Keya loses its fragrance

In the late '90s, radio and TV jingles of Keya cosmetics filled the airwaves. Large ads of its products in the print media were a regular affair, indicating the cosmetic company's strong ascend in the business world.

When Keya Cosmetics hit the market in 1997, it became a prominent company with various products – from lemon soap to coconut oil in a very short time.

Just in a decade or more, it gained 16% of the country's cosmetics market with its popularity reaching a peak among consumers.

But things started to change when Keya's entrepreneur changed his mind and shifted his focus to garment business, leaving many investors in the company perplexed, looking at poor prospects.

Despite high demand for its products the company began to lose its market share, eventually nosediving to 5% in 2015, finds a study.

This is a story of how a popular brand loses steam only because of poor business decisions.

An analysis of the published financial reports of Keya Cosmetics shows the company's annual cosmetics sales were Tk260 crore in 2012-13. In 2017, the turnover almost halved to Tk140 crore. In 2018, the situation improved a bit and sales stood at Tk189 crore.

Workers and officers of the company said the factory that once used to run round the clock is now running a single shift. 

Some old-timers of Keya Cosmetics think that Abdul Khaleq Pathan, the company's founder chairman, and his "wrong decisions" put the company in the current bad shape, even though its products are still in high demand.

While he is focusing on the highest modernisation of his garment manufacturing units, machineries at the cosmetics factory are lying unattended and gradually getting damaged. 

However, Abdul Khaleq Pathan thinks Keya Cosmetics is doing alright. He said his daughter is now looking after the cosmetics business and claimed cosmetics are not doing that bad.

Cosmetics business was good till 2012, but after that this business has been on a gradual decline, he said.

They do not have any plan to expand Keya's cosmetics business at this moment, the chairman told The Business Standard.  

How the factory is running  

During a recent visit to the Keya Cosmetics factory at Jarun in Gazipur, two production units were found to be producing detergent and soaps. 

Around  a dozen workers were packaging detergent powder. A worker standing beside was taking the readings on a digital display.  

A packaging machine worker, who has been with the company for 20 years, said, "Even a few years ago, the detergent unit had nearly 150 workers in two shifts. But now about half of them are working in one shift.

On one area of the shop floor, four to five workers at the aromatic soap and cosmetics manufacturing unit were packaging the items.

Laundry soaps were being packed on the right side of the unit. Inside the unit, shampoo, dishwashing liquid and toothpaste were being produced in a glass-enclosed area. Three small machines were running there.  

The petroleum jelly and shaving cream production machines lay unused. Workers said those machines ran only during winter.

Soap noodles, a raw material for making soap, were being manufactured at another side of the glass-enclosed area. Workers said there was a great demand for the soap noodles.    

They claimed most of the soap manufacturers of the country buy the raw material from them. 

Abdul Khaleq Pathan said their soap noodles have good demand and a large multinational was one of their prominent buyers.  

 Keya soap sees good sales in pandemic

Top officials of the company said their soap factory did not stop production during the 66-day pandemic period shutdown. The Chief Financial Officer of the company Homaun Kabir told The Business Standard that they could continue the production though their raw material import was hit.

"Basically, we had plenty of stocks of palm oil – one of the main ingredients of soap manufacturing," he said.   

The official said though the sales of soap surged during the shutdown, demand for other items dropped during that period.  

Workers and officials of the factory said the sales of the company have started to pick up again, after a slump in the middle. However, the products have greater demand in areas outside Dhaka, they added.

"Our cosmetics products are in demand in the market and we are trying to meet that demand from our current capacity," said a marketing official of Keya Cosmetics.

 Reasons for slowdown in Keya cosmetics business

Abdul Khaleq Pathan started spinning business in 1999. He set up a cotton mill in 2004, a knit composite factory in 2005 and a yarn mill in 2008.

"The garments industry was growing rapidly at that time. That is why I paid extra attention to the garment business. But in doing all this, I could not give much attention to the cosmetics business," acknowledged the owner.

He added that the cosmetics business will continue as it is now.

A lot of money was needed to modernise the garment factory in compliance with the Accord and Alliance conditions. 

Besides, a Tk500 crore worth export order with Keya Garments was cancelled in 2010-11, after it was ready. Then, the company started to struggle to repay the bank loan.

Abdul Khaleq was named in the list of defaulters of some banks after 2012.

According to the 2018 financial report, the company borrowed some Tk990.16 crore from eight banks, including a foreign one, and two financial institutions.

He was sued by the Anti-Corruption Commission (ACC) on charges of embezzling Tk111 crore from Krishi Bank's Karwan Bazar Corporate Branch.

However, at present, the transaction of Keya Cosmetics with the bank is quite good, according to bank sources. 

When contacted, Md Abdul Halim Chowdhury, managing director & chief executive officer of Pubali Bank, said Keya is paying regular loan instalments as per its business agreement with the bank. The company is a good client of Pubali Bank, he added.

Keya share price jumps 166%

Keya Cosmetics entered the stock market to exit from the debt cycle.

Some Tk100 crore in loans was repaid from the money raised from the stock market in 2011 through issuing right shares.

The desperate owner tried to raise more money by listing the garments unit on the stock exchange to repay the remaining debt and modernise the factory. But his application was rejected as he was categorised as a loan defaulter by that time.

At one point, he merged the garment companies with Keya Cosmetics to repay loans by selling shares. Although he announced he would sell 30% shares to repay the loan, he could sell 20%.

The company also has never paid cash dividends to its shareholders since 2010.

Abdul Mannan of Sheltech Brokerage House bought Keya shares for Tk86 each in 2011. "The price fell to Tk2 at the beginning of this year. I cannot even leave the shares because of massive losses," he said.

Equity researchers in the stock market said the company is in such a predicament mainly due to lack of proper leadership.

Noor Hossain, company secretary of Keya Cosmetics, told The Business Standard, "Recently, the High Court has allowed the annual general meeting for the 2017-18 financial year. If the meeting is held, it will be possible to publish the financial accounts of the following years."

Meanwhile, the company's share price has risen by 166% in the last two months following the approval of the annual meeting. The closing price of the company's each share on the stock market was Tk7.70 on Thursday. 

Some 46.27% of Keya Cosmetics' total shares is with sponsors and directors, 9% with institutional investors and 44.73% with general shareholders.