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L Capital pulls back from buying Lilliput Kidswear
May '12
L Capital, the private equity arm of luxury group LVMH, has pulled back from acquiring the troubled Indian clothing manufacturer Lilliput Kidswear.

According to Sanjeev Narula, Founder of Lilliput Kidswear, L Capital withdrew its buy-offer owing to differences over valuations and deal details.

In March, Lilliput announced that L Capital had nodded to procure its retail, manufacturing assets and export business for Rs. 10.5 billion, but now in wake of the present depressed market conditions, the private equity firm was only interested in Lilliput's retail assets and is not interested in the firm's export and manufacturing divisions, Mr. Narula said.

Such partial deal offering automatically reduced the valuation, which was not acceptable to us, and hence the deal is off, he added.

Mr. Narula, who holds a 55 percent share in the company, said L Capital also refrained from accepting a claw-back clause discussed earlier, which would have allowed him to raise his stake in the business, once it regained its momentum.

Lilliput, which has over seven billion rupees in debt, is trying to find solutions to ease its debt burden and has also approached the debt-restructuring cell.

Following rising debt burden, and pressure from the Chinese, Bangladeshi and Indian suppliers, the New-Delhi based firm closed 25 of 62 large format outlets, ceased operations at four of its six factories, cut salaries by 10-40 percent and sacked 10,000 employees.

Mr. Narula said that rather than compromising on the valuation, he would try running the company on his own, as long as possible.

Lilliput's advisors Coralbay have presented a debt-restructuring plan before the company's consortium of banks, seeking concessions, including a moratorium on repayments, a reduction in interest rates and the conversion of working capital into term loans.

Fibre2fashion News Desk - India

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