Safko Spinning's assets put on auction for loan default

The assets of Safko Spinning Mills, which were mortgaged to Bank Asia for borrowing money, have been put on auction by the lender after the company defaulted on the loans.

On 1 February, the financier published an auction notice inviting interested buyers to submit tenders for 610 decimals of land and the factory infrastructures in Habiganj by 28 February.

"We allowed them enough time but they did not repay the loan. That is why we have put their assets on auction," an official of the bank told The Business Standard, requesting anonymity.

The assets were kept as mortgage for the loan from Bank Asia's corporate branch in 2015. As of 30 January, Safko's outstanding dues, including interests, stood at nearly Tk122 crore, according to the lender.  

As per the company's half-yearly financial statement for FY24, the approximate value of the property is more than Tk140 crore.

Syed ABM Humayun, the managing director of the company, did not respond to phone calls of this correspondent and did not reply even after a message was sent to his WhatsApp number.

Iftekhar Ahmed, Safko's company, told TBS, "As of now, we've not received the auction notice." He mentioned that some pressing business challenges led them to default on the loans.

The official also informed that they had applied to the lender in December last year to reschedule this loan. Earlier, the loan was rescheduled in 2019.

The company manufactures cotton yarn, polyester, cotton-blended yarn, and synthetic yarn for the local market. Production at the factory was halted from January 2009 due to abnormal losses.

However, the mill resumed production on 25 May2010, as per the company's latest annual report.

In FY2022-23, the spinning mill's revenue witnessed a 39% decline to Tk41 crore, compared to that of the previous year. The company incurred a loss of Tk16.53 crore in the year.

The business woes of the company continued in the July-December period of the current fiscal year. In the period, its revenue plummeted by over 86% year-on-year to Tk3.46 crore with a Tk22.36 crore loss.

In its annual report, Safko said its production was disrupted by a number of factors, including inflation, dollar shortage, and gas and electricity crisis. Additionally, the production cost of yarn went up.

Meanwhile, the price of yarn in the local market has continuously decreased for the past one year. As a result, the company has suffered huge financial loss due to selling the yarn at a price lower than the production cost.

The company is about to run out of capital and it was not possible for it to pay the bank loan installments because of the financial loss, the report said.

Furthermore, Safko Spinning was unable to distribute any dividends to its shareholders in the last fiscal year because of the financial difficulties.

The company's shares closed at Tk17 each on Monday at the Dhaka Stock Exchange, experiencing a 1.73% decline compared to the previous session.