Shares in Welspun India, one of the world’s largest textile manufacturers, fell by their maximum daily limit of 20% on Monday after Target Corp said it was severing ties with the company over a cotton supply dispute.
Target Corp said that after an extensive investigation it had confirmed that Welspun, which uses Egyptian cotton to make bedsheets and pillowcases sold by the retailer, substituted another type, of non-Egyptian cotton, to make these sheets between August 2014 and July 2016.
Target has pulled all the remaining products from its stores and on its website target.com, the company said in a release on Friday.
“We have informed Welspun that, due to this conduct, we are in the process of terminating our relationship with them,” it said in the release.
Shares in Welspun India dropped 20% on NSE before trading was halted. The broader Mumbai market was trading down 0.47% at 0518 GMT.
Welspun India said in a release to the BSE on Saturday that it was investigating a product specification issue with one client program, without specifically naming Target Corp.
“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 said.
“This is an issue of highest priority for us and we will take all necessary steps to address it,” the company added.