Shrenuj closes, 300 jobs lost
Brian Benza | Friday November 18, 2016 18:00
Shrenuj Botswana’s parent company, Shrenuj &Co has run into trouble in India where it is failing to pay back lenders about $450 million. As a result of troubles at Shrenuj &Co, De Beers has suspended the company’s allocation of diamonds (sight) for financial compliance reasons.
According to sources close to the developments, the trouble at the parent company left the local subsidiary, whose operations were wholly funded from India, without diamonds to cut and polish as well as no funding.
“Although the Botswana operation was profitable, it was left with no diamonds to cut and polish because of the De Beers’ suspension. Even if they had the diamonds, the Indian head office could no longer afford to fund Botswana operations and buy diamonds because of the challenges it is facing with Indian banks,” said an industry source who declined to be named.
The company is linked to former President Festus Mogae who sits on the Shrenuj &Co board.
Shrenuj Botswana operated a diamond cutting and polishing factory, which employed 270 workers, while its jewellery factory, the only jewellery manufacturing plant in Botswana, had a staff complement of 70.
The company also operated a jewellery retail outlet where it has a supply contract with Massmart through the Game Stores. Shrenuj Botswana is however said to have had no exposure to local banks as its operations were wholly funded from India.
In June this year, Indian banks, with a combined exposure of around $450 million, obtained a court order to repossess stocks of diamonds lying with the company and also restrict travel of the promoters.
The court order restrained Shreyas Doshi, chairman and managing director of the listed company Shrenuj & Co, and group executive director Vishal Doshi from travelling outside India without the permission of the court.
Around 21 Indian banks are said to have exposure to Shrenuj group entities across markets including Bank of India, Punjab National Bank and Standard Chartered bank.
Industry insiders attribute the problems faced by the group to aggressive expansion overseas even as rough diamond prices kept soaring and polished diamond prices remained relatively muted following the financial meltdown of 2008-09.
“So the company had to pay higher prices for raw material while finished goods prices took a hit. In the past decade the company set up cutting and polishing diamond facilities in Botswana and Johannesburg, in addition to existing ones in Mumbai and Patna. “The slowdown in the diamond industry along with some of the company’s business bets such as diversification in Africa backfired,” said an industry expert in the Indian Economic times.
With an estimated sight allocation of about $50 million a sight, Shrenuj Botswana was one of the biggest diamond cutting and polishing firms in the country, having had started operations in 2009.
Efforts to get a comment from Shrenuj Botswana general manager, Kim Lanny were fruitless as he was said to be out of the country. The closure of the two factories will come as a hard blow to beneficiation efforts as Shrenuj was the only company involved in jewellery manufacturing in Botswana. Due to depressed polishing prices set against high rough prices, cutting and polishing companies globally faced severe difficulties last year with the local industry’s situation exacerbated by the comparatively higher labour costs. This led to about 1,500 job losses in Botswana last year.