Beximco set to lay off 40,000 workers as banks, buyers shun it
Over the past four months, Beximco has spent Tk300 crore, largely on worker wages, including Tk100 crore financed through bank loans
Beximco Group is expected to announce layoffs across its 16 apparel factories located at its Gazipur Industrial Park today, citing no orders and the absence of banking support since the ouster of Sheikh Hasina’s government in August.
The decision threatens the livelihoods of 40,000 workers as the conglomerate struggles to manage escalating financial pressures.
Osman Kaiser Chowdhury, a director of Beximco Group and managing director of Beximco Limited, described the situation as unsustainable.
“We were initially assured by the interim government that our businesses would be supported. Based on this, we kept the factories operational for four months. However, no support materialised,” he said, explaining the rationale behind the impending layoffs.
Over the past four months, Beximco has spent Tk300 crore, largely on worker wages, including Tk100 crore financed through bank loans.
The group requires Tk60 crore per month to pay wages and an additional Tk15 crore for other staff who have gone unpaid for four months.
“We are generating Tk5-6 crore in monthly revenue from subcontracting with other factories, which is far from sufficient. Previously, these factories earned $25-30 million per month [Tk250-300 crore],” Osman said.
Global buyers cautious doing business
The lack of fresh orders since August has compounded the challenges. Osman said major global buyers have signalled willingness to resume business if the group could secure Letters of Credit (LCs) from banks. However, the banking sector’s reluctance to support Beximco, due to its financial position, has left the company unable to fulfil these requirements.
“Some banks could open LCs, but only with a 100% margin and positive signals from the government. We don’t have the necessary cash reserves to meet such terms,” he noted.
Closure may follow layoff
The Bangladesh Labour Act 2006 mandates compensation for laid-off workers who meet specific criteria. According to its Section 16, workers must be compensated for all lay-off days, excluding weekly holidays. Sub-section 5 stipulates additional compensation if layoffs extend beyond 45 days within a calendar year.
Osman indicated that the layoffs would initially last for 45 days, with the possibility of a 15-day extension if conditions fail to improve. He warned that permanent factory closures might follow.
He said the layoff in Beximco Limited’s textile division has not yet been finalised as it is a publicly listed company and needs to go through certain procedures.
Loans over Tk50K crore, 50% defaulted
Beximco’s financial troubles are closely tied to its mounting debt. A recent report submitted by the Bangladesh Bank to the High Court revealed that the group’s loans stood at over Tk50,000 crore as of 30 November 2024, with over 50% – Tk25,524 crore – classified as defaulted. Out of the group’s 188 companies, 78 have borrowed from 16 banks and seven financial institutions.
In November, the Bangladesh Bank appointed its Executive Director Ruhul Amin as the receiver for the group following an order from the country’s apex court.
Amin acknowledged the difficulties facing Beximco’s apparel units. “Beximco cannot open LCs due to its defaulted loans and is now reliant on subcontracting. Running factories is not our job, but we are willing to help if approached,” he said.
He also criticised the group for failing to service its debts on time, arguing that Beximco’s actions had worsened its precarious financial situation.
The crisis at Beximco has broader political implications. Salman F Rahman, vice-chairman of the group, served as an adviser to ousted prime minister Sheikh Hasina on private industry and investment.
During his tenure, critics allege, he leveraged his influence to secure favourable terms for Beximco, including extensive bank loans. Salman was arrested on 13 August from Sadarghat area in Dhaka and now in jail.
With the group now under financial and operational strain, the fallout from its debt crisis may extend far beyond its apparel factories, raising concerns about broader implications for Bangladesh’s banking and industrial sectors, according to bankers.
Source: The Business Standard | 16 December 2024 | Author: Mahfuz Ullah Babu & Tonmoy Modak
