Welspun India shares again came under pressure on Thursday after staging a recovery following media reports said that after Walmart, JC Penny, another big US retail giant Bed Bath & Beyond has ordered an external audit of the textile company in the wake of Target Corp terminating business ties with the Gujarat-based firm textiles over use of low quality cotton. Welspun India share price ended 8.26 per cent down at Rs 54.40.
Welspun India shares had managed to stage a recovery after hitting lower circuit for fourth day in a row in the early trade on Thursday by clarifying the product in question by Target Corp accounts for about 1 per cent of the company’s sales. US retail giant has terminated the business ties with Welspun Inda aver supply of low quality cotton for its sheets and pillowcases other than Egyptian cotton. In a BSE filing, the company said “Business with Target Corporation was approximately $90 million in FY16, which accounted for almost 10 per cent of our overall business. The product in question with Target specifically, represents about $ 8.50 million in FY16, which accounted for about 1 per cent of our overall sales and about 10 per cent of our business with Target.”
The scrip of the company was trading 2.19 per cent up at Rs 60.60 at 10.45 am. Share price of Welspun India opened at Rs 53.40 and touched a high and low of Rs 62.40 and Rs 53.40, respectively, in trade so far. Sensex was trading 57.70 poimnts up at 28,117.64 during the same time.
The Bombay Stock Exchange had sought clarification from Welspun India with respect to news reports on Walmart reviewing company’s supply record and Target Corp terminating all businesses with it. In the wake of cotton controversy, global retail majors Walmart and JCPenney are investigating textiles sourced from Welspun India for product integrity. However, reports said that IKEA is awaiting the outcome of an investigation by the Indian firm in the wake of lapses in its supplies to US-based Target.
Welspun India shares dipped 43 per cent in last 3 days – since Target Corp decided to terminate its contract with Welspun India over use of non-Egyptian cotton in sheets and pillowcases. The company eroded Rs 4,375 cr to Rs 5,958.02 cr from Rs 10,333.60 crore on Friday in market cap.
Chandan Taparia, analyst at Anand Rathi Securities sees the event to have a short term impact with target price of Rs 55. He however sees a recovery in the long-run with target price at Rs 120- Rs 130.