Monthly Archives: May 2014

Pakistan: A graveyard for successful business tycoons…

Recently came across a few articles that provide great behind the scene stories about failing top businesses in Pakistan.

Case No. 1

Company: Pakland Cement

Tycoon:Tariq Mohsin Siddiqui

Pakistan’s first first dry-cement process plant, started in 1984 by his father. Tariq took over in 1990

“It was making so much money that we didn’t even know what to do with it,” said N H Mistry, who worked at Pakland for over 20 years. “Tariq had plans to go big — really big. He sent me and others around the world to look for investment avenues.”

Pakland Cement was located in southern region, Pakland invested Rs800 million in Saadi Cement, to become the first company to have footprint in both northern and southern sectors.

A well-known politician made demands for bribe. When Tariq refused, every conceivable problem was created for the project. Roads were blocked, locals were instigated against contractors and, finally, a firing incident that claimed 11 lives made matters worse if they were not already.

This is where his financial problems started to grow.

One particular case related to this financial dilemma has caught everyone’s attention.  Through another company, Tariq owned a 6,650 square yard-plot located along Main Shahrah-e-Faisal near Drig Road. In 1999, Military Lands and Cantonment had priced it at Rs399 million, according to court filings.

Since he needed the cash, Tariq sold the plot to a bank for Rs35 million under a buyback arrangement, which specified that the property would be returned once the outstanding loan is settled. Instead the bank laid claim over the property. The case is still pending.


After losing substantial wealth, his peace came in 2004. Financial institutions were seeking liquidation of Pakland and some groups were waiting to buy the company cheaply.

Somehow, Yousuf Dewan, the scion of the Dewan Mushtaq Group, got hold of the development. The two met and the deal was sealed. Yousuf bought Pakland for Rs1.1 billion including all its debt.

Tariq went into seclusion, cutting himself off after cancer got hold of his health. He died entrusting his entire wealth to the Pakland Trust for charitable purposes.

Read the full story here.

Case no. 2

Company: Dewan Mushtaq Group DMG

Tycoon: Dewan Umar Farooque, 

After family tragedy he took over Dewan Textile Mills in 1970.

He showed business acumen by becoming a major importer of second-hand clothes and tea within a few years. Eventually, he rose to the top of the Pakistan Secondhand Cloth Merchant Group and Tea Traders Association of Pakistan.

Between 1970 and 1978, Dewan Umar along with his younger brother Dewan Salman set up two more textile spinning units in Kotri and Hyderabad.

They also set up Pakistan’s largest sugar mills with a production capacity of 5,000 tons in Thatta.

By December 1988, the DMG’s four listed companies had a combined revenue of Rs1.5 billion. Dewan Textile’s share price was at Rs62. There was zero debt on the three textile units, which together were among the five largest spinning companies in the country.

It was time for DMG to embark on the most ambitious project — the largest polyester stable fiber (PSF) plant.

Just when work on Dewan Salman Fibre was being completed, DMG started to feel the heat from other PSF makers who were not in the incentive area and did not enjoy tax benefits.

Little over three months after production commenced, PSF producers called a meeting to discuss the issue. Dewan Umar Farooque was already suffering from heart complications.

On April 8, 1992, he flew to Islamabad where executives of another Lahore-based polyester company met him at the airport and assured him that they wouldn’t protest against the tax exemptions.

But later that day, the entire industry ganged up against him. He suffered a cardiac arrest during the meeting, succumbing a few hours later, not living to see even the first financial statement of his most cherished achievement.

Dewan Ziaur Rehman

Despite the setback, the DMG under the leadership of Dewan Umar’s eldest son Dewan Ziaur Rehman was on its way to make history.
To regain the DSF’s cost advantage over competitors, it was decided that another unit would be added with a capacity of 56,000 tons. Unit II needed an investment of over Rs2.5 billion. There was no way local banks could fund that, especially as the government had limited the role of state-backed development financial institutions.

To raise funds, DSF went to international capital markets with Pakistan’s first and only Euro Convertible Bond issue by a private company to date.

The convertible bonds were floated on May 5, 1994 with an overwhelming response from international investors. The company easily raised $45 million.

By June 2001, Dewan Salman Fibre had sales of Rs17.9 billion with net profit of Rs630 million. It had a long-term debt of Rs5.4 billion. The same year it settled entire foreign debt taken to finance the Unit II.

Three years later Dewan Zia set up Dewan Petroleum, 30% of which was owned by DSF.

Dewan Yousuf

By 1998, Dewan Yousuf had come of age and wanted to play his part in adding to the group’s prestige. He infused new life into DMG.

A staunch believer that the auto industry propels real economic growth, he incorporated Dewan Farooque Motors Company Limited (DFML) in December 1998.

With the capacity to make 10,000 vehicles a year, DFML produced 95,429 vehicles between 2000 and 2011 which included Kia Spectra, Sportage and Hyundai’s Santro. It also sold 50,000 Shehzore trucks, which still dominate the one ton-truck category.
The sales revenue of Rs3.3 billion in 2001 would go up to Rs10.6 billion in 2006. It will post a net profit of Rs840 million for six-year period.

And the noose tightens…

For the first time since its inception, Dewan Salman Fibre announced a loss in fiscal 2005. Just a year earlier, it had netted Rs327 million in profit.

By the end of next fiscal year in June 2007, DSF’s loss jumped to Rs808 million, machinery was running at only 20% capacity as other PSF producers  ate into DSF’s market share.

All this coincided with differences between Dewan brothers that now came out in the open.
A few years back, Dewan Zia had moved to Islamabad from where he was running DSF and Dewan Petroleum, distancing himself from all the other firms.

“It was their mother who held the brothers together,” said a family friend. She passed away in 2007. The same year Dewan Zia handed over the group’s chairmanship to Dewan Yousuf and disappeared from public life.

At the same time, bridge financing of Rs2 billion for the working capital was to be arranged. This money was supposed to come from five banks by November 2007.
DSF even collateralised its most valuable asset –30% shares in Dewan Petroleum worth around $100 million – against the bridge financing facility. Only Rs1.1 billion were released and that too after a delay of four months.

The delay resulted in all the money being consumed by cash losses. With no new credit lines, there was no raw material. All the fixed cost meant losses.

Seeing how things were taking shape, DMG had started negotiations with Goldman Sachs and Merrill Lynch to refinance Pakland Cement’s debt.
By late 2007, the $120 million refinancing agreement was ready to be signed.

“Deal was called off at the last minute after the CEOs of a few banks persuaded Dewan Yousuf against it. They assured him that local banks would re-profile the entire debt of the cement business,” said a DMG official.

In 2008, an influential politician in Sindh had asked Dewan Yousuf to handover the cement company and sugar mills – excluding the debt.

The Dewans have vanished from mainstream news. Dewan Salman Fibre is shut. Stock analysts no longer follow the group companies. But Dewan Yousuf has held his ground.

He didn’t run away in desperation. Under him, DMG is contesting all cases. Settlements have been reached with some banks and working capital lines are open to few firms.
The group still employs over 7,000 people. Even when all the units were shut, no one was fired.


Read the full story here…

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Posted by on May 17, 2014 in Uncategorized


Dying Shopping Malls



Here is an incredible photo book “Black Friday” by Seph Lawless as he travels the USA capturing eerie pictures of abandoned shopping malls.


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Posted by on May 3, 2014 in economy

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