Dewan Group has proposed to sell its cement and sugar companies to settle billions of rupees worth bank loans in an apparent last ditch effort to remain afloat, people close to the development said.
Top Pakistani bankers will meet on Friday to discuss whether the four companies should be liquidated or sold to some other business group, which could turn them around to pay off their liabilities, they said.
“The group has over Rs50 billion in debt,” a banker said. “In some cases, banks have not received a single installment or interest payment during the last four years. It is about time that they sell their assets to settle our debt.”
Likely outcome of deliberations will be the sale of two cement and two sugar units to recover part of the loans, while the remaining would be paid off by the new owner later, a banker said.
The Dewan Group, which owns 14 companies, has borrowed from almost all the Pakistani banks. Most of its factories are closed as banks have stopped financing working capital.
As of March 2010, Dewan Sugar Mills has accumulated losses of Rs661 million, which eroded its paid-up capital by Rs106 million. Its current liabilities exceed assets by Rs2.09 billion.
The other sugar mill is Dewan Khoski Sugar. Its financial statements were not available on the website of the group. The financial statements of Dewan Hattar Cement were also unavailable.
Dewan Cement is in a relatively stable position with fixed assets valued at over Rs19 billion. The losses incurred by the company are mainly due to the economic slowdown.
At its prime, Dewan had a turnover of over Rs30 billion and around 12,000 employees. Now its workforce has shrunk to 4,000.
A banker said that chances for the loan rescheduling seem remote. “The situation could have been different if Dewan Group had made the offer two years back.”
Dozens of recovery suits are pending before courts. The group has also filed counter suits against banks.
It still has some companies, which carry a lot of intrinsic value. The Dewan Salman Fibre is the country’s largest manufacturer of polyester stable fibre.
“This valuable company is literally dormant,” said Hamad Aslam, head of research at BMA Capital.
“The other two local PSF makers are running at full capacity and yet the country has to import to meet local demand. So you can imagine the potential.”
Some people close to the Dewan family say banks have been ruthless in their demands. “If a little more time had been allowed, the companies could have made a comeback. Other companies in cement, sugar and automotive industries are doing pretty good these days.”
The decline of the once powerful group in the wake of infighting between Dewan brothers is classic example of the vulnerability of family-run businesses.
A source said for too long, the group avoided hiring professionals in the management and relied on family members for its operations, something that ultimately proved disastrous.
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