Evaly refunds come with long post-dated cheques

Customer experience shows that Evaly, after failing to deliver products, has delayed refunds by up to eight months to use customers' money as an alternative working capital.

A customer showed The Business Standard the refund cheque they received from Evaly, and said they had placed the order in February this year and now the cheque is dated 11 August.

Many customers are now trying to sell their post-dated refund cheques they have got from the e-commerce company at high discounts in the wake of media reports over its risky business model.

Furthermore, the Negotiable Instrument Act will allow Evaly one more month past the issue date on a cheque to make the payment.

Thus, a buyer who placed an order in February will not get the refund as late as September.

This tricky refund allows Evaly to use customers' money for eight months as working capital. If it had to fund its operations using working capital financing instead, it would have to pay interest rates as high as 7% to 9%.

This is how Evaly's current short-term debt-to-asset ratio is rising abnormally, putting it at the risk of defaulting.

Many customers who prepaid for products lured by lucrative discounts are also crowding the Evaly office to get their money back.

Masud Parvez, a shopkeeper in Moulvibazar, is one of the customers who would be happy to merely get his capital back.

He had ordered a 160cc motorcycle in February this year under a campaign that offered around 40% discount and promised delivery in 45 working days. A few months later, Evaly issued a bank cheque to refund him at MRP, citing stock issues. But, the encashment would take up to August this year.

Masud was "frustratingly waiting for the good day, but not anymore" as he has learned from a Bangladesh Bank investigation report recently that the aggressively expanding loss-making online marketplace is struggling with six times more liabilities than its assets. Its current assets virtually eroded to meet the current liabilities that already surpassed Tk400 crore.

"I am not sure if I will be paid back on time. Now, I will be happy if someone gives me my order value in cash in exchange for the worrisome cheque," he told The Business Standard.

Ahsanul Kabir, a Dhaka resident, submitted his Evaly cheque last week and it bounced back due to insufficient balance in Evaly's bank account.

He panicked about his money but later got some assurance when the company through an SMS requested its customers to encash their cheques next week.

This reporter has seen several sell posts in Evaly online user groups and talked to a few users.

Imran Khan, an Evaly customer, last week made a sell post to the Facebook group "Evaly Product Buy Sell and Exchange-All Bangladesh" for Tk3 lakh in cash for a Tk3.28 cheque scheduled for encashment in mid-September.

He received no response at that price in the curb forward market.

Another group member named Kazi Abu Naser offered him Tk2.2 lakh on the condition of full cooperation in the encashment process.

Customers are terribly worried about their pending Evaly orders. Some are even counting on the hope that the company will turn around.

Unlike the previous ones, Evaly customer Faisal Hossain is not surrendering to uncertainties.

"I saw such disruptions previously and remained optimistic. I still hope, the company would arrange its finances to pay me back in October this year," Faisal told TBS.

Evaly Chief Executive Officer Mohammad Rassel, however, denied that his customers are panicking now.

"The number of such customers is negligible," he said, claiming, "Most customers are confident with their orders and the loyal ones are ordering at our regular shops to support our break-even goal."

Asked why the company is refunding, Rassel said, "Most of the orders have been delivered on time and a few, which we could not deliver on time due to stock issues caused by supply chain disruption during the pandemic, are being repaid."

So, why is the 45 working day delivery being deferred up to more than six months? Rassel said "We are paying back customers at MRP – those who did not accept the actual refund amount. In that case, we have to inject funds and financing, that is why it takes an additional time."

The rise, the wrong and the hopes

Amid no regulations in the country, Evaly pioneered a deep discount prepaid online order campaign three years back, embracing a long delivery cycle – officially, 45 working days, and stretching further for many orders.

Discount hunters from across the country responded rigorously to make Evaly a loss-making mammoth in the e-commerce sector of the country.

Almost all major brands in the market and thousands of SME merchants onboarded Evaly as sellers to beef up their topline, while millions of customers turned addicted to the Evaly app, checking what was there to hunt every weekend.

Evaly has already achieved the milestone of hosting 1 crore visitors in a day, Rassel claimed.

He feels his scaling up the game worked well to grow to a position to "rule the future e-commerce market of the country".

But observers do not overlook thousands of complaint posts regarding the delivery delay, and most importantly its business model to finance the growth – dependency on increasing liabilities to customers and sellers.

As soon as the Bangladesh Bank report revealed that the company is running with virtually no cash in its bank account against its net current liabilities – Tk190 crore to merchants and Tk214 crore to customers – the panic regarding default risk began to loom.

Cash flow mismatch was supposed to disrupt further as the government announced that prepayments to the long-delivery-cycle e-commerce platforms through digital channels will remain halted until the products are delivered.

The government is also planning to make it mandatory to deliver prepaid online orders within a maximum 10 days or sooner.

The Evaly CEO welcomed the moves to regulate the sector and told TBS that his company is looking for funding to smoothen its operations.

"Our business and delivery is going on, we can borrow from diversified sources as we did previously and with an estimated standard valuation of $800 million, we should receive handsome equity investments in the coming days," he said in a telephonic interview recently.

Declining to disclose the potential sources of fresh funding, he said "We are in talks with both local and foreign investors and will disclose on time if there is any concrete development."

On top of that, "suppliers' credit is still growing as merchants find business with Evaly profitable," and that would help Evaly keep delivering products and services during its announced transition to regular business from deep discounting, he said.

"So, nothing to panic," Rassel reassures his customers.

Abdul Wahed Tamal, general secretary of the E-commerce Association of Bangladesh (E-cab), said the business model, which Evaly has come through, was not an ideal one and it is their sole responsibility to deliver products to their customers and pay the merchants.

Barrister Tanjib ul Alam recently told Deutsche Welle that the business model Evaly has followed is not sustainable and "nowhere in the world is this type of business model seen".

"It is not possible for Evaly to do sustainable business through the kinds of offers it is offering. So, since the business is not sustainable, it is a  Ponzi scheme," a Deutsche Welle bangla report dated 25 June quoted Tanjib as saying.

A Ponzi scheme, in economics, is a fraud aimed at making quick bucks.

Barrister Tanjib said this kind of business is illegal in Bangladesh and punishable under the Penal Code.

"The liabilities would not be a big deal for Evaly if it secures funding," said E-cab General Secretary Abdul Wahed Tamal.

They have a very large customer and seller base that investors might not overlook, the industry association leader opined.