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Business News/ Companies / News/  Welspun India inks pact with Cotton Egypt Association
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Welspun India inks pact with Cotton Egypt Association

The strategic agreement with the Cotton Egypt Association will allow Welspun India to market its Egyptian cotton products with the CEA's logo for the next five years

Welspun India’s December quarter net profit had declined 17.2% year-on-year to Rs150.24 crore with the loss of their largest client. Photo: MintPremium
Welspun India’s December quarter net profit had declined 17.2% year-on-year to Rs150.24 crore with the loss of their largest client. Photo: Mint

Mumbai: Textile maker Welspun India announced on Thursday that it has entered into a strategic agreement with the Cotton Egypt Association (CEA) that allows it to market its Egyptian cotton products with the CEA’s logo for the next five years until 2022.

CEA is a non-profit body set up in 2005 by Egypt’s ministry of industry and foreign trade set up to certify Egyptian cotton products made by textile manufacturers worldwide and ensure they maintain sourcing and supply quality.

“Following the recent incident, we undertook an E&Y study and have been working on our supply chain to ensure traceability," Welspun India managing director Dipali Goenka said at a press conference in Mumbai on Thursday. “We are now a vertically integrated company, and work on our supply chain to ensure traceability to the source [of cotton] will be completed by 15 March this year."

ALSO READ: Welspun India Q3 profit falls 17.2% to Rs150.24 crore

“After auditing our processes, the CEA has allowed us to use this logo," Goenka said. “The CEA’s agreement is testament to their confidence in our supply chain."

Welspun India announced it will spend $3 million in the next five years for marketing and promoting its Egyptian cotton products with the new logo. The company said it is also exploring setting up a manufacturing facility in Egypt, but Goenka declined to comment further on the plans.

“It will take a couple of quarters for us to update you on details of the manufacturing facility," Goenka said, adding that 6% of Welspun India’s revenue comes from the sale of premium Egyptian cotton products and is expected to grow with this new initiative. He, however, declined to share growth projections.

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American retail chain Target Corp. terminated its contract with Welspun India in August 2016, accusing Welspun of passing off ordinary cotton products as Egyptian cotton, which is considered higher quality and is more expensive. Target was Welspun’s largest client, bringing in $90 million in sales last financial year.

Welspun India’s December quarter net profit had declined 17.2% year-on-year to Rs150.24 crore with the loss of their largest client. The company also faces class action lawsuits for violating American consumer laws, two of which were filed in September 2016.

“These four lawsuits have all been consolidated into one, and we have allocated Rs501 crore for all expenses related to this," chief financial officer Altaf Jiwani said. “Our Ebitda (earnings before interest, tax, depreciation and amortisation) guidance remains the same at 22-23% and we should be back to double digit growth soon."

Goenka declined to share details on Welspun’s efforts to bring Target back on the board. Welspun’s business is largely export-oriented and it sells in 50 countries, including the US, Europe and the UK.

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Published: 09 Feb 2017, 06:12 PM IST
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