Today is day 54 of our NewsX NPA investigation campaign and in the case 32 of our list is India’s leading kidswear brand Lilliput kidswear limited. As per our NPA list, the company owes oriental bank of commerce 220 cr rupees and per the ROC records, the company is allegedly defaulting on 20 loans from various financial institutions…this case will once again prompt us to wonder why such large loans are granted without taking sufficient collateral in order to, make up for bad loans. The directors of the company in our list are Sanjeev Narula, Arun Jain and Gajender Sarup Sharma.
The same list of directors appears on the ROC records as well…with an addition Gurpreet Singh and Kunaal Madaan. The registered address of this company is d95, phase 1, Okhla industrial area. This is a story of what was one India’s leading kids apparel manufactures, which is now accused of having fudged balance sheets to present a rosy picture about their financial health. Leaving a trail of unpaid loans in the wake. According to the roc records with the ministry of corporate affairs, the company was incorporated in August 2003 with an authorised capital of 150 crore rupees..the company held its last agm in September 2013 and filed its last balance sheet in march 2013. Let’s have a look at the outstanding loans on the roc records..there are a total of 4 pages worth of loans with 33 entries, of which 13 loans have been satisfied..and the rest 20 loans are still pending.. taking the total to a little over 240 crore rupees …
So even a company who has its merchandise listed on india’s top e-commerical portals like amazon, myntra and flipkart, has allegedly defaulted on crores of loans. Upon further inspection of the roc records, we found that the promoter of lilliput kidswear sanjeev narula has 5 other companies listed under him, with lilliput kidswear being the flagship company. Then we came across an e-possession notice of allahabad bank which reveals that in 2015, a consortium of banks had taken possession of director sanjeev narula’s residence in Delhi. The property was valued at rupees 360 lakhs..but what the banks were claiming was no where close to this amount…allahabad bank was looking at claiming 411 cr, for axis bank it was 120 cr, 165 cr for icici bank, 128 cr for bank of india and 37 crore for standard charterd bank..taking the total to 865 crore rupees…
As we dug futher into the paper trail, we found 2 e-auction notices of oriental bank of commerce from 2014 and 2016, both naming lilliput kidswear ltd as a borrower and hoping to recover 240 cr. The notice from 2014 has listed 3 properties for auction, the total reserve price of these properties was not more than 17 cr. Aand this one from 2016 also claims that the company has 240 cr worth outstanding dues with the bank and mentions 1 property with the reserve price of just 208 lakh rupees. Then we reached the registered address of lilliput kidswear…and not to our surprise, the company was nowhere to be found. We repeatedly questioned the new occupants, but they too were hesitant in sharing any kind of details.
Have a look at this report from October 2011. it reveals that 2 private equity firms bain capital llc and TPG growth had allegedly accused lilliput’s founder Sanjeev Narula of fudging the company’s financial accounts. This doesn’t end here…this media report from february 2012 reveals that tata capital filed a winding up petition in Delhi high court to recover an outstanding debt of rupees 10 crore from lilliput kidswear ltd. Another media report from just 2 weeks later reveals that another financial institution chinatrust commercial bank ltd took lilliput kidswear to delhi high court and filed a winding up petition for an alleged failure in paying its debt..this time to the tune of 15 crore rupees. Following this, a report from June 2014 reveals that bain capital partners had sued the auditors for aiding and abetting fraud and for misinterpreting facts about lilliput in order to invite firms to invest in the company..the auditor dispute this.
Then a 2012 report on the website of Bangladesh garment manufacturers and exporters association reveals that around 2 dozen local garment factories in Bangladesh have failed to secure payment of nearly 5m dollar from lilliput kidswear. When we dug deeper into this, we came across this media report from July 2013, it revealed that after mediation by the commerce ministry, Lilliput had paid a small portion of its pending dues to the Bangladeshi garment suppliers. Here’s what we know so far..lilliput kidswear ltd was one our country’s largest kidswear brands and was started by Sanjeev Narula in 2006… …by 2010, the company started allegedly defaulting on loans…oriental bank of commerce put out company’s properties for auction, first in 2014 and then in 2016…in 2014, three properties with a total reserve price of 17 cr were listed for an auction..following which, a property worth 208 lakhs was listed for auction in 2016…the total amount banks were aiming to claim was 240 cr.
In 2015, a consortium of banks also took possession of Sanjeev Narula’s residential property in Delhi…the cumulative total that all the members of the consortium were aiming to claim was a whopping 865 cr rupees. Here’s another case of a well known brand that ran up large loans from banks, debts from investors and failed to even service it’s suppliers. while some of the investors alleged fraud and malpractice, we could not find any information corroborating those charges. we found no information of either a cbi investigation or the indictment on criminal grounds of any directors.
As we’ve investigated before, not all npas are frauds or malpractices, sometimes it’s just businesses that go bad. but that doesn’t take away the main larger questions. how do businesses manage to get huge loans without providing collateral even remotely near the loan amount? how do businesses with such huge amounts of debt secure even bigger investments from some of the world’s biggest funds? how does the system of internal, external and independent audit not spot a business model going sour before the loans turn into hundreds and hundreds of crores. the systemic failure is the biggest alarm, the biggest challenge. Another npa..another investigation..stay tuned for more.