Welspun's shares crash by 43%, market-cap falls by over 4000 crore
- Textile major Welspun India's shares have corrected by 43%
- Its market cap eroded by over Rs 4,000 crore
- US retailers have raised questions about the quality of its products
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Over the last three trading sessions, Welspun India shares have corrected by 43%, leading to a market cap erosion of over Rs 4,000 crore, as quality issues assailed the textile major said a NDTV report .
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Welspun India's shares were locked down in lower circuit for the third straight session on Wednesday, though in some relief for investors, the stock fell 10 per cent on Thursday, following the revision in circuit limit from 20 per cent to 10 per cent.
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The sell-off in Welspun India, one of the world's largest textile manufacturers, started on Monday, following Target Corp's decision last week to snap ties with the company.
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Target Corp terminated its contract with Welspun after it found that the company had substituted Egyptian cotton with non-Egyptian cotton in bed-sheets and pillowcases sold under the Fieldcrest brand between August 2014 and July 2016.
Target Corp, Welspun India's biggest customer after Bed Bath and Beyond, accounts for 10 per cent of the company's revenues.
In further bad news for Welspun, its products have come under the scanner of other big clients. Wal-Mart Stores, Welspun's third-biggest customer, is also reviewing Welspun's cotton certification records.
Fortune reported that JCPenney, Welspun's fifth-biggest customer, is also reviewing the company's cotton products.
"JCPenney is conducting a thorough investigation of its Welspun textiles to ensure the integrity of its product claims,"Â said a company statement.
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Though brokerages such as Edelweiss Securities continue to view the stock positively, many others have turned bearish on the Welspun, following Target's contract termination.
Elara Capital has downgraded Welspun to "sell", while Centrum Wealth said it will review its "buy" rating on the stock.
Welspun India has initiated an external audit of its supply systems. Its Managing Director Rajesh Mandawewala said the company is "actively engaged with our clients."
