Exchange 2013 fails to deliver mail to a DL

I have an application server auto-generating reports and emailed to a distribution list with external users. Earlier, application server was relaying directly to the customer mail server, but it was either not delivered or delivered very late. In order to resolve this issue and better tracking for delivery, I created a distribution list and added an external contact as a member. I checked the transport log if the report was delivered to the customer mail server, but there was no record of it. I could see from the front end log for receiving it.I queried messaging tracking log using:

Get-MessageTrackingLog – ResultSize Unlimited -Receipients “xyz@abc.com” | fl

and I saw this:

Source: Routung
EventID: FAIL

RecipientStatus         : {[{LRT=};{LED=550 5.7.1 RESOLVER.RST.AuthRequired; authentication required};{FQDN=};{IP=}]}

On the xyz@abc.com DL , I selected Sender inside and Outside my organization to be able to send messages to this group from the delivery management poperty. By default, only senders inside the organization are allowed.