Welspun India was locked at 20 percent lower circuit at Rs 82.30 on BSE after US based retailer, Target Corporation said that it is in the process of terminating its contract with the company over a cotton supply dispute.
Meanwhile, the S&P BSE Sensex was down 123.60 points or 0.44 percent at 27,953.40.
On BSE, so far 61,269 shares were traded in the counter as against average daily volume of 1.34 lakh shares in the past one quarter. The stock had hit a 52-week low of Rs 66.80 on 8 September 2015. The stock had hit a record high of Rs 119.90 on 14 June 2016.
The stock had underperformed the market over the past one month till 19 August 2016, falling 4.33 percent compared with 1.04 percent gains in the Sensex. The scrip had also underperformed the market in past one quarter, gaining 2.75 percent as against the Sensex's 10.54 percent rise.
The mid-cap company has equity capital of Rs 100.47 crore. Face value per share is Rs 1.
Target Corporation in a statement issued on 19 August 2016 said that its vendor, 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, Target recently confirmed that Welspun substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016 without Target having any knowledge of this substitution.
These sheets were produced by a number of vendors and only Welspun was substituting product. Target said it was a clear violation of both Target's Code of Conduct and Standards of Vendor Engagement, and was contrary to the high ethical standards to which the company hold itself, and its vendors.
As soon as Target's investigation confirmed the substitution, it pulled all remaining product from Target stores and Target.com. On 19 August 2016, the company began reaching out to all REDcard and Target.com customers who purchased the sheets between August 2014 and July 2016 and offered them a full refund. The company is reassuring its customers that this is not an issue of safety and there is no risk in continuing to use this product.
Welspun India in a statement on Saturday, 20 August 2016 confirmed that it encountered a product specification issue with one client program of its subsidiary, Welspun Global Brands. Welspun India said that it has initiated immediate actions to investigate the root cause of the issue. The company is appointing one of the Big Four external audit firm to audit its supply systems and processes.
This is an issue of highest priority for the company and the company will take all necessary steps to address it, Welspun said in a statement. Welspun added that it has an impeccable record of supplying quality products to customers globally for over two decades and reiterated its commitment to the highest standards of customer service and compliance.
Welspun India's consolidated net profit rose 10.3 percent to Rs 201.85 crore on 11.3 percent rise in net sales to Rs 1386.46 crore in Q1 June 2016 over Q1 June 2015.
Welspun India is the leading home fashions supplier in the USA and amongst the top 3 global manufacturers of bed and bath linen.
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