31, 2011 As at March 31, 2010

Bank Guarantees outstanding in respect of loans taken by

—Subsidiaries 1,674,375,000 1,692,750,000

—Associates 111,019,644 135,561,059

Others 216,000 216,000

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

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.

5. 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.

7. 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

3 HOV SPV, LLC (w.e.f March 1, 2011)

(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 HOV Services, Inc (Formerly known as Lason, Inc.)

6 Lason India Private Limited

7 Vetri Software (I) Private Limited

b) Associates with whom transactions have been entered during the year

1 HandsOn Venture, LLC

2 Bay Area Credit Service, LLC

3 HOV AR Management Services Private Limited (merged with Tracmail India Private Limited)

c) Directors/Key Managerial Personnel and their relatives:

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)

B 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 except disclosed above.

8. Employees Stock Option Plan (Plan 2007):

The shareholders in its Nineteenth Annual General meeting held on July 21, 2007 has 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.

9. 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.

13. 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.

14. 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.

16. 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.

17. The Board of Directors in their meeting held on March 12, 2011 had given approval to combine its wholly owned subsidiary HOV Services LLC with Source Corp Inc. In the combined entity SCH Services Inc., HOV Services and Source Corp Inc. will each control fifty percent and obtaining necessary approvals subsequent to the year end. The aforesaid combination stands effective April 29, 2011.

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