Lilliput IPO stuck Promoter accuses PE investors and their legal advisors
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Lilliput IPO stuck Promoter accuses PE investors and their legal advisors

Bar & Bench

There seems to be lot of issues cropping up between kids apparel retailer Lilliput and its PE investors, stalling Lilliput’s IPO plans. Just before Lilliput was to file its Draft Red Herring prospectus, the PE investors Bain Capital and TPG withdrew their consent for the IPO stating that they had got anonymous calls alleging that the company’s accounts are forged. The PE investors have now sought re-audit of accounts stalling the IPO plans.

There seems to be lot of issues cropping up between Kids apparel retailer Lilliput and its PE investors, stalling Lilliput’s IPO plans. Just before Lilliput was to file its Draft Red Herring prospectus, the PE investors Bain Capital and TPG withdrew their consent for the IPO stating that they had got anonymous calls alleging that the company’s accounts are forged. The PE investors have now sought re-audit of accounts stalling the IPO plans.

Last year, the PE arm of Texas-Pacific Group (TPG) had purchased about 11 percent of Lilliput from Everstone Capital for Rs. 120 crore ($26.68 million) and Bain Capital had purchased stake in Lilliput worth Rs. 270 crore ($60 million) from Everstone Capital. Promoter Sanjeev Narula holds 55 percent stake in Lilliput while the two private equity investors hold the remainder 45 percent.

Desai & Diwanji’s Mumbai office advised Bain Capital, while AZB team advised TPG.

Lilliput aggrieved with this move of the PE investors, approached the Delhi High Court on October 3 to restrain the PE investors from interfering with and obstructing the operations of the company, from harming the reputation of the company and selling their stakes. Senior Counsels Abhishek Manu Singhvi and N.K. Kaul represented Lilliput before the Delhi High Court.

The Delhi High Court granted Lilliput an injunction restraining the PE investors from acting contrary to the minutes of the board meeting and further restrained them from giving adverse publicity. The matter is now listed for further hearing on November 2, 2011.

According to a media report, the two PE firms, in their reply to the Delhi High Court, have asked for a forensic examination of Lilliput’s accounts and also sought to appoint a different auditor to investigate the financials of the firm.

The Promoter has claimed that the two investors forced the company to take a property on rent at of Rs. 33 lakh per month at South Extension, New Delhi which belongs to their legal advisors. The Promoter making allegations against the legal advisors of the PE investors stated that this “highlights their material interest and involvement in the transaction”.

Lilliput promoter Sanjeev Narula has on Monday moved the Company Law Board (CLB) seeking to restrain PE investors from obstructing the company’s operations. Lilliput has also sought CLB approval for a proposed IPO, blocked by the PEs. Lilliput has also alleged in its Petition that the PE investors were trying to damage the reputation of the company and seize majority control by choking all sources of funds, reports ET.

The CLB would now hear the plea of Lilliput and its promoter Sanjeev Narula after Diwali vacations as the retailer has not served its estranged PE investors 48 hours notice.

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