Welspun India: Rs 4,400 cr investor wealth wiped out in 3 days

82

Welspun India’s shares were locked in the lower circuit limit for the third day in a row on Wednesday, after investors dumped the stock on fears that there is more bad news in store for the company, one of the world’s largest textile manufacturers.The stock has fallen about 42 percent in the last three days after Target Corp’s decided to terminate business with the firm for passing off cheap sheets as premium Egyptian cotton.

Welspun India’s market capitalisation has eroded by a whopping Rs 4,376 crore from Rs 10,335 crore on 21 August to Rs 5958 crore on 24 August.

Target said on Friday that it was severing ties with Welspun after its extensive investigation had confirmed that the Indian company, which purportedly used Egyptian cottons to make sheets and pillowcases sold to the retailer, substituted non-Egyptian cotton instead.

Target said on Friday that it was severing ties with Welspun after its extensive investigation had confirmed that the Indian company, which purportedly used Egyptian cottons to make sheets and pillowcases sold to the retailer, substituted non-Egyptian cotton instead.

Target is Welspun India’s biggest customer after Bed Bath and beyond. It accounted for about $90 million, or 10 percent of the company’s total business in the financial year through March, Welspun executives said on a conference call on Monday.

Rupee recovered 3 paise to 67.08 against US Dollar

Wal-Mart Stores Inc, Welspun’s third-biggest customer, is also reviewing the company’s cotton certification records, a report in the Wall Street Journal said.

We are currently reviewing Welspun cotton certification records and plan to have additional conversations with Welspun. If we discover an issue, we will handle it appropriately.

A spokesman for Welspun said the company did not wish to comment on the reported Wal-Mart review.The US retail giant accounts for about 8-9 percent of Welspun’s revenues, according to Elara Capital analyst Sumant Kumar.

“The risk is there as these are still early stages, so we need to wait and see,” Kumar said.

Sales of Egyptian cotton bedding account for only about 6 percent of Welspun’s total sales, according to Kumar, but the loss to the company’s credibility means other customers could withdraw all their business as Target has done.

According to a report in the Fortune magazine, retail giant JC Penny too is conducting a probe into the company’s products.“JCPenney is conducting a thorough investigation of its Welspun textiles to ensure the integrity of its product claims. It is too early in our review process to determine what actions may be necessary,” a company has been quoted as saying in the Fortune report.

For latest hindi news, click here

NO COMMENTS