Welspun India is paying the price of tripping up on quality standards. The number could be more than Rs 6,000 crores it lost in market value after its second largest customer, the US-based discount retailer Target Corp pulled the plug on $90 million business from its Indian supplier. Where Welspun went wrong was that the sheets and pillows it sold to Target were labeled as made of premium Egyptian cotton but were actually made of another type of cotton.

Interestingly, just a month ago, the Singapore International Arbitration Centre, adjudicating in the case between Ranbaxy Laboratories and Daiichi Sankyo, passed severe strictures on the way the Indian company had hoodwinked its Japanese buyer which paid Rs 19,804 crores in 2008 to buy a majority stake in the company. The Court noted that Ranbaxy deliberately hid information that allegedly implicated its owners and top management in a host of irregularities, from fraud to falsehood, to dupe its new owners.

Significantly, both Welspun and Ranbaxy have been market leaders in their businesses of bed sheets and generics respectively. And both the companies led in a space where India’s factor advantages had made them global leaders in their own fields respectively. Indian manufacturers have a 47 per cent share of the worldwide bed sheets market, while the country is the largest provider of generic drugs globally with Indian generics accounting for 20 per cent of global exports in terms of volume. What comes out of both the stories is that Indian companies don’t care for long term relations by maintaining quality.