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Thursday, January 24, 2013

Sidbi slaps winding-up petition on Catmoss, alleges mismanagement

Kidswear maker Catmoss Retail, which is already facing audit investigations at the behest of its private equity investor SAIF Partners, has now been slapped with a winding up petition by one of its lenders.

Small Industries Development Bank of India (Sidbi) earlier this month filed a winding up petition in the Delhi High Court against Catmoss and accused the retailer of "financial mismanagement" and "mismanagement of the company".

Sanjeev Sagar, the lawyer representing Sidbi, said his client had loaned 7.5 crore as working capital to Catmoss in July 2010 and the retailer was supposed to repay by October last. "So far not a single penny has come," he said, adding that the cheques issued by Catmoss were dishonoured.

The court issued notice to Catmoss in its first hearing of the case on Wednesday. The next date of hearing is February 28, Sagar said.

Catmoss promoter Ashwini Chawla did not respond to an e-mail questionnaire from ET till late on Wednesday.

A person with direct knowledge of Catmoss' operations said that the retailer has also defaulted on payments for the last quarter to other lenders including State Bank of India, Union Bank of India, Syndicate Bank, Punjab National Bank and Oriental Bank of Commerce, which have collectively loaned about 90 crore to the company.

SAIF Partners, which invested about 115 crore in the kidswear retailer to pick up about 34% stake, has meanwhile mandated auditing firm KPMG to study the books of Catmoss after anonymous letters accused Chawla and a SAIF Partner executive of wrongdoings, the person quoted above said. The executive left SAIF Partners since the anonymous letters surfaced in September 2011.

SAIF had made the investments in Catmoss in three trenches between July 2010 and September 2011. The last trench of 45 crore was to foray into a premium kidswear brand called Munich Polo.

While Catmoss products range starts at around 500, entry-level price for Munich Polo is 2,000. The Munich Polo website flaunts German culture and uses Western kids as models and the company has completely desisted from showing any association with Catmoss.

According to the latest financial documents with the Registrar of Companies, Catmoss made a profit of 16 crore for the fiscal year ended March 2011 compared to loss of 8 crore in the previous year.

Catmoss is the latest in a string of Indian retailers that have been charged with various wrongdoings by PE investors. In 2011, US-based PE firms Bain Capital and TPG Capital dragged Lilliput Kidswear to court, accusing the kidswear retailer of accounting fraud. Prior to that, ICICI Venture charged the promoter of now-defunct Subhiksha Trading Services of widespread financial irregularities in the discount retailer where the PE firm held 23%.

Source: Economic Times


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