Posted On August 26, 2016 By In Business And 489 Views

Bug in bed sheet! Welspun India faces probe

US retailer Bed Bath & Beyond said on Thursday that it ordered an external audit of textiles from Welspun India putting more pressure on the embattled bedding and towel maker, which has seen nearly half its market value wiped out this week.

Welspun has been caught in a maelstrom after US retailing giant Target last week accused the Indian manufacturer of passing off cheap sheets as premium Egyptian cotton for two years.

 Welspun supplied bed sheets and pillowcases made of Egyptian cotton to Target. The US-based retailer alleged that Welspun substituted another type of non-Egyptian cotton when producing sheets supplied between August 2014 and July 2016.The Welspun scrip witnessed severe drubbing for the fourth day in a row falling more than eight per cent amid a host of negative news following Target’s decision to terminate its contract with the company. The stock plunged 8.26 per cent to settle at Rs 54.40 on the Bombay Stock Exchange. During the day, it dipped 9.94 per cent to Rs 53.40, its lower circuit limit. On the National Stock Exchange, it tanked 9.15 per cent to close at Rs 54.05. In four days, the scrip has declined by more than 47 per cent wiping out Rs 4,867.3 crore from its market valuation, which now stands at Rs 5,465.70 crore.

After Target said that it is severing ties with the company, Welspun clients, including Walmart Stores and JC Penney, also announced probes.

Bed Bath spokesperson Leah Drill said that the retailer will pursue an investigation and take appropriate action. The company’s announcement came after Walmart said that it is reviewing Welspun’s cotton certification records. Macy’s had said on Wednesday it is also monitoring the situation.

A Walmart spokesperson said, “We are currently reviewing Welspun cotton certification records and plan to have additional conversations with Welspun. If we discover an issue, we will handle it appropriately.”

Earlier in the day, Welspun managing director Rajesh Mandawewala told analysts in a conference call that the firm is in the process of appointing an external independent ‘Big Four Auditor’ to audit all of its supply systems and processes to understand the root cause. “The audit will give us clarity on a number of questions, including where and how the issue occurred and what steps we will need to take to tighten our processes,” he said, adding the audit is likely to be completed in six to eight weeks.

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