Welspun India turned volatile after the stock slipped over 8% in late noon trades after rising over 5% in early trades on the back of heavy volumes. The company is mulling shifting its orders to Welspun rival Trident Ltd who now looks poised to catch approximately $90 million in business.
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Egyptian cotton supplies have been declining in recent years, but demand is still high for the softer material. Trident shares jumped to the highest level in two months. The people said, Trident, based in the northern state of Punjab, now supplied terry towels to Target and was among the few Indian companies with the capacity to produce more bedsheets. It is currently Target’s supplier for terry towels and can now cash in the opportunity to land a contract for bed sheets as well. “This is even more so as new capacity set up by Trident is yet to be fully utilized. They can ramp up quickly”.
Target spokesperson, Molly Snyder, said: “We have previously shared that we were actively working with existing vendors on our matrix to determine where we move the business”. “It would be premature to speculate on how we will plan for, and distribute, our business”.
On 19 August, Target snapped business ties with India’s largest home textiles exporter after it found that sheets and pillows labeled as premium Egyptian cotton were actually made with another type of cotton (See: Investors target Welspun India after Target severs business ties ). The retailer pulled the items from its stores and offered customers refunds.
Several other retailers in the United States, including Bed, Bath and Beyond and Ikea have initiated their own investigations into the products sourced from Welspun India.
Since then, Wal-Mart, Bed Bath & Beyond and J.C. Penney, also customers of Welspun, said they have started their own investigations.
According to Bloomberg, Trident now has plans to up its ante against its rivals with the expansion of its reach in bath linens and bed sheets.
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The stock of Asia’s largest home textile maker nearly halved from Rs 103 on August 19, after US-based Target Corporation announced last week it was terminating business with the Indian manufacturer for substituting the cotton in bedsheets with a different type than the contracted Egyptian one.
