SS Kothari Mehta & Co withdraw from Lilliput audit

Friday, 24 February 2012

After news of Lilliput Kidswear promoter Sanjeev Narula planning to sell off the debt ridden chain came in, the Delhi High Court-appointed auditor, SS Kothari Mehta & Co’s withdrew from carrying out audit citing non-cooperation from the company as a major reason. This is expected have a major impact on sale negotiations initiated by all shareholders including PE investor TPG and Ben Capital. The auditor’s reasoning for withdrawing the audit and its report had been allowed to be inspected by investors, promoters and the company. According to industry insiders, promoters found the scope of audit defined by the auditor to be 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.

Though the Delhi High Court initially refuted PE investors’ plea to get an independent audit done of the company book, it had directed an independent review and appointed SS Kothari Mehta & Co to do the needful. The bitter public spat began when PE investors accused Narula of fudging company accounts, Narula had in-turn filed a complaint against them in the Delhi High Court alleging that the investors were trying to stall the company’s Rs 850 crores IPO and seize majority control.