Bain Capital, TPG and Sanjeev Narula are exiting Lilliput Kidswear Ltd. These shareholders have asked their advisors to initiate the slump sale of the business. According to BS, the existing kidswear and retail business of the company will be transferred to another company, which will then be sold to a strategic and financial investor.

Lilliput Kidswear was promoted by Sanjeev Narula in August 2003 under the name of Anand Childrenwear Private Limited. While this company was involved in domestic retail business, Narula had another company - Anand International Limited for exporting exports kids' apparels.

Until August 2006, these two businesses ran parallel. In September 2006, the two businesses were merged under Lilliput Kidswear Limited and subsequently in 2006-07, Indivision India Partners invested in the company and acquired about 36.6% stake in the company over last three years.

In April 2010, Indivision exited the company by selling its entire stake to Bain Capital India Private Investments I and Star Markets Asia Inc. Currently Bain and Star Markets Asia Inc. hold 31% and 14% respectively in Lilliput Kidswear with the promoter group shareholding being 55%. Bain Capital also infused R90Cr fresh equity in the firm and bought some shares Sanjeev.

In the past one year, Liliput has added close to 100 stores, covering over 600,000 sq ft of space, and redesigned its business model to go for bigger stores. Started in 1991 as a supplier to some large retailers, Lilliput forayed into direct retailing with a store in New Delhi in 2003. The company currently operates 275 stores, occupying a total retail space of 750,000 sq ft, and employs close to 14,000 people.

Lilliput Kidswear Operational Performance

* Source KVEZAR - Lilliput Annual Reports

The two shareholders and Sanjeev Narula have been engaged in a court battle for the past six months. The PE funds accused Narula of fudging the books and not providing access to it's financials to the auditors, while Narula has alleged that the investors were trying to stall the company's Rs 850-crore initial public offering and seize majority control.

In the mean time two of it's key lenders, Tata Capital and Taiwan's Chinatruct Commercial Bank Ltd have also filed petitions against the company to recover the outstanding debt. It currently has R750Cr of debt on it's books.

Who will buy it?

The company has about R750Cr of debts on it's books. According to a report on BS, it has over R30Cr of fixed costs ever month, translating to a yearly fixed cost of R360Cr. The promoters would be seeking upto R2000Cr for the retailer.

According to business dailies, several PE players like TA Associates, India Value Fund and several textile groups including Arvind Mills, Reliance Retail could be interested in the deal.

However we have to wait and see who will be interested in taking over this debt laden firm at a time when most of the corporates are looking at deleveraging their own balance sheets.

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