WELSPUN INDIA - DID IT INDEED SPIN A YARN?

 By Ruma Dubey

Welspun India. It would be no exaggeration to say that it has singlehandedly put down all the efforts made by the PM to promote India as the destination to “make”. As such “Made in India” did not have it going too well for and now Welspun has only made matters worse.

Breaching 20% lower circuit and hitting new lows every day, the stock is literally getting battered down to pulp and rightly so.

As it is those living abroad feel that India is a big con, a jugaadu is our language. Things coming from India are always eyed with suspicion and the reputation is that money is siphoned off from one purpose to the other, with quality taking it on its shoulder. In the country itself, the condition of the roads and various infra projects are a pointer to this very fact where adulteration and passing off poor quality as higher is the way most conduct business here. We have become tolerant towards these issues (becoming intolerant towards irrelevant ones) and accept this as a way of life.

But abroad it is not acceptable. Poor quality is poor quality and it is shown the door. The supermarket chain in USA, Target terminated its contract with Welspun after it unearthed a con – it has been accused of selling fake Egyptian cotton bedsheets. Last month a consignment of 7,50,000 sheets and pillow cases labelled as “Egyptian cotton” was actually made with some other lower quality cotton. This is a pure case of cheating and Welspun is now trying its level best to contain the damage. It is in the process of appointing an auditor to probe into these charges while saying that the issue was more about origin of the cotton and not about quality of the finished product. Is that right though? Selling and charging for a superior brand but using lower quality cotton cannot be justified in any ethical way.

This damage, more than that of revenue to Welspun is more about the dent on its reputation and that damage is something which will be very tough to recover from. Though the quality discrepancy was noticed only in bedsheets, Target has cancelled contract for all products coming from Welspun. This means as of now, Target has lost all trust in Welspun and that is a huge blow.

For Target this cancellation of contract is not a big deal, just a drop in the ocean but for Welspun, Target was its marquee client and contributed 10% to its topline. And the worry is that Target could lead to a contagion effect with other clients also reviewing its quality – Walmart has already said that it was reviewing Welspun product quality. The next big client after Target is Bed, Bath and Beyond; though it is yet to comment about a quality review, that day might not be too far away.

The perception which clients of USA will now nurture for Welspun has most certainly changed from good to poor. If there is a voluntary recall, the company is still considered to be ethically sound but when there is an issue of con, there is simply no middle path there.

We had heard how the US FDA was after the Indian pharma sector and how it was a conspiracy against the Indian pharma companies. Now we might hear the same for the Indian textiles too.

It is truly tragic for India that this happened at this crucial juncture, just when PM Modi is trying so hard to convince one and all to come and make in India. Welspun has put his efforts behind by a few blocks.

We now wait to see what comes out of this Welspun investigation but as far as Target goes, it had no doubts. And if Target decides to sue the company, the damage could be debilitating.

Just like we needed the US FDA to pull up the Indian pharma companies to better their quality, maybe this will be a wakeup call for Indian textiles. The saga of pharma companies began with Wockhardt and now Welspun ; looks like the alphabet “W” does not agree too well!