Welspun India shares slumped 20 per cent and locked in lower circuit on Monday after Bloomberg report said that Target is severing all its business ties with Welspun India over Egyptian-cotton controversy. Target said that in July it discovered that 750,000 sheets and pillowcases labeled Egyptian cotton were made with another type of cotton. The global retail joint has informed Welspun that due to this conduct it is in the process of terminating relationship with them.
The scrip was trading 19.98 per cent down at Rs 82.30 at 10.53 am. The share price of the company opened at Rs 82.30 and touched a hogh and low of Rs 82.30 and Rs 82.30, respectively in trade so far. Sensex was trading 106.61 points down at 27,970.39 during the same time.
While confirming phasing out all of its products from Welspun, Target said withdrawal includes two lines of Egyptian cotton bedding, and not all of its Egyptian cotton sheets are affected.
While reiterating its commitment towards quality, Welspun India told BSE in a filing that it has initiated a probe in the matter. “We have initiated actions to investigate the root cause. We are appointing an external auditor to audit our supply systems and processes. This is an issue of highest priority for us and we will take all necessary steps to address it, ” the company informed BSE.
For the quarter ended June 30, 2016, Welspun India reported 10.29 per cent rise in consolidated net profit at Rs 201.85 crore against Rs 183.01 crore in the corresponding quarter a year ago. Consolidated gross sales of the company jumped by 11.31 per cent year-on-year to Rs 1386.46 crore. On a standalone basis, net profit of Welspun India slipped by 3.20 per cent year-on-year to Rs 182.05 crore.