Indian Firm Admits 'Error' After Target Cuts Ties Over Cotton Dispute

NEW DELHI—Welspun India Ltd., the Indian textile company accused of selling fake Egyptian cotton sheets to Target Corp. and other U.S. retailers, said it was modifying its supply chain and reviewing its practices to address the accusations.

The company Thursday released a transcript of its conference call with investors through the Mumbai stock exchange. Welspun was addressing investor concern after Target said Friday it was cutting ties with the company. The discount-retailer said an investigation into Welspun's practices concluded the Mumbai-based company had sold it phony Egyptian-cotton sheets.

Welspun responded on Saturday saying it had commissioned an accounting firm "to investigate the root cause," of the problem. The company has refrained from making other public statements this week, even as other large clients including Wal-Mart Stores Inc., J.C. Penney Co. and Bed Bath & Beyond said they would conduct their own investigations.

In the call with investors held on Monday, Welspun's Managing Director Rajesh Mandawewala took responsibility for the mishap.

"Without any ambiguity the fault is on our side and so it is, let's say, the error is from our side so I guess we have to take responsibility for it," Mr. Mandawewala told investors, according to the transcript.

He declined to say what, specifically, had gone wrong, saying only that "in the manufacturing process you source a lot of materials at various stages."

The dispute exposes the complexities of a global supply chain in which each stage of production, from sourcing to stitching to selling, can happen in different continents.

"The idea is to actually look at the entire supply chain and our supply processes so that we can bring about robustness in the whole process," Mr. Mandawewala said. The company said the accounting firm would conclude its investigation in six to eight weeks.

Welspun's share price has more than halved since the Target allegations surfaced Friday. Two-thirds of Welspun's sales come from American retailers.

Write to Preetika Rana at [e-mail]

(END) Dow Jones Newswires

August 25, 2016 08:35 ET (12:35 GMT)

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