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Shares of Welspun India crashed for the second day, leading to a 36 per cent fall in the stock in the last two days after Target Corporation, a US-based retailer, terminated its supply contracts due to quality issues.
On Tuesday, Welspun shares crashed by 20 per cent to Rs 65.85, a fall of over Rs 3,700 crore in investors’ wealth in just two days.
“We refer to a product specification issue with one client programme of our subsidiary WGBL. We have initiated immediate actions to investigate the root cause. We are appointing an external auditor (one of the Big Four) to audit our supply systems and processes. This is an issue of highest priority for us and we will take all necessary steps to address it,” Welspun said.
“We have an impeccable record of supplying quality products to our customers globally tor over two decades. We reiterate our commitment to the highest standards of customer service and compliance,” the firm said.
Target Corp has alleged that Welspun substituted Egyptian cotton with non-Egyptian cotton to make bedsheets between August 2014 and July 2016. The US firm has pulled all Welspun products from its stores.
“One of Target’s vendors, Welspun Global Brands (Welspun), was one of the producers of Egyptian Cotton 500-thread count sheets under the Fieldcrest label for Target. After an extensive investigation, we recently confirmed that Welspun substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016,” Target said.
“Neither Target nor Fieldcrest had any knowledge of this substitution. These sheets were produced by a number of vendors and only one of those vendors was substituting product. This was a clear violation of both Target’s Code of Conduct and our standards of vendor engagement, and was contrary to the high ethical standards to which we hold ourselves, and our vendors,” Target said.
“As soon as our investigation confirmed the substitution, we pulled all remaining product from Target stores and Target.com. On August 19, 2016, we began reaching out to all REDcard and Target.com guests who purchased the sheets between August 2014 and July 2016 and offered them a full refund,” the Target statement said.