US-based retailer Target Corp has decided to terminate its contract with Welspun India for alleged lapses in products supplied to it, prompting the textiles firm to initiate a probe and an external audit even as its share price plunged by 20 per cent today.
The Indian textiles manufacturer said it is investigating the root cause and appointing an external auditor to audit its supply systems and processes.
Target Corporation is the second largest retailer in the US after Walmart and is a major customer for Welspun.
"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," Welspun India has said in a regulatory filing.
Target Corp said that after an extensive investigation, it has confirmed that Welspun, which uses Egyptian cotton to make bedsheets and pillowcases sold by the retailer, substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016.
"As soon as our investigation confirmed the substitution, we pulled all remaining product from Target stores and Target.Com. We have informed Welspun that, due to this conduct, we are in the process of terminating our relationship with them," Target Corp said in a statement last week.
Welspun India stock today dived 20 per cent, wiping-out Rs 2,064 crore from its market valuation to Rs 8,268.89 crore.
The scrip tanked 19.98 per cent to settle at Rs 82.30 - its lower circuit limit - on BSE. On NSE, the stock dipped 19.96 per cent to end at Rs 82.60.
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