Alhaj Textile's deadlock prolongs amid internal discords

The securities regulator's efforts to put the years-long legal battle of Alhaj Textile Mills with its lender to an end and to bring the company back to regular business are facing hiccups because of internal discords among the company's reconstructed board members.

It appears they are divided on the question of should the company solve the decade-long problems with the bank immediately to better focus on core business or continue with its legacy of litigations and inefficient operations.

Md Mizanur Rahman, managing director and CEO of the company, alleged that the board's chairman appointed by the Bangladesh Securities and Exchange Commission (BSEC), one of the shareholder directors, and the company secretary created hurdles in the CEO's assigned tasks for coming out of the long deadlock.

In a letter to the BSEC chairman on 29 January this year, Rahman also requested for regulatory interference to help the company come out of the standstill situation.

He also alleged the Company Secretary Selim Parvez of conspiring against the company to trigger "gigantic damages" through cunningly provoking the Chairman Khondoker Kamaluzzaman and a few others in the board and executive management.

Being contacted, Mizanur Rahman, who is also a member of the sponsor family, told The Business Standard, "I officially communicated the facts that hindered my way of accomplishing regulator-assigned tasks."

In August last year, the BSEC asked him to lead the faster loan settlement process with its lender Agrani Bank that left the company unable to import raw materials and proceed with any modernisation of the nearly three decade old machinery.

Also, the BSEC asked the company to ensure 30% shareholding by sponsor-directors that would need 4.33% share accumulation by the existing directors or onboard new directors having qualifying shares.

The BSEC has called the company's board of directors it had built last year in combination of shareholders and independent directors for detailed hearing, confirmed BSEC Spokesperson and Executive Director Rezaul Karim.  

"The board reconstructions have purposes and the updates need to be communicated with the regulator. If any deviation or conflict emerges, the commission will act to protect shareholders' interest," he told TBS on Sunday.

The discords

The oldest publicly traded textile company, that was founded in Ishwardi, Pabna by a Bengali entrepreneur family in 1962, has come through long waves of rises and falls as it was nationalised after the independence, again given back to the sponsors in 1982.

It had a decade-long legal battle with state-owned Agrani Bank and one was settled after the bank paid it a huge sum of over Tk43 crore against an old FDR following the Supreme Court verdict before the pandemic. However, the bank's money loan court case filed in 2013 is yet to go.

Following the BSEC instruction in last August, Mizanur Rahman and his team initiated negotiated settlement, reduced the payable sum to Tk38.2 crore in December through securing interest waiver proposal of Tk22 crore by the bank's branch office to the head office, and paid the down payment of Tk5 crore upon his board approval.

Chairman Khondoker Kamaluzzaman, a former judge and BSEC commissioner (legal), the company secretary and a shareholder director, bypassing the MD and the two banking expert independent directors, went to Agrani Bank's chairman to renegotiate and the end result was a letter for Tk52.6 crore total payables.

Kamaluzzaman told TBS on Saturday he, as an independent director and the chairman, was acting to best protect shareholders' interest and he still finds space to reduce the payable through negotiations.

He, instead, alleged the MD for not caring about the due diligence and complying with the corporate governance norms.

Echoing him, Company Secretary Selim Parvez said, "I am a professional chartered secretary and was trying my best to uphold corporate governance within the company. I am not aware of any such complaint."

The deadlock

Alhaj was not suffering only because of the internal dissents over bank affairs, but also it has been getting paralysed in operations with grouping and non-cooperation among themselves, TBS has learned talking to two other board members and several employees who requested anonymity.

Yarns worth over Tk17 crore remained unsold till date only because of non-approval of the relevant board committee.

One said the MD was preferring a clean Credit Information Bureau (CIB) report that would enable the company to best utilise its vast land, gas connection, and the reputation in business. Also, a clean CIB became crucial to onboard new directors as no deserving investor was ready to be a director of a loan defaulter company.

At least two conglomerates, including a top tier apparel exporter, have accumulated qualifying shares from the market eyeing a board seat at Alhaj, according to regulatory and investment banking sources and they were waiting for the loan settlement to ask for a board seat.

"Through my education and experiences in the USA and also in Bangladesh, I have learned to prefer cash flow rather than idle assets," said Mizanur Rahman.

"After solving bank problems, starting afresh, we can be a cashflow-rich business, which is much better than the current state of an asset-heavy inefficient business," he added.

Most importantly, delay in loan settlement only adds to the interest pile, he said adding "We have had a good opportunity to enter a virtuous cycle from a vicious cycle in business."

"A Tk150 crore modernisation project can let our shareholders smile as it would enable us to be an export-oriented company. Also, we can import raw materials ourselves to save a lot in costs," he added. 

An independent director told TBS his opponents within the Alhaj family might be in fear of new directors on board.