Mostafa Group eyes a comeback
Debt-ridden Mostafa Group wants to pay back Tk 1,500 crore loans with around three dozen lenders taking advantage of the central bank’s rescheduling facility, as it looks to make a comeback.
Soon after the arrest of Group Chairman Hefazatur Rahman on June 20 this year, the Chittagong-based company has started talking to 35 lenders and showed interest to pay off the loans. He was released on bail a week later. Officials of the banks said the group has contacted with them expressing interest to repay loans.
The group is pinning hope on the central bank’s loan rescheduling facility for loan defaulters. The facility allows borrowers to regularise the bad loans by paying 2 percent of the total loans as down payment.
According to data collected from the Money Loan Court in Chattogram, the group owes Tk 300 crore to National Bank’s Agrabad branch, Tk 200 crore to Southeast Bank’s Khatunganj branch, Tk 135 crore to Social Islami Bank’s Khatunganj branch, Tk 65 crore to Pubali Bank’s Agrabad branch, Tk 56 crore to Mercantile Bank’s Khatunganj branch, Tk 40 crore to Mutual Trust Bank’s Agrabad branch, Tk 35 crore to Bangladesh Commerce Bank’s Agrabad branch, Tk 33 crore to Uttara Bank’s Khatunganj branch and Tk 31 crore to NCC Bank’s Andarkilla branch.
It also owes around Tk 600 crore to several other banks such as Standard, State Bank of India, IFIC, UCB, Eastern Bank, Prime Bank and City Bank and five non-banking financial institutions such as Midas Finance and Union Capital Ltd.
The group, once the country’s top commodity importer, paid back loans amounting to Tk 1,600 crore on various occasions and the current amount has been accumulated as interests, according to Mostafa Group’s Managing Director Jahir Uddin.
Failing to recover money from the group, the lenders have far filed more than 100 cases with the Money Loan Court.
The court issued around 45 arrest warrants against Rahman and a number of directors.
Rahman, also a former president of the Bangladesh Ship Breakers Association, was arrested from the group’s head office in the port city’s Agrabad in connection with two cases filed by Union Capital.
The bad shape of Mostafa Group is contrast compared to its beginning.
Founded in 1952 by late Mostafizur Rahman, the group was initially engaged in commercial trading, export and import.
Later it branched out into manufacturing of steel products, iron and mild-steel rod, shipbreaking, artificial leather making, and shrimp cultivation, processing and export.
It also has business in textile and readymade garments, paper, refined palm and soybean oil, coconut oil, tea, rubber plantation, transport, IT and the financial sector.
The group had no bank loans when its founding chairman was alive and it used to run the operations mostly banking on cash.
It changed after Rahman died in 2006 and when his seven sons took charge of the group. Since then the group went for massive borrowing.
The lenders also jumped in and lent more than what Mostafa Group required. It faced gradual losses for the lack of skill in managing business.
It is alleged that Mostafa Group bought huge land by diverting funds.
The group took most of the bank loans between 2007 and 2012, Jahir Uddin said.
During the period, the prices of commodity items, including edible oil, fluctuated globally abnormally and the group incurred a loss of about Tk 600 crore. It lost another Tk 100 crore in the shipbreaking sector.
“We sought working capital to recover from the losses, but banks refused. So, we have failed to make a comeback,” Jahir Uddin said.
He said the group set up 35 industries with own cash and bank loans but now 14 are in operation. The rest are ready to go for production but have been forced to remain shut due to a lack of raw material for want of money.
Md Abdul Mannan, manager of Southeast Bank’s Agrabad branch, said senior officials of Mostafa Group contacted them and showed interest to repay their loan amounting to Tk 200 crore under the loan rescheduling facility.
The official hoped to recover the money since there is enough mortgaged assets against the loan.
Mostafa Group used to employ 16,000 workers in 2012 but the closure of many of its factories has brought the headcount down to 6,000.
