Welspun Shares Slide a Third Day as Bed Sheets Probe Widensby
J.C. Penny will review products from Welspun, retailer says
Stock slumps by limit and is worst performer in BSE 200 index
Welspun India Ltd. shares tumbled by the daily limit for a third day as the controversy over the manufacturer passing off cheaper bed sheets as premium Egyptian cotton widened, with customers Wal-Mart Stores Inc. and J.C. Penney Co. now reviewing items to verify product claims.
Shares dropped 10 percent Wednesday to a low of 59.30 rupees in Mumbai. The company has lost as as much as 43 percent of its market value this week, the worst performance among India’s top 200 companies. J.C. Penney, the manufacturer’s fifth-biggest customer, said the company is reviewing its Welspun products. It’s too early to determine what actions the retailer might take, spokeswoman Daphne Avila said in an e-mail Tuesday.
Target said Aug. 19 it had pulled sheets and pillowcases off its shelves after discovering they were mislabeled as Egyptian cotton. It also terminated all business with the supplier. Part of a roughly $3 billion conglomerate headed by Balkrishan Goenka -- with interests spanning textiles, steel, pipes, energy and infrastructure -- Welspun now faces one of its worst crises since being founded 30 years ago.
Welspun said it’s reviewing its supply chain and would hire a “Big Four” accounting firm to examine its processes. The company is engaging with key customers, managing director Rajesh Mandawewala said during a conference call Monday. The company manufactures every fifth towel sold in the U.S. and counts Costco Wholesale Corp. and Macy’s Inc among its customers.
Wal-Mart, the world’s largest retailer, is reviewing Welspun’s cotton certification records and plans to hold further discussions with the manufacturer. The chain is also reviewing its other suppliers of Egyptian cotton products out of an abundance of caution, spokeswoman Marilee McInnis said Tuesday.