In a new twist in the tussle between Lilliput Kidswear promoter Sanjeev Narula and investors Bain Capital and TPG, the Delhi High Court-appointed auditor, SS Kothari Mehta & Co, has expressed inability to complete the court-directed audit. The auditor's withdrawal could have a significant bearing on the sale of the business initiated by all shareholders.
The auditor has cited the company’s non-cooperation in the audit as the reason.
The auditor's report had been allowed to be inspected by the investors, promoter and the company. Narula declined to comment on the issue. The spokesperson of Bain Capital also declined to comment.
However, sources close to the promoter say the auditor had initially not defined the scope of the audit. The promoter then had to ask the auditor to define the scope, which was done. However, the promoter felt the scope was too elaborate.
The audit report findings are important as most potential suitors were waiting for the independent audit. Its completion was to have actually kick-started the divestment.
The Delhi High Court had directed an independent review of the company's books after a bitter fight broke out between shareholders last September.
The PE investors had accused Narula of fudging books and not providing access to the company's financials to the auditor. Narula had alleged the investors were trying to stall the company’s Rs 850-crore initial public offering and seize majority control. The two marquee investors had together invested $86 million for 45 per cent stake April 2010. Narula owns the remaining 55 per cent.
Last November, the court had mandated SS Kothari Mehta & Co to probe the company's books and review an earlier audit carried out by SR Batliboi. SR Batliboi resigned as external auditor after Lilliput’s board disapproved of the company’s financial statements by a majority vote at a meeting on September 28 last year amid questions over the authenticity of the company’s books.