New Delhi: Textile firm Welspun India on Friday reported a consolidated loss of ?78.43 crore for the quarter ended 31 March, due to exceptional expense of ?224.01 crore related to settlement of litigation in the US with regards to labelling and marketing of Egyptian cotton products.
The company had posted a net profit of ?89.86 crore for the corresponding period of the previous financial year.
Welspun India said the company and its subsidiaries, which have been facing litigation in the US surrounding its premium cotton home textile products, have entered into a settlement agreement in the US.
“To avoid the burden, cost, and uncertainty of continued litigation in the United States surrounding the provenance of its premium cotton home textile products, the company and its subsidiaries have entered into a settlement agreement subsequent to year-end.
“The settlement agreement provides monetary payments to settlement class members not to exceed an aggregate $36 million (about ?250 crore),” Welspun India said in a regulatory filing.
The company reported an exceptional item aggregating to ?224.01 crore for the quarter ended 31 March, and it represented a provision for the settlement costs.
“The settlement agreement is subject to approval by the appropriate courts in the United States and regulators, and is intended to resolve legal claims in the US concerning the past marketing and labelling of the company’s premium cotton home textile products,” the company added.
In 2016, the US retail giant Target Corporation had terminated contract with the Gujarat-based textiles maker over alleged lapses in its products supply.
Target Corporation after an extensive investigation confirmed that Welspun substituted another type of on-Egyptian cotton when producing bed sheets and pillows between August 2014 and July 2016. Welspun India had, later, appointed consultancy firm Ernst & Young to look into the alleged lapses.
Welspun India said it continues to deny the merits of these claims and does not admit to any liability in the settlement agreement.
“Nonetheless, Welspun believes this settlement agreement, which is subject to approval by the appropriate courts in the United States and regulators, is in the best interest of all stakeholders,” it added.
Welspun India’s total income during the quarter stood at ?1,600.94 crore, up 4.30% as against ?1,534.92 crore in the year-ago period.
The board of directors of the company has recommended a dividend at the rate of ?0.30 per share on equity share.
Welspun India is part of the $2.3-billion Welspun Group.
Shares of Welspun India Friday were trading 4.73% higher at ?57.55 apiece on the BSE.
This story has been published from a wire agency feed without modifications to the text.