As Bain Capital, TPG frown, Lilliput defers IPO

Lilliput Kidswear Ltd has deferred filing the draft red herring prospectus for its initial public offering in India as its private equity investors, Bain Capital and TPG, raised doubts over the company’s audited financial statements, investment banking sources said.

Promoters, including the company’s managing director Sanjeev Narula, hold 55% while the two private equity investors hold the remainder.

Lilliput approached the Delhi High Court on October 3 to prevent the private equity investors from selling their stakes. The court has granted Lilliput injunction. Bain and TPG are yet to file their responses in the matter.

“The private equity guys got crank calls alleging financial irregularities in our books. It was just a couple of days before we were to file DRHP (draft red herring prospectus). Now it’s their protocol to investigate since they got such calls which is what they are doing. This soured our relations and we approached the court...,” Narula said in an SMS reply.

He said the partners were trying to sort out the matters among themselves.

Narula said the company continued to be confident about the issue and was now working on a ‘Plan B’ to raise `900 crore.
He said valuation was an issue that could be settled and would depend on response the road shows get.

Sources alleged the Delhi-based company might have inflated its earnings for the financial year 2010-11 by about Rs350 crore although the exact quantum could not be ascertained.

Lilliput accounts are said to have been audited by Ernst & Young’s audit arm SR Batliboi and Associates, said sources.

Bain Capital has invested in Lilliput through BC India Pvt Investor, while TPG owns the stake through Star Market Asia. Lilliput had plans to raise funds in an initial share sale that was to be completed by March.