What the future holds for Sheema Group

Infographic: TBS

Sheema Group, a business conglomerate mostly engaged in ship-breaking and steel manufacturing business, has seen better days except for the past four-five years.

The once-thriving Chattogram-based group seems to be crumbling since the death of its founder in 2019, according to local lenders and business people.

Mired in bank loans of more than Tk1,000 crore, all the group-operated companies — managed by three sons of the late founder Mohammad Shafi — are now struggling for survival.

But the latest blow for the group came after one of its oxygen manufacturing plants was devastated by an explosion and subsequent fire on 4 March. Seven people lost their lives and 30 were injured in the fire. The group said it suffered a loss of Tk100 crore.

Founded in the 1990s, the group has been doing good business for a long time in shipbreaking, MS rod and oxygen sectors.

Sheema Automatic Re-rolling Mills Ltd, a concern of the Sheema Group, was one of the first to manufacture MS rods in Chattogram. 

At present, the group owes about Tk1,000 crore to five banks. Officials of the creditor banks and businessmen in the related sector are now concerned about whether the Sheema Group will be able to make a turnaround.

According to officials of the creditor banks, of the Tk1,000 crore bank debts, Pubali Bank's Sheikh Mujib Road branch lent Tk410 crore, Mutual Trust Bank's Oxygen Mor branch Tk250 crore, Mercantile Bank's OR Nizam Road branch Tk250 crore, Social Islami Bank's Agrabad branch Tk80 crore and Dutch Bangla Bank's OR Nizam Road branch Tk40 crore.

According to Pubali Bank officials concerned, Sheema Group has taken huge sums of loans from the Sheikh Mujib Road branch since 2014 for importing steel raw materials (scrap ships). In 2019, Sheema Automatic Re-Rolling Mills Ltd took a loan of Tk100 crore for importing scrap ships. Till 2019, the branch's total loan to the institution amounted to Tk380 crore. But the loan taken from the bank was not returned. Currently, the group owes about Tk410 crore to the bank.

Officials of the bank said Sheema Steel did not pay the instalments on time when the loan was rescheduled in 2021. It, however, made a down payment of about Tk8 crore in December 2022.

Besides, collateral security taken by the lenders against the loans was inadequate. Pubali Bank took collateral security worth Tk200 crore against Tk410 crore credit.

Pubali Bank Assistant General Manager (AGM) and Manager of the Sheikh Mujib Road branch Mohammad Shahed Ali said, "Sheema Group had a good reputation in steel, ship-breaking and oxygen businesses. That is why it managed to secure large loans. But since the founder of the group died, there is a growing concern among lenders about the recovery of this debt."

Mutual Trust Bank has also taken a big risk by investing in the Sheema Group, lending more than Tk250 crore to Seema Steel without taking any collateral security.

Syed Mahmud Akhter, senior executive vice-president and head of the Wholesale Banking Division (Chattogram) of Mutual Trust Bank, said, "Sheema Steel has been doing business with Mutual Trust Bank since 2010. However, the company has been reluctant to repay the loan since 2019. Although the loan was rescheduled in 2020, the company is not repaying the loan instalments as per the terms."

The conglomerate collapsed due to a lack of a competent successor to manage the business, he added.

Mercantile Bank's OR Nizam Road branch has been investing in the Sheema shipbreaking business since 2009 but loan instalments have become irregular since 2019. Last year the group rescheduled the loan with a down payment of around Tk 3 crore. Currently, the amount lent by Mercantile Bank to Sheema exceeds Tk200 crore.

Meanwhile, Dutch-Bangla Bank filed a case on 12 September 2022 against Sheema Steel Mills Ltd for defaulting on a loan of Tk40 crore.

Sheema Steel Mills Managing Director Mohammad Mamun Uddin, Director Mohammad Parvez Uddin and Mohammad Ashraf Uddin have been made defendants in the case.

On condition of anonymity, an official of Jamuna Bank's OR Nizam Road branch said, "Seema Steel's credit quality has deteriorated in the last five years. We tried to keep the loan regular and collect the instalments. But due to a lack of cooperation from the group's management, we had to take legal action. The company took the loan mortgaging only 97 decimals of land."

According to Social Islami Bank, the bank invested in Seema Steel and Seema Oxygen Plant. Currently, Seema Steel owes Tk78 crore and Seema Oxygen Plant owes Tk 1.40 crore to the Agrabad branch of the bank. Against this loan, the group mortgaged land worth only Tk10 crore.

Sheema Group Founder Mohammad Shafi, a resident of the Bhatiari area of Sitakunda, joined the ship-breaking business in the early 1990s. 

After making good profits in ship-breaking, Shafi set up Sheema Steel Mills. Then in 1997, he built the first private oxygen factory in Chattogram. Later, in 2000, he established Automatic Re-Rolling Mills.

After Mohammad Shafi's death in 2019 due to cancer, his three sons took over the business. But they could not manage the companies properly.

Since the explosion rocked the group's Sheema Oxygen plant on 4 March, the three managing directors of the group have been in hiding. They could not be reached for comments as their mobile phones were switched off.

However, Iftekhar Uddin, manager of Sheema Oxygen Limited, told The Business Standard that the owners have switched off their phones to avoid trouble following the blast incident. 

"However, we are working according to instructions of the administration in all matters, including compensation for the victims of the incident. It is not yet clear how long it will take to repair the factory and resume production."

Altogether 16 people, including three owners of Sheema Oxygen Plant Limited, have been sued in connection with the explosion and the loss of lives it caused.