Vedanta shares fall 3.38% after Viceroy alleges group-wide misconduct

Business Standard

09-07-2025

Anil Agarwal-owned firm denies Viceroy Research's allegations of a Ponzi-like structure, calling them a malicious attempt to discredit the group and derail future plans
Mumbai
Shares of Vedanta Ltd, the Indian metals-to-mining giant, fell 3.38 per cent on the stock exchanges on Wednesday after the US-based short-seller Viceroy Research released a scathing report accusing its London-based parent, Vedanta Resources, of orchestrating a 'Ponzi-like' structure and alleging group-wide financial misconduct, accounting fraud, and looming insolvency risks.
In a detailed 87-page forensic report, Viceroy — which disclosed a short position in Anil Agarwal-owned Vedanta Resources' debt — described the group as a "financial zombie" reliant on extracting unsustainable cash flows from Vedanta Ltd to service mounting debt at the parent level. The report alleges that Vedanta Ltd's own balance sheet is being hollowed out through massive leverage, accounting trickery, and cash transfers masked as brand fees and inter-company loans.
Apart from Vedanta, shares of Vedanta Ltd's subsidiary Hindustan Zinc also fell by 2.56 per cent to Rs 425 a share (see chart).
The spokesperson said the timing of the report is suspect and could be intended to undermine forthcoming corporate initiatives. 'Our stakeholders are discerning enough to understand such tactics. In fact, to avoid any responsibility, the authors of the report have included disclaimers stating the report is for educational purposes and merely expresses opinions, not facts,' the spokesperson said, adding that the group remains focused on business and growth.
The Viceroy Research report, reminiscent of a similar attack on the Adani group by now-defunct Hindenburg Research in 2023, says the core of its investment thesis rests on a simple but critical dynamic: Vedanta Resources Ltd (VRL) is a "parasite" holding company with no significant operations of its own, propped up entirely by cash extracted from its dying "host": Vedanta Ltd.
To service its own debt burden, VRL is systematically draining the Indian listed entity, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. 'This looting erodes the fundamental value of Vedanta Ltd, which constitutes the primary collateral for VRL's own creditors,' the report said. 'Consequently, VRL's actions to meet its short-term obligations directly impair its creditors' long-term ability to recover their principal, a situation that resembles a Ponzi scheme where Vedanta Ltd stakeholders, which include VRL creditors, are the 'suckers',' the report said.
Viceroy Research was founded by Fraser Perring, who was an early critic of the fraudulent German payments company Wirecard AG. The firm has previously targeted large companies such as industrial software group Hexagon AB. Notably, Viceroy was fined by South Africa's regulator in 2021.
The report said this arrangement has pushed the entire group to the brink of insolvency, propped up only by a continuous cycle of new debt, accounting tricks, and the deferral of massive, undisclosed liabilities. 'New credit lines serve only to destroy the PropCo's only collateral, staving off immediate insolvency at the expense of any chance of creditors recovering principal. The mechanisms used to maintain the illusion of stability are failing, and a group-wide insolvency event is no longer a distant risk,' it said, adding that the group's proposed demerger plan will spread liabilities across weaker entities, exacerbating financial fragility rather than resolving it.