Welspun India's shares plunged 20 percent for a second day on Tuesday, as the fallout from Target Corp's decision to terminate business with the firm for passing off cheap sheets as premium Egyptian cotton escalated. Shares in Welspun, one of the world's largest textile manufacturers, were suspended after a few hours of trading, as on Monday, after dropping by 20 percent, their daily limit.
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. Welspun said on the call that it was investigating the product specification issue and would hire a Big Four accountancy firm to review its supply processes. Wal-Mart Stores Inc, Welspun's third-biggest customer, is also reviewing the company's cotton certification records, the Wall Street Journal reported.