Bucking the trend: Tauseef Group buys out rivals, targets IPO in 2013

Published: November 2, 2012
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Salamat credits the company’s success to the group’s decision to invest early in setting up a presence in Bangladesh.

Salamat credits the company’s success to the group’s decision to invest early in setting up a presence in Bangladesh.

FAISALABAD: 

Not everyone in the textile industry is having a rough time: some are taking advantage of their size and cash flows to buy out smaller, financially distressed rivals. The Tauseef Group is one such textile conglomerate. Having benefited from an early and timely decision to invest in Bangladesh, the Faisalabad-based group is now using the profits from that foreign venture to buy out dying competitors at home.

Tauseef Enterprises, the group’s main entity, has bought out two firms that had been shut down – Light Hosiery Mills and Ehsan Yousaf Textile Mills – and bought a 50% stake in another struggling company, the Jaguar Group. All three of the companies are based in Tauseef’s home town of Faisalabad.

In an exclusive interview with The Express Tribune, Tauseef CEO Chaudhry Salamat Ali said that after consolidating the operations of its acquired companies, the firm (currently privately held) will seek to go public with a listing on the Karachi Stock Exchange. The firm has yet to retain the services of an investment bank for the listing, and is currently in the process of obtaining the approval of its own shareholders.

So how is Tauseef doing so much better than its rivals? Salamat credits the company’s success to the group’s decision to invest early in setting up a presence in Bangladesh. Tauseef began setting up two subsidiaries in Bangladesh – Taqwa Textile Mills and Labbas Textile Mills – in 2008, just as the combination of the energy and financial crisis began to cripple the Pakistani textile industry.

The Bangladesh subsidiaries of the firm became operational in 2010 and have allowed Tauseef to have a more stable cash flow as well as retain customers in Europe who are able to import from Bangladesh without any tariffs. The group’s revenues now exceed Rs4 billion, of which more than Rs1.5 billion – or about 38% – are from Bangladesh.

Tauseef Enterprises manufactures a wide variety of garments and owns three factories in Faisalabad. It supplies to retailers and brands in Europe as well as North America, supplying most of its European clients out of Bangladesh, owing to the favourable tariff structure. Pakistani textiles have to pay an average of 10.5% tariffs in Europe, but Bangladeshi textiles can enter the market without any tariffs at all.

Salamat was all praise for the Bangladesh government and what he described as the right combination of incentives for the textile sector. The Bangladesh government, for instance, does not delay the processing of his tax refunds. Meanwhile, the Tauseef Group has close to Rs7 billion in refunds from the past two years still tied up with the government of Pakistan.

He said that the lower cost of doing business in Bangladesh – with cheaper electricity and labour costs – meant that his profit margins were about 50% higher in Bangladesh than they were in Pakistan.

The higher profits have encouraged the Tauseef Group to start thinking in more expansionist terms. While the group’s revenues have grown rapidly over the past four years, Salamat expects even faster growth once the mills the firm bought from Light Hosiery Mills and Ehsan Yousaf Textile Mills are made operational. (They are currently shut down after their previous owners were unable to keep them running due to financial difficulties.)

Part of the expansion may be more international growth. “We may open more franchises in other countries,” said Salamat.

But another part of the expansion has been to diversify out of textile into other sectors. Like many of their Faisalabad textile tycoon counterparts, the Tauseef Group are setting up real estate developments. The group is setting up the Quality Golf Project in Karachi, a 218-acre development near the Karachi airport that will have an 18-hole golf club, shopping malls, parks and residential colonies. However, construction has been temporarily halted owing to law and order problems in the country’s commercial capital.

Published in The Express Tribune, November 2nd, 2012.

 

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Reader Comments (4)

  • A. Khan
    Nov 2, 2012 - 8:25AM

    Bangladesh government does have a vested interest in ruining their own country unlike our successive governments.

    Recommend

  • Khurram
    Nov 2, 2012 - 3:22PM

    People of Punjab have more favorable conditions to invest in Bangladesh than in Pakistan. My friend visited Bangladesh and he is from Faisalabad and he told me that he got much better response, more hospitality and less hostility compared to any city outside Punjab especially Karachi where his group was targeted on Ethnic lines and one Dominant political party and their thugs were used to oust his business group from Karachi and he is setting up his business in Bangladesh now and many people from Punjab are investing Bangladesh as a lucrative business spot.

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  • fus
    Nov 2, 2012 - 7:57PM

    @Khurrum,

    ..And yet Tauseef CEO Chaudhry Salamat Ali is going is planning to set up the Quality Golf Project in Karachi. Go and ask a Punjabi speaking karachite who lives and die in and for this city. Come out of this paranoia and blame game. You dont find “educated” ppl leaving their jobs or businesses and running away from Karachi beacuse of discrimination. It is law and order, which has impacted everyone, irrespective of etnicity. Specifically Karachi as a city and Sindh is the only province that is actually ethnically and religiously diversified. Do you know how many Chinoti businessmen are there in KCCI? It easy when you have your own short coming, you start finding an excuse to your failure and blame others.

    Recommend

  • fus
    Nov 2, 2012 - 7:58PM

    @Khurrum,

    ..And yet Tauseef CEO Chaudhry Salamat Ali is going is planning to set up the Quality Golf Project in Karachi. Go and ask a Punjabi speaking karachite who lives and die in and for this city. Come out of this paranoia and blame game. You dont find “educated” ppl leaving their jobs or businesses and running away from Karachi beacuse of discrimination. It is law and order, which has impacted everyone, irrespective of etnicity. Specifically Karachi as a city and Sindh is the only province that is actually ethnically and religiously diversified. Do you know how many Chinoti businessmen are there in KCCI? It easy when you have your own short coming you start finding an excuse to your failure.

    Recommend

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