Welspun India shares tumbled nearly 5 per cent intraday on Monday after global retail giant Walmart stopped selling Gujarat-based company’s Egyptian cotton products after US retail giant Target Corporation snapped its business ties over use of low quality products supply.
At 9.35 am, share price of the company was trading 3.88 per cent down at Rs 54.55. The scrip opened at Rs 53.95 and touched a high and low of Rs 55 and Rs 53.95, respectively. Later, the scrip settled the day 0.18 per cent down at Rs 56.65.
Walmart said in a press release, “Welspun has not been able to assure us the products are 100 per cent Egyptian cotton, which is unacceptable. While the sheets are excellent quality, we are offering our customers a full refund.”
In a BSE filing, Welspun India said that it has engaged a big four firm to review its processes and is installing technology to monitor its supply chain, and vertically integrating to ensure complete traceability of cotton fibres.
It further said, “The affected products represent around 6 per cent of Welspun’s annual business. The product line in question with Walmart accounts for approximatley 1.5 per cent of Welspun’s India business.”
Last month, Target Corporation after a probe confirmed that Welspun substituted another type of non-Egyptian cotton when producing bed sheets and pillows between August 2014 and July 2016.
Brokerage house Sharekhan last month in its report on Welspun India after Target Corporated terminated ties said that the recent development in Welspun India, whereby one of its key clients “Target” has terminated all its contracts (in FY2016, Target’s revenue constituted 10% of overall revenue) citing usage of inferior cotton for manufacturing bed sheets instead of the contracted high-end Egyptian cotton, has raised a red flag over the quality assurance process as well as the corporate governance standards followed by the company.