Notes to Accounts of Southern Magnesium & Chemicals Ltd.

Mar 31, 2015

1. Rights, preferences and restrictions attached to shares

(i). Equity Shares: The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

2. Explanatory Notes & Other Disclosures

2.1 Financial Statements of the Company have been prepared on "Going Concern basis" despite complete erosion of net worth and the current liabilities exceeding the current assets by Rs.58.87 lakhs.

3. Contingent Liabilities

(i) Arrears of Fixed cumulative dividends on preference shares. (Rs. in Lakhs)

Particulars Current Year Previous Year

Arrears of cumulative Dividend on 5 % Nil 72.25 preference shares

(ii) Interest against Late Filing of TDS Returns of Rs. 79,000/- not acknowledged as debt.

4. Excise Duty expenses of Rs. 48,169 /- represents the differential excise duty in respect of finished goods as on 01.04.2014 and as on 31.03.2015.

5. (i) Depreciation for the year has been provided as per the provisions of the Section 123 read with Schedule II to the Companies Act 2013 under the Straight Line Method pursuant to this, provision of depreciation is lower by Rs. 30,760/- compared to the depreciation as per the schedule XIV of the Companies Act 1956. and accordingly the profit for the year is more by Rs. 30,760/-for the year.

(ii) In respect of Fixed Assets those had completed usefull life as on 31-03-2014, the carrying amount of Rs. 19,782/- had been adjusted to accumulated loss.

(iii) Where the Net block of an asset is less than the residual value specified in schedule - II to the Companies Act 2013, residual values are restored by adjusting the net block and crediting the excess depreciation written back which is taken to statement of profit and loss.

6. Disclosures in accordance with the requirements of Accounting Standards stated under the Companies (Accounting Standards) Rules, 2006.

a. Segment Reporting

The Company operates only in one segment i.e, manufacture and sale of magnesium metal related products and hence, Segment Reporting in accordance with Accounting Standard -17 is not applicable.

b. Related Party Disclosures

The Related party disclosures as required by AS - 18 are given below:

S. No Related Parties Nature of Relationship

1 Mr. N. Ravi Prasad, Managing Director Key Managerial Personnel

2 Mr. N. Rajender Prasad, Joint Managing Director

3 Smt. N. Anantha Lakshmi Relatives of Key Managerial Personnel

4 Southern Electrodes Ltd Enterprise over which relatives of

5 Pumps India Pvt. Ltd Key Managerial Personnel exercise significant influence.

7. Accounting for Taxes on income i) Current Tax

The Company has made Current Tax Provision for Minimum Alternate Tax (MAT) under section 1 5JB of the Income Tax Act, 1961. As per the provisions of section 115JAA, MAT Credit receivable for the amount in excess over tax liability as per normal computation of income has been recognized as an asset. MAT Credit is recognized as an asset in accordance with the recommendations contained in Guidance Note Issued by ICAI. The said asset is created by way of the credit to the Statement of Profit and Loss and shown as MAT Credit entitlement.

8. Dues to Micro, Small and Medium Enterprises

On the basis of details furnished by the suppliers, there are no amounts to be reported as dues to micro, small and medium enterprises as required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED Act').

9. Previous Year's figures have been reclassified, wherever necessary so as to conform with those of Current Year.

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Mar 31, 2014

1. Rights, preferences and restrictions attached to shares

(i). Equity Shares: The company has one class of equity shares having a par value of Rs.10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

2. Explanatory Notes & Other Disclosures

A. Financial Statements of the Company have been prepared on "Going Concern basis" despite complete erosion of net worth and the current liabilities exceeding the current assets by Rs. 2.065 Crores.

B. Contingent Liabilities

(i) Arrears of Fixed cumulative dividends on preference shares. (Rs. in Lakhs)

Particulars Current Year Previous Year

Arrears of cumulative Dividend on 5 % preference shares 72.25 67.25

(ii) Interest on Late Filing of TDS Returns of Rs. 65,440/- not acknowledged as debt by the Company.

3. Excise Duty expenditure of Rs. 83,810/- represents the differential excise duty in respect of finished goods as on 01.04.2013 and as on 31.03.2014.

4. Disclosures in accordance with the requirements of Accounting Standards stated under the Companies (Accounting Standards) Rules, 2006.

a. Segment Reporting

The Company operates only in one segment i.e, manufacture and sale of magnesium metal related products and hence, Segment Reporting in accordance with Accounting Standard -17 is not applicable.

d. Accounting for Taxes on income

i) Current Tax

Provision for current tax is not required in view of the brought forward unabsorbed depreciation and business loss, both under book profits tax and normal provisions of the income tax act.

ii) Deferred Tax

In view of the absence of reasonable certainty that sufficient future taxable income will be available against which deferred tax asset can be realized, the Company has considered it prudent not to provide for deferred tax asset of Rs. 75,24,845 (Previous Year Rs. 82,72,453), in accordance with Accounting Standard - 22, Accounting for taxes on income, resulted on account of brought forward losses and unabsorbed depreciation.

Note - 5

Dues to Micro, Small and Medium Enterprises

On the basis of details furnished by the suppliers, there are no amounts to be reported as dues to micro, small and medium enterprises as required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED Act'').

Note - 6

Previous Year''s figures

Previous Year''s figures have been reclassified, wherever necessary so as to conform with those of Current Year.

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Mar 31, 2013

1.1 Financial statements of the Company have been prepared on "Going concern basis" despite complete erosion of net worth and the current liabilities exceeding the current assets by Rs.2,31,91,128 as at 31 March 2013.

1.2 Excise Duty expenditure of Rs. 2,45,139/- represents the differential excise duty in respect of finished goods as on 31.03.2012 and as on 31.03.2013.

2. Additional Information :

b. Earnings in foreign exchange:

The Company has no earnings in foreign exchange for the year to report.

c. The value of consumption of imported and indigenously obtained raw materials, stores and spare parts and the percentage of each to the total consumption:

3. Disclosures in accordance with the requirements of Accounting Standards stated under the Companies (Accounting Standards) Rules, 2006.

The Company has made disclosures in accordance with the Accounting Standards as applicable for the year under report.

3.1 Segment Reporting

The Company operates only in one segment i.e, manufacture and sale of magnesium metal related products and hence, Segment Reporting in accordance with Accounting Standard -17 is not applicable.

3.4 Taxes on income

3.4.1 Current Tax

Provision for current tax is not made, in view of the brought forward unabsorbed depreciation and business loss, in accordance with the provisions of the Income-tax Act, 1961 as well as book profits tax under Section 115JB of the Income-tax Act, 1961.

3.4.2 Deferred Tax

In view of the absence of reasonable certainty that sufficient future taxable income will be available against which deferred tax asset can be realized, the Company has considered it prudent not to provide for deferred tax asset of Rs. 82,72,453 (Previous Year Rs. 1,11,68,149), in accordance with Accounting Standard - 22, Accounting for taxes on income, resulted on account of brought forward losses and unabsorbed depreciation.

4. Dues to Micro, Small and Medium Enterprises

On the basis of details furnished by the suppliers, there are no amounts to be reported as dues to micro, small and medium enterprises as required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 (''''MSMED Act'').

5. Previous Year''s figures

Previous Year''s figures have been reclassified, wherever necessary so as to conform with the requirements of the Revised Schedule VI to the Companies Act, 1956.

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Mar 31, 2010

1. Contingent Liabilities to the extent not provided for on account of:

Particulars As at 31.03.2009 As at 31.03.2008

(Rs.In lakhs) (Rs.in lakhs)

i)Penalty levied by the Deputy Director, Directorate of Enforcement (FEMA) As the company prefers as appeal Before the special Director (Appeals) FEMA - New Delhi. Nil 0.50

ii) a) Interest levied by the Sales Tax Authorities for the accounting year 2000-01 on delayed payments of General Sales Tax Nil 1.96 Central Sales Tax Nil 2.36

The Company preferred appeals before Deputy Commissioner (Appeals)

b) Arrears of cumulative Dividend on preference shares (@ 5%) 52.25 47.25

(The Cum. Pref Shareholders have agreed to reduce the rate of dividend from 14% to 5% with retrospective effect from 1999 onwards and the time for the maturity has been extended till March 2015)

2. Excise Duty of Rs.1,06,231/- represents the differential excise duty in respect of finished goods as on 01.04.2009 and as on 31.03.2010.

3. Managerial Remuneration, included in other Heads of Account

4. In view of the absence of reasonable certainty that sufficient future taxable income will be available against which deferred tax asset can be realized, it is considered prudent not to provide for deferred tax asset of Rs.2,27,21,627/-, in accordance with Accounting Standard - 22, Accounting for taxes on income, resulted on account of brought forward losses and unabsorbed depreciation.

5. Information required pursuant to the Accounting Standards issued by the Institute of Chartered Accountants of India.

a) AS-17 Segment Reporting: Company operates only in one segment that of manufacture and sale of magnesium metal related products, Segment Reporting in accordance with AS-17 is not required.

b) AS-18 Related party disclosures:

Related party disclosures as required by AS - 18 are given below

Related Parties

1. Southern Electrodes Ltd

2. Pumps (India) Pvt. Ltd

3. Phoenix Finance & Leasing Limited

4. Mr.N.Ravi Prasad

5. Mr.N.Rajender Prasad

6. Smt N.Anantha Lakshmi

7. Sri N.B.Prasad

8. Sri N. Ram Prasad

Nature of Relationship

Associate Companies

Key Management Personnel

Relatives of Key Management Personnel

i) Transactions with associate Companies

ii) Details of transactions in respect of Key Management personnel.

6. Quantitative particulars in accordance with the requirements of Part - II of Scheduled VI to the Companies Act., 1956.

7. Previous Years figures have been regrouped wherever necessary and paise have been rounded off to the nearest rupee.