Extending its downtrend for the third straight session today, shares of Welspun India tanked 10 percent as the US-based retailer Target Corp has decided to terminate its contract with the company for alleged lapses in products supplied to it.
The scrip plummeted 9.95 percent to Rs 59.30 - its lowest trading permissible limit for the day - on BSE.
On NSE, shares of the company plunged 9.98 percent to hit the lower circuit of Rs 59.50.
In the previous two trading sessions, the stock declined by 40 percent. In three days, the company has lost Rs 4,374.98 crore to Rs 5,958 crore in market valuation.
The Indian textiles manufacturer said it is investigating the root cause and in the process of 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 had said in a BSE filing.
Target Corp said it has confirmed after an extensive investigation that Welspun, which uses Egyptian cotton to make bedsheets and pillowcases sold by the retailer, substituted another type of non-Egyptian cotton while producing these sheets between August 2014 and July 2016.
"As soon as our investigation confirmed the substitution, we pulled all remaining products 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 had said in a statement last week.
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