Hall-Mark’s way of building empire with short-term loans
Controversial business group Hall-Mark in wilful violation of banking rules has invested in long-term projects the money it took in short-term loan from state-run Sonali Bank.
The group that began making garments in 2007 now owns 80 factories, at least 40 of which are on paper though. Most of the ones that exist were built with the short-term loans.
Hall-Mark itself is aware that it has done wrong by diverting short-term loans (Inland Bill Purchase-IBP) into project loans, which are long-term in nature, but lender Sonali Bank seemed not to notice it.
“We’ve taken short-term loans for up to 120 days, but invested the money in setting up factories,” said Tushar Ahmed, group general manager (commercial) who is also a close relative of company owner Tanvir Mahmud.
Talking to this correspondent on September 17 at the company’s Hemayetpur project site in Savar, Tusher said, “It takes long to get a project loan. We know the way we’ve utilised the working capital for long-term investments is not proper.”
The project in Hemayetpur, some 30km northwest of the capital, is built on a 100-acre land, a large portion of which was bought with Sonali Bank loan.
Tushar, the key man to deal with banks on Hall-Mark’s behalf, defended his boss’s decision to divert the loan money.
He claimed his company did not siphon off the money; it rather invested in setting up more factories and creating jobs.
According to Hall-Mark, its net liabilities to Sonali Bank stand at Tk 2,268 crore. Of the sum, Tk 1,567 crore is funded loan, meaning the amount has been taken in cash. The remaining amount is non-funded loan, mostly in the form of guarantee against letter of credits (LCs).
The company paid back Tk 400.38 crore to the bank after the lender stopped disbursing new loans to the company in May this year.
A Bangladesh Bank investigation in May found the group’s total liabilities to be Tk 2,686.14 crore.
All of the Hall-Mark loans were against IBP, which is a short-term credit facility utilised as working capital. But the hitherto little-known company used these loans for buying land and building factories.
“We are ready to pay the loans, but our factories must keep on running for that,” said Tushar.
He claimed that they had export orders worth $7 million (about Tk 57 crore) from renowned buyers like H&M, JCPenney and Walmart.
“We cannot export anything as no bank wants to accept our letter of credits now,” he said.
Hall-Mark bought 36 decimals of land from Janata Housing at Hemayetpur in 2006 and set up its first factory, Hall-Mark Fashion, there in 2007, the year it started banking with Sonali Bank’s Ruposhi Bangla Hotel branch.
In 2008, the group set up Boby Fashion, Wall-Mart Fashion, Hall-Mark Style, Boby Denim and Hall-Mark Design Wear with Sonali Bank loans.
There was no factory built in the next two years. But in 2011, it suddenly got hold of a source of money and set up 27 factories that year.
“We’ve invested all loans from Sonali Bank to set up these factories,” said Tushar.
A chief executive officer of a leading private bank said IBPs are a short-term working capital that cannot be used for long-term investments.
“It’s a violation of banking norms and grammar,” he added, preferring not to be named.
The CEO said the way Hall-Mark used the loan money was not viable either because it had to repay the loan within 120 days; but it would not get the return of its investments in two to three years for the nature of the business.
Group Managing Director Tanvir Mahmud did not respond to the phone calls by The Daily Star. He also did not reply to the text messages requesting his comment on such violation.
Courtesy of The Daily Star