After closure of almost four months, the company has reopened its factory with a dream of rising from the ashes
It’s a new beginning for Stylecraft Limited.
The readymade garments manufacturer that shuttered its factory in mid-July this year – just six years after the company witnessed the highest annual turnover of Tk400 crore since its inception in 1983 – amid worker protests over arrears resumed production on the first day of this month.
While on a visit to the factory on 9 December, The Business Standard was informed by a senior official of the company that production was going on in 12 lines out of 62 lines in the factory as there were less work orders compared to its capacity. “At present, the company has got work orders for about 10 lakh pieces of clothes while orders for another 3.5 lakh pieces are in process.”
A series of impulsive investments by the company owners following the death of its founder Shamsur Rahman in 2016 coupled with the leaving of its premier buyer, Japan’s Uniqlo, in 2019 over allegations of non-compliance reportedly brought the once-burgeoning business on the verge of collapse while the Covid-19 pandemic dealt the final blow, according to people concerned.
As orders dried up and investments failed, arrears of workers’ wages began to grow and repaying bank loans was getting difficult, compelling the authorities to shut down production, said officials at the company. Before the closure, around 4,300 workers of the company were owed salaries of four to nine months.
But after a closure of almost four months, the company has reopened its factory with a dream of rising from the ashes.
A senior officer of the company, on condition of anonymity, told The Business Standard that the company was trying to obtain bank loans in working capital to resume full-fledged manufacturing. Agrani Bank had already approved the company’s application for a loan of around Tk35 crore, the official added.
“It is very difficult to run a garment factory after a four-month closure. However, the board of the company has managed the crisis and reopened the factory.”
Shams Almas Rahman, managing director of Stylecraft, said they had already paid all workers’ salaries for June while half of salaries for July would be given by December.
He also mentioned that they were committed to clear all the dues gradually and salaries for the month of December would be paid in January.
After the partial reopening of the factory, a number of workers have rejoined the company. A senior officer said the company had not recruited any new workers.
Rawshan Ara, an operator at the Stylecraft garment factory, told TBS that she returned to the factory after a long closure as the factory had already cleared one month’s arrear salary. She has been working for this factory since 2005.
Echoing Rawshan Ara, another operator Makbul Hossain mentioned that many workers were returning to the factory following its reopening.
They expressed hope that workers would return to the factory in greater numbers in the following month.
“It is a good factory and there is always a worker-friendly environment here. Since 2005, I had never seen that they failed to pay salaries and allowances in due time. But the company is now going through hard times and we have to help them,” said Rawshan Ara.
The rise and fall of Stylecraft
Shamsur Rahman founded Stylecraft in 1983. To ensure good governance, he got the company listed on the stock exchange that very year.
He then employed his two sons in the company’s the production and marketing departments, in order for them to learn the ropes of the business and take it forward.
It was a best-laid plan.
Of the two children, Sharif Almas Rahman has been with the company since 1987 and Shams Almas Rahman since 2002. Later, the duo was promoted as directors of Stylecraft – Shams Almas in 2010 and Sharif Almas in 2017.
Shamsur Rahman had served the company as its managing director till his death on 31 January 2016.
During this time, he had built a medium-sized factory at Gazipur. The business was going well. In the year before his death, the company had had its best year in terms of profits. In the year, the company sold products worth Tk400 crore.
Shamsur Rahman’s death was followed by his son Shams Alam becoming the company’s managing director. In one of his first big moves, Shams increased the production of Stylecraft and made other investments.
With his brother on board, the duo then established a retail clothing company, Moda Senza Rimorsi Limited, in the UK, and a washing plant in Tongi.
The money for the investment came from Stylecraft’s profits, according to multiple senior executives of the company.
More money was taken from Stylecraft and invested elsewhere. Unfortunately, none of the investments panned out.
Adding to the company’s woes, Stylecraft’s long-time major buyer, Japan’s Uniqlo, severed ties in 2019 over allegations of non-compliance.
Uniqlo accounted for 60% of Stylecraft’s total production, and its loss dealt a severe blow.
Some orders came from H&M but those also stopped due to the pandemic.
In the 2019-2020 fiscal year, the company’s revenue fell to Tk200 crore, which was chalked off as a repercussion of Covid-19.
The downward trend, however, continued into the 2020-21 fiscal year. That year, its revenue fell 39% to Tk125 crore. And the company failed to pay any dividend for its shareholders for the first time.
Its auditor SK Barua and Co said in the financial report for FY21 that the company’s current liabilities exceeded its current assets by Tk13.89 crore. While its revenue decreased significantly and that is why it was very difficult to repay bank loans.
Besides, the company had been suffering from negative cash flow for two years, it added. And all these matters may cast doubt on the company’s ability to continue as a going concern.
