Special Correspondent

HYDERABAD: The N. Rangachary Committee appointed to inquire into the affairs of Margadarsi Financiers has come to the conclusion that "Margadarsi, as it stands today, will not be able to refund the public deposits in full because of its legal inability to raise any more deposits."

The committee, after scrutinising the documents filed with statutory authorities such as the Income Tax Department, has expressed the opinion that deposits raised by Margadarsi were used in a very large measure to make investments in group concerns and also to finance the periodical losses.

In its report, the committee noted that a major chunk of deposits raised every year were going towards meeting the current losses and investments, thus weakening its ability to repay the deposits. A copy of the report is said to have been sent to Eenadu group chairman Ramoji Rao.

Mr. Rangachary said it would not be wrong to assume that fresh borrowings went to meet current losses and did not add to the firm's financial capacity. The other presumption that one could reasonably make was that Margadarsi Financiers had been able to survive as the cycle of borrowings had been able to keep it floating.

To illustrate its claim, the committee said the firm did not show in its balance sheet any equity or capital of its own invested in its business. Therefore, the only route to meet capital requirements was to raise public deposits. Although Rs. 988.31 crore was invested in group companies and sister concerns, their balance sheets did not reveal the existence of any asset that could lead to realisation of a value more than book value.

Moreover, investment by way of share capital and application money towards allotment of shares could only be viewed as "sunk costs" and not available to Margadarsi Financiers as resources. Stating that the moneys drawn from Margadarsi Financiers had flown into very many fields, the committee said Margadarsi continued investments in companies that had become dormant.

Noting that the assets shown by the company were Rs. 1,315.61 crore and debts Rs. 2,685 crore, the committee said in the best situation available, Margadarsi Financiers could repay every creditor only 49 paise in a rupee.