HOV Services Ltd Directors Report.

Your Directors are pleased to present the Thirty First 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, 2019.

FINANICAL RESULTS AND OPERATIONS:

Rs In Lakhs

Particulars

Consolidated

Standalone

For the year ended on For the year ended on For the year ended on For the year ended on
March 31, March 31, March 31, March 31,
2019 2018 2019 2018
INCOME
Income from Operation 1,054.43 1,359.95 1,054.43 1,254.55
Other Income 95.77 420.32 93.17 106.31
Total Income 1,150.20 1,780.27 1,147.60 1,360.86
EXPENDITURE
Staff Cost 732.36 911.96 713.92 884.89
General and Administrative Expenses 296.28 428.02 245.23 269.12
Total Expenditure 1,028.64 1,339.98 959.15 1,154.01
Profit / (Loss) before Interest, 121.56 440.29 188.45 206.85
Depreciation and Tax
Less:Interest - 25.42 - -
Less: Depreciation 52.52 106.62 8.54 9.76
Profit / (Loss) before Exceptional Items 69.04 308.25 179.91 197.09
Less: Exceptional Items - 0.38 - 1,022.72
Profit / (Loss) Before Tax 69.04 307.87 179.91 (825.63)
Less: Provisions for Taxes
Current Tax (50.90) (57.10) (50.90) (57.10)
Deferred Tax (0.58) (12.95) (0.58) (0.97)
Profit / (Loss) for the year 17.56 237.82 128.43 (883.70)
Other Comprehensive Income
Items that will not be reclassified subsequently to Profit or Loss (27,265.18) 61,011.50 4.02 1.23
Total Comprehensive Income for the year (27,247.62) 61,249.32 132.45 (882.47)

1. Results of Operations

For the financial year ended March 31, 2019 as follows:- Consolidated Financial Performance:

• Consolidated total Income for the current year was 1,150.20 Lakhs.

• EBIDT for the current year was 121.56 Lakhs.

• Net Profit for the current year was 17.56 Lakhs.

• Total Comprehensive Income for the current year was (27,247.62) Lakhs.

• The basic and diluted Earnings per Share (EPS) for the current year was 0.14.

Standalone Financial Performance:

• Total Income for the current year was 1,147.60 Lakhs.

• EBIDT for the current year was 188.45 Lakhs.

• Net Profit/ (Loss) for the current year was 128.43 Lakhs.

• Total Comprehensive Income for the current year was 132.45 Lakhs.

• The basic and diluted Earnings per Share (EPS) for the current year was 1.02.

For more information, refer to section of Management Discussion and Analysis part of the Report.

2. Appropriations

(i) Dividend:

The Board of Directors did not recommend any dividend for the year to conserve available resources to pursue strategic growth opportunities for the growth of business of the Company.

(ii) Transfer to Reserve:

No amount was transferred to Reserve during the financial year ended on March 31, 2019.

3. 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.

A report on the performance and financial position of Subsidiaries as per the Companies Act, 2013 is annexed in the financial statements.

4. Policy on Material Subsidiaries

The Company had the policy for determining material subsidiary and it was updated effective April 1, 2019 pursuant to the SEBI (Listing Obligation and Disclosure Requirements) (Amendment) Regulations, 2018. The said policy has been displayed on the website of the Company at http://hovsltd.com/ Policies Disclosures.html

The Companys wholly owned subsidiary HOVS LLC is a material subsidiary in accordance with the thresholds laid down under the (SEBI Listing Obligation and Disclosure Requirements) Regulation 2015 as amended from time to time.

5. Investment

The Companys wholly owned subsidiary HOVS LLC holds investment in Exela Technologies, Inc., through Ex-Sigma LLC a special purpose vehicle.The percentage of investment held by HOVS LLC in Exela Technologies, Inc., as of March 31, 2019 is 18.686% and therefore as per IND-AS, the investment has been accounted as Financial Instrument, i.e. FVOCI Equity Instruments. For details refer Note No. 5.1 of Consolidated Financial statements.

6. ADR/GDR

The shareholders 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.

7. Share Capital of the Company

During the financial year, the Company had allotted 53,250 equity shares under ESOP Plans 2007. Consequently, after the allotment, the paid up share capital of the Company has gone up from 12,535,722 equity shares of 10 aggregating to 125,357,220/- to 12,588,972 equity shares of 10 aggregating to 125,889,720/-.

8. Employee Stock Option Plan (ESOP)

Your Company instituted "HOVS Stock Option Plan 2007" for its employees and for employees of its subsidiary companies as detailed below:

Plan Shareholders Approval Date No. of Options for employees of the Company No. of Options for employees of subsidiary companies Total
"HOVS Stock Option Plan 2007" July 21, 2007 400,000 700,000 1,100,000

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is provided herewith as "ANNEXURE- A" to this report.

9. 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 provided herewith as "ANNEXURE- B" to this report.

10. Human Resources

The Company follows the philosophy to maintain cordial relations with all its employees and value its human resources and takes utmost care of its employees deployed. It encourages all employees to strike a perfect work life balance.

The Company adopted a Policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal Act, 2013) and the Rules made thereunder for prevention and redressal of complaints of sexual harassment at workplace.

During the year there was no complaint received to the Committee constituted under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

11. Particular of Employees and Related Disclosures

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.

Disclosure as per Section 197 (12) of the Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided herewith as "ANNEXURE- C" to this report.

12. Directors Responsibility Statement

The Directors Responsibility Statement in terms of Section 134(5) of the Companies Act, 2013 is provided herewith as "ANNEXURE- D" to this report.

13. Financial Summary and Highlights

The financial summary and highlights are presented under the Management Discussion and Analysis Report part of the Annual Report.

14. Board Meetings

During the financial year 4 (Four) Board Meetings were held. The details of meetings of Board of Directors are provided in the Report on Corporate Governance that forms a part of this Annual Report. The maximum interval between any two meetings did not exceed 120 days as prescribed under the Companies Act, 2013.

15. Directors and Key Managerial Personnel

The Board in its meeting held on May 30, 2019 accepted the willingness of Mr. Sunil Rajadhyaksha to relinquish his office of Chairmanship. The Board of Directors placed on record its deep sense of appreciation for Mr. Sunil Rajadhyaksha as Chairman, and for his strong leadership, valuable contribution and support extended to the Company at all times during his tenure as the Chairman. He will be, however, continue as a wholetime director of the Company.

The Board in its meeting held on May 30, 2019 appointed Mr. Vikram Negi as the Chairman of the Board of Directors & of the Company w.e.f May 30, 2019.

During the year Mr. Harish Bhasin resigned from his office of Independent Director effective September 10, 2018 and Mr. Rohit Jain resigned from his office of Independent Director effective August 13, 2018. Mr. Harjit Singh Anand was appointed as Independent Director effective July 5, 2018.

Mr. Surinder Rametra Executive Director is liable to retire by rotation at the 31st Annual General Meeting. Mr. Rametra has confirmed his eligibility and willingness for re-appointment. Mr. Rametra has requisite qualifications and experience and therefore, your Directors recommend that the proposed resolution relating to the re-appointment of Mr. Rametra, be passed.

There is no change in Company Secretary and Chief Financial Officer of the Company.

None of the directors of the Company have been debarred or disqualified from being appointed or continuing as directors of companies by the SEBI Board/MCA or any such statutory authority. The Company has complied with the requirement in terms of Schedule V Part C of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, of taking a certificate to that effect from the Secretarial Auditor of the Company.

16. Declarations from Independent Directors

The Board confirms that it has received declarations from all the Independent Directors that they meet the criteria of independence as prescribed under Section 149(7) of the Companies Act, 2013.

17. Meeting of Independent Directors

The meeting of Independent Directors was held on February 13, 2019 to review the performance of the Board as a whole, its committees, non-independent directors, independent directors and the Chairman of the Company and assessed 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 independent directors expressed satisfaction on the quality, quantity and timeliness of flow of information between the management and the Board.

18. Familiarisation Programme

The Board members are provided with necessary documents/ brochures, reports and internal policies to enable them to familiarise with the Companys procedures and practices. The management of the Company, as and when required keeps updating to the entire Board including Independent Directors on the Companys operations and were also briefed regularly and or quarterly basis the changes in applicable statutes and regulations.

During the year the familiarisation program was arranged by the Company on February 13, 2019 for Independent Directors. The details of the familiarisation program was disclosed under Investor Relations section of the Companys website www.hovsltd.com.

19. Internal Financial Controls

The Company has adequate procedures for ensuring the internal financial controls and the same are in place with reference to financial statements. The internal control system is reviewed by the Audit Committee with the Management and tested by Internal Auditors of the Company and no reportable material weaknesses in the design or operation were observed.

20. Related Party Transactions

All transaction entered into by the Company with Related Parties are at arms length and are in the ordinary course of business and are intended to further your Companys interest. The particulars of transactions with related parties are provided herewith as "ANNEXURE- E" to this report.

The disclosure of Related Party Transactions as per Ind AS 24 with related parties have been provided in Note No. 34 & 37 of the Standalone & Consolidated Financial Statements respectively, forming part of this Annual Report.

The policy on Related Party Transactions as updated by the Board keeping in view of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, as amended to be effective April 1, 2019 has been displayed on the Companys website at: http://www.hovsltd.com/docs/Policies/2019/ HQVS%20RPTs%20PolicyApril%201%202019.pdf

21. Corporate Governance Report

The report on Corporate Governance is annexed as the part of the Directors report.

22. Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review, as stipulated under Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented as a separate section forming part of the Directors report.

23. Code of Conduct for Board and Senior Management

The Company has adopted Code of Conduct for the Directors and Senior Management and is available on the Companys website http://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 Directors Report.

24. Auditors and Auditors Report Statutory Auditors:

M/s BAGARIA & Co., Chartered Accountants were appointed as Statutory Auditors for a period of 5 years, in 29th Annual General Meeting held on September 1, 2017 till the conclusion of the 34th AGM to be held in year 2022.

The Statutory Auditors Report for FY 2018-19 does not contain any qualification, reservation or adverse remark.

Secretarial Audit Report:

M/s. J B Bhave & Co., Practicing Company Secretaries, Pune were appointed for conducting secretarial audit. The Secretarial Audit Report for FY 2018-19 is provided herewith as "ANNEXURE- F" to this report. The Secretarial Auditors Report does not contain any qualification, reservation or adverse remark.

During the year under review, there were no instances of frauds committed in the Company by its officers or employees, which requires reporting by the Statutory Auditors and the Secretarial Auditor.

Annual Secretarial Compliance Report:

Pursuant to requirements of Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 the Secretarial Auditors of the Company were engaged to issue the Annual Secretarial Compliance Report for year ended March 31, 2019.

25. Extract of Annual Return

Extract of Annual Return is provided herewith as "ANNEXURE- G" to this report.

26. Board Evaluation

The Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations") stipulate the evaluation of the performance of the Board, its Committees, Individual Directors and the Chairperson. The performance evaluation has been carried out on directors individually, working of the Committees and Boards performance. The manner of evaluation is explained in the Corporate Governance Report. Independent Directors met separately to evaluate the Non-Independent Directors and Chairman of the Board. The performance evaluation of Board, its Committees, Independent Directors, Non-independent directors and including Chairman of the Board was carried out during the year considering parameters as set by the members of the Board.

The evaluation of the Board and its Committees was carried out through a structured evaluation process covering various aspects of the Boards functioning and having well defined Committees and each Committee having co-operative working environment with the Board.

The evaluation of Chairperson was carried out by independent directors on criteria of leadership, promotes participation among all members and ability to manage conflicting situations positively.

The evaluation of the independent directors by all board members was carried out based on the criteria of efforts undertaken by them, brings independent view point in discussion and awareness of their roles and responsibilities.

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 nomination and remuneration policy is provided herewith as "Annexure- H" to this report. The said policy has been displayed on the Companys website at:http://www.hovsltd.com/docs/Policies/2019/ Nomination%20&%20Remuneration%20Policy.pdf

27. Risk Management

The implementation of risk management has been covered in the Management Discussion and Analysis (MDA), which forms part of this report.

28. Committees of the Board

The Company has constituted the Audit Committee; Nomination and Remuneration Committee; Stakeholders Relationship Committee. The details of all the committee are disclosed in the Corporate Governance Report. The Board accepts all the recommendations of the Audit Committee.

29. Particulars of Loans, Advances and Investments

The particulars as required pursuant to Section 186 (4) of the Companies Act, 2013, read with Companies (Meetings of Board and its Powers) Rules, 2014 and pursuant to Regulation 34(3) and Schedule V Part A of SEBI LODR, 2015, are mentioned in the Notes to Account to the Financial Statements of the Annual Report.

The particulars of loans are mentioned in Note No. 6 respectively of Standalone and Consolidated Notes to Accounts; the particulars of Guarantees are mentioned in Note No. 33 & 36, respectively of Standalone and Consolidated Notes to Accounts; and the particulars of Investment are mentioned in Note No. 5 of Consolidated Notes to Accounts.

30. Compliance with Secretarial Standards

The Secretarial Standards issued by the Institute of Company Secretaries of India, as applicable to the Company, have been complied with.

31. Whistle Blower Policy

The Company has adopted a 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 Companys Code of Conduct.

The Policy provides for commitment to the highest possible standards of ethical, moral and legal business conduct and its commitment to open communication. The Policy provides for a mechanism to report such concerns to the Audit Committee through specified channels. This mechanism provides safeguards against victimisation of employees, who report under the said mechanism.

During the year under review, the Company has not received any complaints under the said mechanism. The Whistle Blower Policy of the Company has been displayed on the Companys website.

32. Reconciliation of Share Capital Audit

As required by the Securities & Exchange Board of India (SEBI), quarterly audit of the Companys share capital is being carried out by an independent external auditor with a view to reconcile the total share capital admitted with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and held in physical form, with the issued and listed capital. The Auditors Certificate in regard to the same is submitted to BSE Limited and National Stock Exchange of India Limited and is also placed before Stakeholders Relationship Committee and the Board of Directors of the Company.

33. General

a) The statement relating to risk management policy and identification of risk elements are covered under Management Discussion Analysis Report as annexed with this Report.

b) There are no adverse material changes or commitments occurred after March 31, 2019 which may affect the financial position of the Company or may require disclosure.

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

(i) There were no loans, guarantees and investments made;

(ii) Details relating to deposits covered under Chapter V of the Companies Act, 2013;

(iii) No significant and material orders passed by the regulators or courts or tribunals which impacted the going concern status and operation of the Company;

(iv) Issue of equity shares with differential rights as to dividend, voting or otherwise;

(v) Issue of sweat equity shares; and

(vi) None of the whole-time directors of the Company received any remuneration or commission from the subsidiaries of the Company.

(vii) Requirement under Section 148 of the Companies Act, 2013 is not applicable in the respect of business activities carried out, hence cost records are not maintained by the Company.

34. Acknowledgement

Your Directors would like to place on record their sincere appreciation for co-operation and support received from 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 Bombay Stock Exchange, Bankers of the Company and Shareholders during the financial year.

Your Directors would also like to place on record their appreciation for the commitment and contribution made by all executives, officers, workers and staff of the Company for their hard work, co-operation and support.

Your Directors takes this opportunity to express its deep gratitude for the continued co-operation and support received from each one of valued shareholders of the Company.

For and on behalf of the Board of Directors

Sunil Rajadhyaksha Baldev Raj Gupta Harjit S Anand
Chairman & Executive Director Independent Director Independent Director
(DIN:00011683) (DIN:00020066) (DIN:01549385)
Date: May 30, 2019