Failing to recover default loans from Keya Group despite several compromises, Pubali Bank Limited, a lender to the group, now prefers a tougher ending.
The commercial bank has already published an advertisement, inviting tenders for the planned auction of nearly 850 decimals of the land of Keya Group's factory complex along with the factory infrastructure and also the mortgaged luxury apartment complex owned by the sponsor-directors in the capital's Gulshan area.
The luxury apartment complex, where some foreign ambassadors also reside, is now worth around Tk270 crore, according to Pubali Bank's estimation.
The bank has requested interested buyers to apply within 24 May.
The auction schedule includes assets owned by Keya Group's flagship company Keya Cosmetics Ltd, Keya Yarn Mills Ltd and its founder Abdul Khalek Pathan and his family members.
With uncharged interests added, Keya Group and its sponsor-directors owe more than Tk800 crore to Pubali Bank, according to the bank's advertisement for auction.
However, the total liabilities to the commercial bank were resettled at around Tk500 crore and the client has been trying to tame the bank by paying a lump sum of the actual payable in instalments, according to Pubali Bank officials.
Pubali Bank Managing Director Safiul Alam Khan Chowdhury told The Business Standard, "Resettling debts, moratorium – nothing worked for recovering loans from the client, and with the central bank's relief period having ended recently, our board decided to try hard now."
"Recovering the bank's assets is part of our fiduciary duties," he said, replying to TBS queries on why the bank preferred the hard-line during the pandemic.
"We have full provision against the default loans as per the central bank instructions. We also have 42.39% of Keya Cosmetics' shares in lien," said the bank's top executive to assure his own shareholders.
"In the pandemic situation, we struggled to pay the promised sum of instalments recently and the partial payment resulted in a misunderstanding between the bank and us," said Homaun Kabir FCA, chief financial officer of Keya Group.
He has had a meeting with the bankers on Thursday and expects that the bank would withdraw its advertisement for auction.
The rise and fall of Keya
Keya Group is an example of how a business can grow fast in Bangladesh and fall at an even faster pace.
Abdul Khalek Pathan, a professional driver turned entrepreneur, founded his detergent and soap business in the 1990s, which grew to the top tier in the local market alongside achieving export trophies in the early 2000s when the business got listed on the stock market.
It expanded to export-oriented textile and apparel business seriously and bagged successes there too.
But, aggressive financial planning, misreporting of assets and liabilities, and the amalgamation of troubled assets with the listed company together resulted in the fall of the once-a-glorious entity.
Keya Cosmetics Ltd, which owns the group's soaps and detergent business alongside most of the textile units, had absorbed an asset meltdown in the fiscal 2018-19 since the accounting regulator ordered the company to write off fake assets amounting to over Tk1,000 crore.
Due to a one-off annual loss bigger than its paid-up capital, Keya Cosmetics' net asset value came down to near zero, which saw a slight improvement with some profits posted for the fiscal 2019-20.
On top of all the shocks, Keya Cosmetics' shareholders have now absorbed another fresh round of uncertainty following the Pubali Bank advertisement inviting tenders for auctioning Keya factories, its founder's luxury apartment complex, to recover default loans.
Keya's shares closed at Tk5.7 each, which is 1.7% down from the previous session's closing price.
Against the face value of Tk10 each, Keya Cosmetics' net asset value per share was Tk0.25 at the end of last fiscal year.