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Welspun Q2 net loss at Rs 147.52 cr on Egyptian Cotton issue

Its income from operations in the quarter under review stood at Rs 1,789.94 crore, up 21.81 per cent compard to Rs 1,469.44 crore in same period last year, Welspun India said in a BSE filing.
Nov 15, 2016 / 04:42 PM IST
 
 
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Home textiles firm Welspun India today reported a consolidated net loss of Rs 147.52 crore for the second quarter ended September due to provisions for Egyptian Cotton products supply issue.


It had posted a net profit of Rs 179.37 crore in the same period of last financial year.


Its income from operations in the quarter under review stood at Rs 1,789.94 crore, up 21.81 percent compard to Rs 1,469.44 crore in same period last year, Welspun India said in a BSE filing.


During the quarter, the company made a provision of Rs 500.48 crore on account of Egyptian Cotton issue.


"Provision of Rs 500.48 crore is towards return of goods by the customers, cost of network, inventory write-down, legal fees and other expenses relating to traceability issues," the company said.


In August, the US retail giant Target Corporation terminated contract with the Gujarat-based textiles maker over alleged lapses in its products supply.


Soon after, Walmart stopped selling Welspun India's Egyptian cotton products. Welspun India, later, appointed consultancy firm Ernst & Young to look into alleged lapses.


Other US-based retail chains such as Bed Bath & Beyond and JCPenny are also conducting third-party audit of items sourced from Welspun India.


"Welspun has taken the Egyptian Cotton issue very seriously and we have proactively engaged with all our stakeholders and appointed EY as external consultants to thoroughly examine the supply chain which has become significantly complex over the years making traceability very difficult," Welspun Group Chairman B K Goenka said.


It said that EY "suggested several remedial steps covering structural, procedural, people and technological measures on which Welspun has begun to act".


"As a vertically integrated player, the company is moving towards producing all the Egyptian cotton products in-house i.e., from procuring cotton to the finished product," it added.


The Egyptian cotton product portfolio which has come under scanner accounts for 6 percent of its annual business, the company earlier said. The company had posted total net sales of Rs 5,387.66 crore in 2015-16.


In a separate filing, the company said its Board approved capital investment of Rs 600 crore in flooring solutions such as carpets, rugs etc.


"This investment will benefit from synergies arising from the company's existing product line and customer base. The capex will be done over 18 months spread over FY18 and FY19," it said.

Shares of Welspun India closed 4.70 percent down at Rs 61.90 on BSE.

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