The Directors have pleasure in presenting the 26th A nnual Report and
 the Audited Accounts for the year ended 31st March 2012.
 
 
 
 FINANCIAL REPORT / OPERATIONS                                (Rs.Lakhs)
 
 Particulars                             Current Year     Previous Year
                                     As on 31.03.2012  As on 31.03.2011
 
 
 Net Sale and other income                     163.61            185.29
 
 
 Profit/(Loss)Before Depreciation 
 and interest                                   (2.49)            29.28
 
 
 Depreciation, and Interest                      8.62             14.13
 
 
 Net Profit/Net loss (-)                       (11-11)            15.15
 
 
 Total Cum.Loss                               (657.61)          (646.50)
 
 
 
 
 REVIEW OF OPERATIONS :
 
 The Income for the year 2011-12 is Rs. 163.61 lakhs and a loss of
 Rs..11.11 lakhs. The income for the previous year 2010-11 was Rs.
 185.29 Lakhs and a Profit of Rs.15.15 lakhs. The loss for the current
 year was on account of write off of Rs.29.48 lakhs towards fraud
 committed by a new vendor in China. The Board it taking necessary steps
 to recover the same.
 
 DIVIDEND:
 
 In view of the accumulated losses, your Directors have decided not to
 recommend dividend for the year.  PUBLIC DEPOSITS:
 
 Your Company has not accepted any deposits falling within the meaning
 of Sec.58A of the Companies Act, 1956 read with the Companies
 (Acceptance of Deposits) Rules, during the financial year under review.
 
 LISTING:
 
 The equity shares of your company are listed on Bombay Stock Exchange.
 
 CAPITAL OF THE COMPANY:
 
 The Authorised Capital of the company stands at 40,00,000 equity shares
 of Rs. 10/- each and 10,00,000 preference shares of Rs.10/- each. The
 Issued, Subscribed and Paid up capital of the company stands at
 30,00,000 equity shares of Rs 10/- each and 10,00,000 preference shares
 of Rs.10/- each.
 
 SUBSIDIARY COMPANY:
 
 The Company has no subsidiaries.
 
 INSURANCE:
 
 The company''s assets have been adequately insured against major
 risks.
 
 DIRECTORS:
 
 In accordance with the Companies Act, 1956 read with Articles of
 Association of the company the Director namely Sri.Snehal A Thakkar,
 Director retires by rotation and is eligible for re-appointment. Your
 Board recommends the re appointment of the Director above in the best
 interests of the company.
 
 DIRECTORS RESPONSIBILITY STATEMENT :
 
 As required under section 217(2AA) of the Companies Act, 1956, your
 Directors confirm that:
 
 I) In the preparation of the Annual Accounts, the Applicable accounting
 standards have been followed.
 
 II) The Directors have selected such accounting policies and applied
 them consistently and made judgements and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company at the end of the financial year and of the profit or
 loss of the Company for the period:
 
 III) Proper and sufficient care has been taken for the maintenance of
 adequate accounting record in accordance with the provisions of the
 Companies Act 1956 for safeguarding the assets of the Company and for
 the preventing and detecting fraud and other irregularities.
 
 IV) The Directors have prepared the Annual Accounts on a going concern
 basis.
 
 PARTICULARS OF EMPLOYEES
 
 There is no employee who is falling under section 217 (2A). Therefore,
 the disclosures required to be made under section 217 (2A) of the
 Companies Act, 1956 and the rules made there under are not applicable.
 
 AUDITORS
 
 Your directors propose the appointment of M/s.K.S.Rao & Co, Chartered
 Accountants, Hyderabad as statutory auditors to hold office until the
 conclusion of the next Annual General Meeting of the company.
 
 CORPORATE GOVERNANCE
 
 As a listed company, necessary measures have been taken to comply with
 the listing agreements of Stock Exchanges. A report on Corporate
 Governance, along with a certificate of compliance from the Auditors,
 Forms part of this Report as Annexure.
 
 PUBLIC DEPOSITS:
 
 Your Company has not accepted any deposits falling within the meaning
 of Sec.58A of the Companies Act, 1956 read with the Companies
 (Acceptance of Deposits) Rules, during the financial year under review.
 
 Conservation of energy, technology absorption, foreign exchange
 earnings and outgo
 
 A) Conservation of Energy Nil
 
 B) Technology absorption, adoption and innovation.
 
 Specific areas in which R & D carried out by the company Nil
 
 Benefits derived as a result of the above R & D Nil
 
 Future plan of action Nil Expenditure on R & D
 
 a.  Capital Nil
 
 b.  Recurring Nil
 
 c.  Total Nil
 
 d.  Total R & D Expenditure as a percentage of Total Turnover Nil
 
 1) Efforts made towards Technology N.A
 
 2) Benefits derived as a result of the above efforts N.A
 
 3) In case of imported technology imported during 1st 5 years (reckoned
 for the beginning of the Financial year) following information is
 furnished:
 
 a) Technology N.A
 
 b) Year Import N.A
 
 c) Has Technology been fully absorbed N.A
 
 d) If not fully absorbed, area not applicable N.A
 
 e) Where this has not been the, case reason
 
 Therefore and future plans of action N.A
 
 C) FOREIGN EXCHANGE EARNING & OUT GO
 
 During the year Foreign Excnage out go was Rs.85.19 lakhs and Foreign
 Exchange earnings was Rs.  Nil.
 
 ACKNOWLEDGEMENT
 
 Your Directors wish to place on record their appreciation of the
 excellent service rendered by all the employees of the Company.
 
 DECLARATION BY MANAGING DIRECTOR OF AFFIRMATION BY DIRECTORS AND SENIOR
 MANAGEMENT PERSONNEL OF COMPLIANCE WITH THE CODE OF CONDUCT:
 
 The shareholders
 
 I, N.Ravi Prasad, Managing Director of the Company do hereby declare
 that the directors and senior management of the Company have exercised
 their authority and powers and discharged their duties and functions in
 accordance with the requirements of the code of conduct as prescribed
 by the company and have adhered to the provisions of the same.
 
 
 
                            For and on behalf of the board of Directors 
                           For SOUTHERN MAGNESIUM AND CHEMICALS LIMITED
 
 
 
 
 Place : Hyderabad           (N.Ravi Prasad)        (N. Rajender Prasad)
 
 Date : 14.08.2012          Managing Director   Joint Managing Director