Ditched by local banks, Saad Musa Group set to reboot on foreign loans

It was an ambitious expansion plan built on promises of over Tk1,000 crore loan by state lenders.

But the Chattogram-based business conglomerate could not make it happen in 2016 as the approved loans were abruptly cancelled.

It was a disaster for Saad Musa Group as it had already invested its own resources and bank money for spacious factory floors.

That unfinished dream now looks set to come true with loans from foreign banks.

This is the story of a desperate turnaround bid of one of the port city's textile industry forerunners.

Starting off in the 1980s with export-import trade, Chattogram-based Saad Musa Group tasted success when it entered into manufacturing textile products in the 1990s. 

With time, the group had gone from strength to strength through expansion of its businesses in different segments of textiles. 

Its business was going ok until 2010 – when the company went for an aggressive investment in a new project that hit a roadblock for failing to secure utility connections.

To ride out the bad times and get back to the growth trajectory with diversified businesses, the industrial group is now going ahead with massive investment plans as it mulls gaining footholds in new sectors, such as power, steel, cement, agro, hospitality, and real estate alongside increasing investment in its existing textile business.

The business group is set to invest about $334 million, a major portion of it will come as external loans, in setting up Sultana Habiba Fabrics Mills that will comprise eight units – cotton yarn spinning, blended yarn spinning, weaving, circular knitting, RMG dyeing, printing and finishing, home textile dyeing, printing and finishing, and yarn dyeing, said company officials.

Besides, it is going to invest another $90 million in Saad Musa Denim and Saad Musa Terry Towels.

The Group has several companies, including 100% export-oriented ones, in the textile sector, and yet it is building another large plant i.e., Sultana Habiba Fabrics Mills, buoyed by an increasing demand for readymade garments and household textiles. The new plant is planned to go into operation by next year.

The group has already completed partial construction of the mill with an investment of Tk700 crore arranged from domestic sources, and now it plans to purchase necessary machinery with foreign loans.

Muhammad Mohsin, managing director of Saad Musa Group, told The Business Standard that some banks in China, Belgium, and Germany have agreed to provide the company with about $325 million in loans at 3% interest.

"We have applied to the Bangladesh Bank and the Bangladesh Investment Development Authority for their permission regarding the loans," he said.

Even though this group is more focused on the textile sector, especially home textiles, it has already expanded and is planning expansion of its business in various other sectors keeping its focus on future market and business potential.

Saad Musa Group plans to diversify its business into power plants, auto bricks, agro projects, cement, and steel industry by 2025 and real estate sector by 2030.

Muhammad Mohsin said, "With the group expanding in some new sectors by 2025, we will employ more than 30,000. At present, about 12,000 people are employed in 27 industrial units of the conglomerate."

As part of its expansion plan, Saad Musa Group will invest $30 million in manufacturing dalda, vegetable oil, and other oils, $175 million in an HFO (heavy fuel oil) power plant with 200MW power generation capacity, $20 million in manufacturing eco-friendly auto bricks, and $5 million in agro projects.

It also mulls investing in the cement industry that is expected to grow 10% every year. To this end, it has purchased 20 acres of land in Chattogram's Shikalbaha. 

The group plans to set up a steel factory in Chattogram's Anwara by 2025 with an aim of producing 1,000 tonnes of steel daily, for which it has purchased 20 acres of land. The cost of this project also will depend on the time of implementation, said officials.

Saad Musa Group is also planning to invest in a seven-star resort and in the real estate sector in Cox's Bazar.

Foreign loans in pipeline

Saad Musa Group took up the initiative to build Sultana Habiba Fabrics Mills in 2016.

At that time, the Investment Corporation of Bangladesh (ICB) decided to invest in the mill. The corporation approved a loan of Tk485 crore through debentures for Sultan Habiba Fabrics Mills. It was also a lead arranger of another Tk890 crore in loans from four state-owned banks for the company. 

In total, Saad Musa Group received a loan approval of Tk1,375 crore from the ICB.

But, the Tk485 crore ICB loan was later cancelled as the investment was outside the capital market. Loans approved by the state banks also got cancelled.

Muhammad Mohsin told TBS that buoyed by the fact that Tk1,375 crore in loans were in the pipeline, Saad Musa Group started construction of the a 12lakh sqft mill by investing Tk700 crore arranged from banks and the group's own resources. But it is not possible to bring in required machinery, he added.

Denied by local banks, Saad Musa Group approached foreign lenders to finance its new textile mill. And it has received approval for a total of $325 million in loans from several banks based in China, Germany, and Belgium for the import of machinery. 

Among the lenders, the Agricultural Bank of China alone will give $78.33 million or about Tk800 crore, Mohsin told TBS, adding that German Landesbank Baden-Württemberg will give $25 million and Oldenburgische Landesbank AG with provide another $25 million, while the Bank of Belgium will give $15 million.

Application to Bida for approval

Saad Musa Group on 4 August this year wrote to the Bangladesh Investment Development Authority seeking approval of the loan from the Agricultural Bank of China to buy machinery for Sultana Habiba Fabrics Mills.

In its letter Sultana Habiba Fabrics Mills says, "The Agricultural Bank of China, Qingdao branch intends to finance 85% of the contract amount $78.33 million as per acceptance of China Export and Credit Insurance Corporation without any local bank guarantee only on the basis of our corporate guarantor."

How it fell into bad times

In 2010, the business conglomerate started to witness the flip-side of success - it developed Saad Musa Industrial Park with 24 factories of different products but could not start operation in the absence of gas and electricity connections, causing it to incur a massive loss.

In 2015, some units of the industrial were commissioned, but there is still a shortage of gas and electricity. All factories in the park have not yet been able to go into production as losses mount. 

Saad Musa Group's owner also got into legal trouble in the US while buying a warehouse there, resulting in a big loss.

Besides, the group went through problems after renting state-owned Karnafuli Jute Mills. In 2008, it took over the loss-making mill and started its operation.

But four years later in 2012, Saad Musa Group had to return the mills to the government for some unknown reasons. For this, the group suffered a loss of Tk300 crore that it had already spent in the form of a new investment and paying for outstanding electricity and gas bills after having taken over the mills.

Saad Musa Group's bank liabilities

Saad Musa Group owes about Tk3,000 crore to about a dozen banks, including state-owned ones. A portion of the loans have fallen in default following the fire incident in one of its factories in 2005, the loan cancellation by the ICB in 2016, and Covid-induced business slowdown in the past couple of years.

Some of the loans have been rescheduled after payment of instalments and some are still in default.

When asked about this, Muhammad Mohsin said, "I have been doing business since 1982. During this period there was no problem in repayment of loans. But, due to some incidents, there have been problems. We are trying to resolve them."

The rise of Saad Musa Group

Muhammad Mohsin stepped into the world of business in 1982 after completing his higher secondary education by borrowing money from one of his childhood friends, even though his father Abu Saad Chowdhury wanted him to become a service holder.

He started with an import-export business in the trading sector. But the capital he arranged from his friend was lost as he incurred huge losses in the business.

The initial setback, however, could not dampen the spirit of the entrepreneurial young man as he managed to take out a loan from a bank and opened a department store.

After a few years, he started in the ship building sector. And as his new venture saw success, he started business in the textile sector.

The first industrial venture of Mohsin was Chittagong Fibre Boards Mills, which used to manufacture and supply leather fibre sheets and silver cans.

In 1994, he formed Saad Musa Group – named after his father and uncle – and started expanding business in various sectors.

Ever since then, he never looked back as Saad Musa Group has now turned into a large conglomerate consisting of more than two dozen sister concerns and subsidiaries in various sectors.

It is building the Saad Musa Industrial Park on 100 acres of land in Chattogram's Anwara.

There will be an education park, which will have all kinds of education facilities, on a 100-bigha plot of land, a hospital on a 40-bigha plot, planned villages for living, textile mills to meet textile demand, and agro projects for food production in the industrial park.