Otobi- In Crisis of Existence

Otobi- In Crisis of Existence

Even a decade ago, the furniture industry was dominated by the well-known sculptor Nitun Kund. For 30 years, he tirelessly worked to make Otobi an unrivaled Bangladeshi brand in the country and abroad. Through 30 years of dedication and hard work, Otobi has become known as one of the most competitive brands in the country and abroad. There was a time when the name Otobi would come to mind when we say furniture. From the beginning, Otobi’s marketing and promotion was top-notch. They promoted themselves as world-class furniture manufacturers. Although most companies’ promotions relied on print and TV media in 2012, Otobi was ahead of its time with heavy promotions on digital platforms that were much more modern than ever. Otobi ran promotional campaigns on the website and Facebook in parallel. Moreover, they used to broadcast great TVCs during that period. In 2013 Otobi even made a TVC in Romania by Italian director Mauro Salesi.

If you want to know Otobi, you must first know its founder Nitun Kundu. After graduating in first class from the Institute of Fine Arts, Nitun Kundu wanted to be a teacher. Unfortunately because of the liberation war in 1971, he could not fulfill his dream. He wanted to use his creativity and innovative spirit to support the family. So in 1975, Otobi started its journey on Elephant Road in Dhaka with a showroom along with a small factory which cost around 5,000 BDT. Nitun Kund was a hardworking, determined and devoted man whose dream was much bigger. So he set up three Otobi factories in Ashulia, Shampur, and Mirpur to expand Otobi.

Nitun Kundu

Otobi production started in full swing with more than 4,000 employees. Due to his talent and hard work, Otobi’s furniture shops quickly expanded all over the country. In many cases, Otobi follows the famous furniture maker IKEA. Nitun Kundu believed that through determination, sincerity, and perfection, anyone in Bangladesh could acquire world-class skills. And he was the living proof.

Animesh Kundu

But after Nitun Kundu’s death in 2006, Otobi’s full responsibility was passed to his son Animesh Kundu. Sabbir Hasan Nasir was made the CEO of the company. In the financial year 2007-08, the record of Otobi transactions was 218 crore BDT. It could be heard that his son Animesh could not manage the responsibility of Otobi, which was built by the skillful hands of Nitun Kundu. The company started slowly falling behind due to mismanagement and weak leadership. Initially, Otobi made quite a name for their Plyboard, but the demand for it decreased a lot due to poor marketing. As a result, other plyboard makers captured the market. Also, the signature art of the Mr. Nitun Kundu that created a benchmark in the Otobi Furniture Market was largely extinct after Mr. Kundu’s death. 

The demand for Otobi was declining day by day as there was no variation in the product. In a short time, Otobi’s sell has almost halved. On the occasion of Eid, where furniture companies like Akhtar, Hatil, Brothers, and Navana were giving 5-15% discount, Otobi started giving up to 50% discount. But it did not benefit much because the brand value of Otobi decreased a lot by that time. Other companies mock Otobi with provocative campaigns that “good products don’t need a discount.” However, they were responsible for their dilapidated condition in the furniture business. Because they were thinking of investing in power generation by ignoring their main business. And that was probably their biggest mistake.

Otobi furniture

Otobi entered the electricity business in 2010. Otobi formed a company called Quantum Power Generation and entered into an agreement with the government to set up two 105 MW rental power plants. The company took a loan from the bank and invested 800 crore BDT in two power plants as per the loan agreement. Quantum Power signed a three-year agreement with the Bangladesh Power Development Board in February 2010 to build the Bheramara Power Plant. The company came into production after 218 days of scheduled time due to various problems. In June 2010, a contract was signed for the second project in Noapara, Jashore for a period of 5 years. This project also failed to start production on time, and after 316 days production started.

Just then the Otobi’s collapse began. The huge number of fines imposed on the power project for failing to produce on time led to further collapse of Otobi. Quantum Power had to bear losses instead of profits. As a result, it was not possible to repay the bank loan. After investing in the power plant, it did not come back and Otobi became a defaulter of the bank loan. In the latest list of 100 defaulters raised in the parliament, the name of Otobi has also come up along with Quantum. According to the finance ministry, Quantum’s defaulted loans to various banks amounted to 818 crore BDT and Otobi’s defaulted loans amounted to 119 crore BDT. Islami Bank Limited auctioned Otobi’s head office in 2019 to recover defaulted loans. AB Bank auctioned the factory in Shampur. However, both the auction processes have been postponed due to an application by the company to the High Court.

In addition to the collapse of the power plant, the fire in the factory of the company has increased the crisis of Otobi. In April 2014, two of the company’s factories in Birulia and Savar were badly damaged in a devastating fire. They have not been able to start a factory yet after losing more than 50 crores BDT. The other factory was also struggling to operate. This fire incident was a lot like a hailstorm on death row. The factory which is currently in operation used to employ more than 2,000 workers before the fire broke out. Now it has come down to less than a thousand. Many senior officials have also quit their jobs due to the financial crisis. Till 2014, Otobi had four factories in Savar, Mirpur, and Shampur. At present, there are only two factories in Shampur and Savar. Although the production in the Savar factory is very negligible compared to the production capacity. Moreover, as the equipment gets old, the productivity of both the factories has decreased to a great extent. On the other hand, the company’s Mirpur factory was shut down in 2015 due to protests over non-payment of salaries to officials due to cash crunch. Another company is currently using the place as rent.

Otobi furniture 2

The impact of declining production has also been seen in the market. Due to lack of variety in furniture, various showrooms and outlets are gradually closing down. Its rate of revenue has also declined at an alarming rate. According to the Customs Excise and VAT Commissionerate of the Board of Revenue, in 2014, Otobi had 3 factories and 7 showrooms under that commissionerate. The company currently has a factory and three showrooms due to the closure of the business. But revenue from these three showrooms are very low. Over the years, the rate of VAT payment from Otobi has also come down. The company blames factory closures and declining business. They later went on to pay fines before the power plant could go into production, leaving them with an operating capital deficit. At the same time, the defaulted loans are also there.

In 2008, their annual sales were 218 crore BDT. After 10 Years In 2018, the amount was 250 crore BDT. Which is very insignificant for such an established company. Besides, the amount of defaulted loans in the bank is around Tk 950 crore BDT. There are doubts whether it will be able to repay it at all.

However, there is some hope that Otobi is trying to turn around. The sales and marketing team has targeted customers in the rural area rather than the city center. Almost every month, the announcement of the opening of a new showroom in a new area is made on their Facebook page. With this new initiative, the current number of showrooms across the country stands at 35. However, Otobi will now face a challenge to re-occupy the market. Because new competitors have been added to the market.

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