Target severs contract with Welspun India, Walmart orders review

Shares of Welspun India logged their biggest one-day fall in over 16 years and lost 20 per cent of market capitalisation on Monday after Target Corp – Welspun’s biggest client – severed business ties with them.
The Indian company suffered another jolt on Tuesday as the shares of the company nosedived 20 per cent from its previous close, hitting the 20 per cent lower circuit limit at Rs 65.85 on the Bombay Stock Exchange.
This is the biggest fall in stocks that Welspun has faced since March 2000, when Welspun’s stock fell 24 per cent.
Target has alleged that Welspun used cheaper quality cotton while supplying bedsheets, passing it off as premium Egyptian cotton.
This is just the tip of the iceberg. While Welspun has swung into damage control mode fearing a spillover effect on other clients, – Welspun is engaging with key customers, Managing Director Rajesh Mandawewala said on a conference call on Monday – storm clouds seem to be gathering and investors are fearing collateral damage.
Walmart Stores Inc., the world’s largest retailer, is reviewing supplier Welspun India Ltd’s cotton certification records after Target terminated business with the Indian manufacturer.
Walmart is Welspun’s third-biggest customer, according Bloomberg data. Welspun currently supplies a number of products, including sheets, to Walmart.
“Walmart is already reviewing Welspun’s cotton certification records and plans to hold additional conversations with the supplier,” company spokeswoman Marilee McInnis was quoted by Bloomberg as saying. “If any issue is discovered, the retailer plans to “handle it appropriately,” she further added.
Welspun makes towels, sheets, rugs and carpets for many high profile, global retailers including JC Penney, Bed Bath & Beyond Inc., Walmart Stores Inc., and Macy’s Inc.
According to its website, Welspun Group hopes to become one of India’s top 50 groups by 2020, with a market value of $2 billion.