Welspun India is a textile company based in Mumbai. It is Asia's largest and the 2nd largest Terry Towel producer in the world it exports more than 94 per cent of its towels to more than 34 countries.
Welspun India shares made a comeback on Friday, following the nearly 50 per cent crash in the textiles manufacturer in previous four trading sessions. The stock jumped 6 per cent today, though analysts warned that the rally could get sold into like yesterday.
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.
The sharp selloff in Welspun India shares was triggered by US retailer Target Corp's decision last week to cancel its contract with the company, following accusations that the Indian manufacturer had passed off cheap sheets as premium Egyptian cotton for two years.
At least three other companies – Wal-Mart, JC Penny, Bed Bath & Beyond – have initiated review of Welspun India's bedding products following Target Corp's contract cancellation.
Welspun India gets over 90 per cent of its revenue from the US, so the controversy is expected to hit the company hard, analysts say.
Welspun India is part of the Welspun Group, a $3 billion conglomerate headed by Balkrishan Goenka with interests spanning textiles, steel, pipes, energy and infrastructure. The company has initiated an external audit of its supply systems following Target Corp's contract cancellation.
Welspun India's Managing Director Rajesh Mandawewala said the company is "actively engaged with its clients."
But analysts are not convinced that the stock is out of the woods yet. Many analysts told NDTV Profit that investors should avoid bottom-fishing in Welspun India shares.
In a related development, Ludhiana-based Trident, one of the world's largest terry towel manufacturers, jumped over 6 per cent today on the buzz that Target Corp may shift Welpsun India's contract to the company.
As of 10.45 a.m., Welspun India shares traded 6 per cent higher at Rs 57.25, outperforming the broader Nifty that traded flat. Trident shares were also up 6 per cent at Rs 52.80.