The loan that bankrolled Young Indian's adventure

The main source of funds for the Gandhi family-run non-profit has been an unsecured loan by a company that now belongs to the Sanjiv Goenka group

A loan from late takeover tycoon RP Goenka helped Young Indian, the non-profit firm floated by the Gandhis, acquire control over The Associated Journals in 2010.

An analysis of the financials of Young Indian shows that it did not earn much income and accumulated a deficit of over Rs 1 crore (Rs 10 million) in the first three years of its operations.

The Rs 1-crore loan from Goenka's investment arm, Dotex Merchandise, was the primary source of funding for the company with a capital base of Rs 500,000.

A significant portion of this loan was used in acquiring Young Indian's only major asset, the shares of The Associated Journals, the company that owns the National Herald.

At the end of 2013-14, Young Indian reported a deficit of Rs 1.03 crore (Rs 10.3 million) against its capital of Rs 500,000.

The bulk of this deficit was accumulated in the first reported accounts of the company for the year ending March 2012.

Being a non-profit firm, Young Indian does not have a profit and loss account.

It reports its accounts in an income and expenditure format.

Though it was incorporated in 2010-11, Young Indian sought and got permission to extend its accounting year to 2012.

The accounts were approved in the first annual general meeting held at 10, Janpath, the official residence of Congress president Sonia Gandhi, on May 15, 2012.

The notes to the accounts for 2011-12, which were for the period from incorporation in November 2010 to March 2012, give some insight into the company's objects and operations.

It says, Young Indian's objective is to inculcate 'in the mind of India's youth commitment to the ideal of a democratic and secular society for its entire populace without any distinction as to religion, caste or creed and to awaken India's youth to participate in activities that promote the foregoing objective.'

The largest item on the expenditure side of the company for 2011-12 was 'expenses to attain objects of the company' at Rs 65.73 lakh (Rs 6.57 million).

Other expenses included professional fee at Rs 162,000 and preliminary expenses written off (Rs 244,000).

With the annual fees from members being the lone income item at Rs 800, the company ran a deficit of Rs 69.78 lakh (Rs 6.97 million).

The director's report said, "In pursuit of its objects, the company acquired a loan owed by The Associated Journals, which was subsequently converted into equity capital of The Associated Journals.

"The company is making efforts to generate sufficient revenue to meet its costs."

However, the accounts of subsequent years showed these efforts did not bear enough fruit.

In 2012-13, expenses to attain objects came down to Rs 14 lakh (Rs 1.4 million), while other expenses were Rs 250,000.

Since total income in annual fee was Rs 400 only, deficit for the year came to Rs 16.49 lakh (Rs 1.64 million).

In 2013-14, the numbers were almost the same with a marginal increase in other expenses taking the deficit to Rs 16.57 lakh (Rs 1.65 million).

Keeping it afloat

An analysis of the balance sheets for these three years shows these deficits were funded by a sum of Rs 1 crore (Rs 10 million), which appeared in the balance sheet of the first year as an unsecured loan.

In 2011-12, the books showed interest accrued on inter-corporate loan at Rs 155,000.

In subsequent years, this appears as 'short term borrowing' with remarks saying 'repayable within one year' in some places.

However, there are no signs of repayment.

According to the filings, the management committee of the company, which included Motilal Vora and Oscar Fernandes, approved a loan of Rs 1 crore (Rs 10 million) from Kolkata-based Dotex Merchandise in August 2013.

Under Section 180 of the new Companies Act, 2013, which was enforced in September, any loan exceeding the paid up capital and free reserves of the company needs approval by a special resolution of shareholders.

This approval was taken by the company at the third Annual General Meeting held in September 2014 at 10, Janpath.

Sources say that the late R P Goenka, a Congress Rajya Sabha member at one time, advanced the Rs 1 crore (Rs 10 million) loan in 2010 through Dotex Merchandise.

The two-decade-old company, has had both R P Goenka and his grandson, Shashwat, as directors in the past. Its email address had the domain name of rp-sg.in, indicating that the company now belongs to the Sanjiv Goenka group.

A mail sent to Sanjiv Goenka group spokesperson remained unanswered. Dotex was inherited by the Sanjiv Goenka group after R P Goenka's demise in 2013.

Sources say Shashwat Goenka was a director on the Young Indian board for just a few weeks and did not attend a single board meeting.

They add that the loan was advanced much before Shashwat Goenka joined the board and has been fully repaid with interest.

An email sent to Young Indian remained unanswered.

"Young Indian took a commercial loan of Rs 1 crore (Rs 10 million) at a commercial interest rate of 14 per cent per annum from Dotex.

This amount has been paid back by Young Indian along with interest by cheque," Congress spokesperson Randeep Surjewala says in an email.

"Accounts of Young Indian have been duly audited by the Income Tax Department as also the Registrar of Companies."

Young Indian's only major asset, its holding of 90.21 million shares of The Associated Journals, is "carried at NIL as the acquisition cost was written off as Expenditure on the objects of the company."

At face value of Rs 10 per share, this holding is worth Rs 90.21 crore (Rs 902.1 million).

Image: Rahul and Sonia Gandhi. Photograph: Vijay Verma/PTI Photos