Keya Cosmetics announces shutdown of 4 factories from May

Keya Cosmetics has announced the permanent closure of four factories under its textile division, effective from 1 May this year, citing severe financial difficulties. 

As a result, around 8,000 workers will lose their jobs. 

The affected factories include Keya Group's Knit Composite Garments Division, Spinning Division, Cotton Division, and Keya Yarn Mills Limited.

According to a stock exchange disclosure, all the activities of the factories have been declared permanently closed effective from 1 May and the dyeing and utility division of the company will be permanently closed from 25 May. 

The company said it made the decision due to the current market instability, inconsistency of accounts with the bank, inadequacy of raw materials and inadequacy of the production activities of the factory. 

Knit composite garments, knitting, spinning, cotton and dyeing units are parts of the listed company, while Keya Yarn Mills Limited is a separate company.

On Thursday, the share price of the company closed at Tk5 on the Dhaka stock exchange.

In the first week of January, Keya Group Chairman Abdul Khaleque Pathan told TBS that around 8,000 workers would be jobless as a result of the factory closure. Of the workers, some 1,000 are individuals with disabilities.

"We cannot afford to run the factories anymore," he said, adding that only the dyeing unit from the textile wing, employing some 400-500 workers, will continue operations as that still secures locally outsourced orders for yarn dyeing.

The group's cosmetics and detergent wing, which generates about Tk25-26 crore in monthly revenue, will also continue business. 

Every month the company needs Tk7-8 crore to pay the workers, he said, estimating that the company would require Tk60 crore to compensate all affected workers when the factories are closed down.

Keya Group owes around Tk3,000 crore to banks and all its three banks classified it as a loan defaulter.

The group is an example of how a business can grow fast in Bangladesh and fall at an even faster pace. Keya Group, founded by the self-made businessman in 1996 had a spectacular rise through its cosmetics and detergent businesses under the brand Keya.

It, established by Adbul Khalek Pathan, was doing well in its detergent and soap business until it became too aggressive in the textile business in the 2000s, and also as a stock market issuer.

Pathan significantly popularised Keya soaps across rural Bangladesh mainly through sponsoring Ityadi, the most popular TV magazine programme in the country.

Keya Group also received export trophies in its golden days of rise during the 2001-2005 period.

However, excessive loan dependency, lack of professional management, stock market irregularities through amalgamating the textile units with the listed company, and failure in debt servicing dragged the group down to where it is today, according to analysts.

However, while talking to this newspaper, Pathan claimed that the banks, violating central bank rules, confiscated his export proceeds to recover their loans and that deprived the company of working capital and workflow.

Besides, the amalgamation appeared to be a synergy killer in contrast to the common expectation for synergy boosts as the post-amalgamation listed company's profit dropped by two-thirds within three years.

With their salary for November unpaid, several thousand Keya workers on 29 December last year took to the nearby highway as the company planned for a shutdown in the New Year. However, mediated by local law enforcement officials, the company decided to defer it till 30 April.

"By then, we will have some cash by selling the inventories and new goods under production," said the Keya chairman.

He added, "By the end of January the workers' dues will be cleared and they (workers) will have months to look for a new job."

As of 31 December 2024, sponsors and directors jointly hold 46.275% shares of the company while institute and general shareholders hold 8.54%, and 45.19% shares, respectively.