HOV Services Ltd Management Discussions

HOV Services Limited ("HOVS" or the "Company") operates as a hybrid between an investment and a diversified services company. The Companys business encompasses majority of Software and IT Enabled Services and the prevailing trend would further enforce the importance of outsourcing, as companies will be compelled towards curtailing cost without sacrificing on quality.

Current economic and political situation, inconsistent movements in global markets, inflation and unemployment are constantly shifting business and technology landscape. The worldwide digital transformation, customers are well informed, decisive and influential - the mantra from technology being replaced by artificial intelligence business driven process platforms that allows organizations to design, execute, monitor, change and continuously optimize their business processes and operations.

[Financial Performance]

The following discussion and analysis on financial performance of the Company for the year under reporting is based on the audited financial statements prepared in accordance with Ind-AS.

Overall Performance - March 2025 vs. March 2024 Consolidated and Standalone financial performance

• Strong Revenue Growth: Revenue from Operations increasing by 39.35% to Rs2,246.83 lakhs in FY25 from Rs1,612.36 lakhs in Fy24.

• Total income grew by 38.68% from March 2024 to March 2025 from Rs. 1,784 lakhs to Rs. 2,475 lakhs.

• Total Expenses: Total expenses also rose for both, from approximately Rs. 1,419 lakhs in March 2024 to Rs. 1,995 lakhs in March 2025.

• Profit before exceptional items from continuing operations grew by 31% to Rs479 lakhs in March 2025 compared Rs365 lakhs in March 2024.

Standalone financial performance

• Exceptional Items (FY24 Impact): The Standalone results included a significant exceptional gain of Rs207.00 lakhs in March 2024.

• Profit/(Loss) after tax and exceptional items from continuing operations is Rs. 422.39 lakhs in March 2025 compared to Rs. 472.04 lakhs in March 2024.

• Total Comprehensive Income/(Loss) Showed a drop from Rs. 460.84 lakhs in March 2024 to Rs. 412.08 lakhs in March 2025.

• The basic and diluted Earnings Per Share (EPS) after Exceptional item is 3.35 for the year.

Consolidated financial performance

• Profit/(Loss) after tax and exceptional items from continuing and discounting operations is Rs. 421.71 lakhs in March 2025 compared to Rs. 268.62 lakhs in March 2024.

• Total Comprehensive Income / (Loss) for the period increased from Rs. 28.81 lakhs in March 2024 to Rs. 134.37 lakhs in March 2025.

• The basic and diluted Earnings Per Share (EPS) for Continued and Discontinued operation is 3.35 for the year.

Human Resources & Prevention of Sexual Harassment

The Company considers it of imperative importance to ensure development of employees at various levels therefore, during their employment tenure they are provided with training for skill sets, motivated through reward and recognitions programme at quarterly basis focusing on their long term career with the Company. Career enhancement and progress opportunity is planned at all levels. In additions with HR recruitment process, employees are encouraged to refer candidates for filling any positions. Management communicates with employees on regular basis through various modes and including internal portal. The Company has maintained cordial relationship with the employees and there were 209 employees at the peak during the year.

The Internal Complaints Committee had been constituted pursuant to the Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for protection against sexual harassment of women at work place. During the year there were no complaints of such manner.

Internal Control Systems and their adequacy

The Company has established adequate internal control systems with checks and balances observed at all levels, covering not only, financial transactions but other department functions as well, viz Purchase, Sales and Operations, Payroll, HR and others as mandated by the Audit Committee. The Company has appointed reputed external firm of Chartered Accountants to oversee and carry out internal audits of its activities. The Internal audit team functions vigilantly on a continuous basis and monitors the effectiveness of internal controls and provides assurance of the adequacy and effectiveness of the internal controls to the Audit Committee and Board of Directors. The system of certification of the effectiveness and deficiencies of internal controls is in place.

The Internal Auditor periodically do testing of the internal controls and monitors the effectiveness of internal controls and provide assurance of the adequacy and effectiveness of the internal controls to the Audit Committee and Board of Directors. The Audit Committee reviews the reports submitted by the Internal Auditors and seeks views of the Statutory Auditors on the adequacy of internal control system in quarterly meetings. The Companys Internal Control framework is commensurate with the size and the nature of its operations.

Risks and its mitigation

The risk management framework includes identifications of element of risk, if any which in the opinion of the Management need mitigation. The risk categories covered under risk management includes foreign exchange risk, debtors risk, investment risk, statutory compliance/payment risk, business risk, quality compliance risk and human resource attrition risk. The Management on continues basis evaluates and attempts to monitor each of the above categories and other emerging risks. The main objective of risk management is to minimize the impact of potential risk on organization. The Company has an appropriate risk management framework comprising risk governance structure and defined risk management processes.

The Management has identified the following key risks considering the operations relating to the businesses of the Company and continuously monitor and review to mitigate the key risks in manner stated herein below: -

a) Business model related risk: - The revenue of the Company is based on cost plus mark up for contracts with customers. The wage cost is major risks which may not be acceptable to customers due to change in minimum wages requirements. This could expose the Company to risks like price pressure, excessive dependency on select customers. In order to mitigate the risk, Management of the Company in continues endeavour keep appraised its customers about any change in cost factors well in advance.

b) Foreign currency fluctuation risk: - A substantial part of Revenue accrues in US Dollars and expenditure of the Company are 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 constantly review and tracks foreign currency movements closely.

c) Financial risk: - The surplus funds of the Company are invested in fixed deposits with banks which is averse to risk related to volatility of interest rate. To mitigate the risk of interest, rate the Management closely tracks movement of rate change with banks.

d) Credit risk: - It is exposed to risk of delay in collection from customers and to mitigate such risk pre-defined credit period is mentioned in contract entered and regular follow up process for receiving overdue invoice payments from customers.

e) Operational risk: - The Company is exposed to risks of operational performance on account of costs. If the performance is lower than expected from the operators, it could have impact on profitability. So to mitigate such risks the Company had proper MIS in place. The rising inflation and salaries along with high attrition is a threat. This is planned to be offset with increased productivity and increased use of technology to reduce the dependence on manpower.

f) Investment risk: - The Company through its wholly owned subsidiary HOVS LLC holds investments in quoted shares. The Company is exposed to the risk of value of investment gettng effected due to performance of the investee company and related market risks. To mitigate such risk, the Management of the Company keeps constant liaison with investee company and the Board of the Company is being kept informed about necessary information on timely basis.

g) Information Technology risk: - The evolving technologies through challenges. The business operations are mostly dependent on systems involving computers/ servers which are prone to hacking due to advancement in technology. In order to mitigate the hacking risk, appropriate anti-hacking multi layered systems are installed, education of all employees at all levels and periodic strengthening of IT security.

h) Legal, Compliance risk: - There is a risk on account of dynamic legal environment. Understanding regulations and statutory compliance is vital to mitigate such risk. The Management had created a robust compliance framework and at times takes help from professional firms in order to ensure compliance.

i) Social Media risk: - Being listed entity, the Company is exposed to risks of any inappropriate discloser made by any employee in social media. In order to mitigate such risk, the employees and Management including board members strictly adheres to the code of "Fair Disclosure Code" of the Company.

j) Business Continuity and Disaster Recovery risk:- To ensure continued delivery of services to customers irrespective of any disturbances the Company has implemented strong systems and processes across different locations so as to enabling it to take appropriate measures in respect of disaster recovery and business continuity.

k) Inflation risk: - The rising inflation and salaries along with high attrition among employees is a risk. The impact of this is hard to manage and to the extent possible, the Management uses technology, automation, incentives and good work environment to reduce its impact.

l) Cyber Security risk: - It possess risk for business in all aspects, right from phishing emails; vulnerable to hacking of IT systems; and clicking on links or downloading documents that turn out to be malware. Key steps to mitigate such risk is educating employees to aware of unwanted mails, implementation of antivirus software and proper patch management along with strong monitoring from IT Department on continuos basis.

Significant Financial Ratios

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor

Opportunities, Outlook & Threats

Your Company being positive to capture opportunities in growing emerging markets. The landscape of information technology has been continuously evolving and one has to keep pace with the changing trend in order to excel and tap significant growth opportunities. With Management having strong domain knowledge and experience of leading business venture in technology space, the Company is well placed in building next generation technology, partnerships with the worlds technology leaders and has set up very well for the future.

DECLARATION REGARDING CODE OF CONDUCT

We hereby confirmed that for the financial year ended March 31, 2025, the Directors and Senior Management Personnel have complied with the Code of Conduct of the Company as applicable to them.

Parvinder S Chadha Chairman & Executive Director (DIN:00018468)

FINANCIAL STATEMENTS CERTIFICATIONS

We the undersigned, in our respective capacities to the best of our knowledge and belief, certify that:

a) We have reviewed financial statements and the cash flow statement of the Company for the financial year ended on March 31, 2025 and that:

i. these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

ii. these statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations.

b) There are no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Companys code of conduct.

c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.

d) We have indicated to the Auditors and the Audit Committee that;

i. there were no changes in internal control over financial reporting during the year;

ii. there were no significant changes in accounting policies during the year required to be disclosed in the notes to the financial statements; and

iii. there were no instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Companys internal control system over financial reporting.