We have capacity to meet 20% of country’s edible oil demand through our 6 refineries: SA Group chairman
The factories were closed for six long years but we had to pay 15% interest on the bank loans
S A Group, a familiar name in the country's consumer goods sector, has big investments in several edible oil refineries, condensed milk factories, etc. However, it plunged into crisis in 2012 as a gas connection at the factory level was suspended by the order of the president of the country.
The company became a defaulter in the aftermath of the decision as it failed to start production in its factories due to a lack of gas connection. However, in 2018, it returned to production after the government provided a gas connection to six of its factories along with 59 factories in Chattogram.
Currently, the company with the employment of 3,500 people is trying to bounce back into business with the heart and soul effort of its chairman Shahabuddin Alam. His two sons Sajjad Arefin Alam and Shahriar Arefin Alam have also joined in the business recovery after returning to the country after completing their studies abroad.
In an interview with The Business Standard (TBS), Shahabuddin Alam shared the detailed story of the company. Shamsuddin Illius, TBS's bureau chief of Chattogram, conducted the interview.
How did you get into the business?
My family has been involved in business and industry for a long time. My father and grandfather had business in Khatunganj. Our business was spread up to Myanmar from where we used to import wood during the British period.
At that time, the clothing business was our main focus. We used to import clothes from Pakistan and sell them exclusively in Khatunganj and Islampur.
In 1983, I completed my Master's in Management from Chattogram University and joined my father's business the next year. I got interested in electric bulbs after seeing them during a visit to India. I also set up a small electric bulb factory next to our home. Our products were sold at the electronics markets in Nandankanan in Chattogram and Nawabpur in Dhaka.
Later, in 1989, I set up a refinery factory in Kalurghat named Shah Amanat Edible Oil with a capacity to produce 30 tonnes of oil. The machines of the factory were imported from Germany. Later, in 1991, I set up another refinery. At that time, we made good profits as there was little competition in the market.
Tell us about the rise of your business. How did you start the brand Goalini?
In 1999, we purchased MEB Agro Dairy from Elias Brothers and started producing Samannaz Condensed Milk. We renovated the factory with new machines from Switzerland. The factory is now currently running under the name Goalini.
In 2000, we set up two more large scale oil factories in Chattogram named SA Oil and Samannaj Super Oil with an investment of around Tk150 crore.
After that, we set up flour and semolina factories. We also set up two paper mills named South-Eastern Paper and SA Paper Mill, and then SA Beverage (Muskan Drinking Water) and SA Salt factories. All the machines in these factories are the latest and imported from European countries. We invested at least Tk500 crore in these factories between 2005 and 2010.
In 2003, we purchased the Kamal Vegetable Factory at Fatullah in Dhaka. In 2011-12, two oil refineries named Sarija Oil Refinery and South-Eastern Oil Refinery were set up there with an investment of about Tk400 crore. These two factories can refine 3,500 tonnes of edible oil daily.
These are still the largest edible oil refineries in the country and we invested about Tk2,000 crore for capital machinery and building construction.
How did you become a defaulter?
The gas connection at the factory level was abruptly shut down in 2012 by the order of the President of the country. By then we had not even started production. Most of the banks adjusted the loans that I took from my working capital till 2018.
The factories were closed for six long years but we had to pay 15% interest for the bank loans. In 2018, the gas connection was restored but by that time I had no working capital. So, the main reason behind being a defaulter was not getting a gas connection on time for my factories.
How did your other businesses suffer?
I have about 17 industries. The country's rule is that if an industry of a group becomes a defaulter, other industries of it become classified. I think this rule is problematic. We have discussed this with the regulatory body of Bangladesh Bank.
Tell us about the impact of high-interest rates on bank loans?
I had to pay 15%-17% interest rates even when my factories were closed. Some banks even charge a 21% interest rate.
Bank loans swell due to these high interests, penalty charges, delay charges etc. Many companies cannot survive these charges in the long run.
How much did you borrow from the bank and how much is still unpaid?
Since 1985, we have paid interest of thousands of crores to banks. The highest exposure was Tk2,000 crore. So far, we have paid around Tk5,000 crore. We have around Tk2,000 crore more debt to pay.
The government has given special facilities in the BRPD-5 circular for rescheduling loans. Of these, with the direct cooperation of some banks and the sincere efforts of various boards of banks, we have regularised loans in most of the banks with recovery down payment. We have even started payment in most of the banks.
However, our industries have not been started yet. We are paying the banks with the existing cash flow. Now, most of the banks are satisfied with our transactions. A few banks are awaiting approval of the Bangladesh Bank's rescheduling.
What do you need right now to start the closed factories?
We need financing for the closed factories. For this, the banks can appoint a stock monitoring agency for close supervision. Then the closed factories will return to business and the bank will also get their money back.
There is an obstacle in this case which is a 15% down payment on further refinancing. You have to pay a 10% margin to reschedule. Then it would be 25%.
We think this down payment should be brought down to 2%-3%.
Since it is not possible to import goods with a 100% margin. The banks should collateralise products. The importer or entrepreneur will pay. The products will be under the control of the bank.