Stay Away From Welspun India, Warn Analysts After 48% Fall In 4 Days

Welspun India shares were locked down in lower circuit for the fourth straight session on Thursday. Shares of one of the world's largest textile manufacturers have shed nearly 50 per cent of their value since Monday, leading to a market cap erosion of over Rs 4,500 crore.

Welspun India shares have crashed, following Target Corp's decision last week to cancel its contract with the company over the substitution of Egyptian cotton with non-Egyptian cotton in bedsheets and pillowcases sold between August 2014 and July 2016.

On Wednesday, Bed Bath & Beyond Inc became the fourth company to initiate review of Welspun India's bedding products. Wal-Mart and JC Penny have earlier initiated review of Welspun's products.
NDTV Profit spoke to three analysts to know if investors should buy Welspun India following the sharp selloff this week.

Gaurang Shah of Geojit BNP Paribas said investors should not buy Welspun India, unless somebody is a "great fan" of the company.

"There is too much news flows and the management's clarification is not helping. More cancellation of contracts is possible," Mr Shah said.

Technical analyst Sarvendra Srivastava also advised investors to stay away from Welspun India.

"When there is a corporate governance issue or when a company's trust is at stake, this market penalizes the stock... Welspun India is coming down on its own weight," he added.

Market analyst Sharmila Joshi said there are concerns that other textile manufactures may also get impacted because of the controversy around Welspun India.

"Either it's a deliberate mistake or some slip up of gigantic proportions... Investors should wait for clarity before buying this stock," she added.

Welspun India shares were down 10 per cent at Rs 53.55 as of 09.45 a.m., underperforming the 0.3 per cent gain in the broader Nifty.

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