Lilliput confirms purchase offer from L Capital

Debt-ridden retail firm Lilliput Kidswear, which recently

decided to sell off the company to get out of its debt situation has confirmed that it has received a letter of intent from L Capital, the private equity (PE) arm of Louis Vuitton Moët Hennessy, the world’s biggest luxury goods group. They want to acquire 85-90 per cent stake in Lilliput Kidswear, along with another investor, for Rs 1,100 crores.

While Founder and M D Sanjeev Narula will continue to hold 15-20 per cent stake in the company, after due diligence, by mid-June it would part with the remaining stake in favour of the buyer. A term sheet or letter of intent provided by a PE firm is a pre-acquisition or pre-funding agreement offering a framework of proposed transaction terms as well as an indication of the valuation. Though non-binding, it is a tool for facilitation of the deal as it chalks out prerequisites to closing the deal, such as due diligence, valuation, returns and payment terms.

Lilliput, which posted a net profit of Rs 40 crores and revenue of Rs 565 crores in 2010-11, looks forward to ending the year March 31 with revenues of Rs 950 crores. The company got into a public-brawl after its PE investors TPG and Bain Capital accused Narula of fudging company’s books. Narula in turn dragged them to Delhi High Court accusing them of stalling company’s fund raising plans to gain majority stake in the company. Delhi High Court later appointed independent auditing firm, SS Kothari Mehta & Co to audit Lilliput accounts. But the firm withdrew from the audit proceedings citing its inability to complete the auditing due to non-cooperation from the company. In its interim report on February 17, the firm stated that Lilliput has instructed lender ICICI Bank not to provide statements of accounts to the auditors directly.