Viceroy Research says Vedanta Semiconductors a ‘sham' commodities trading operation
According to Viceroy, 'We believe that Vedanta Limited (VEDL) subsidiary, Vedanta Semiconductors Private Limited (VSPL), is a sham commodities trading operation designed to improperly avoid classification as a Non-Banking Financial Company (NBFC)'.
In its report that came out on Friday (US time), the short-seller firm alleged that this scheme was devised to 'facilitate VEDL's remittance of brand fees to Vedanta Resource's (VRL) in April 2025, when it faced a severe liquidity crisis'.
'VSPL's operational illusion needs 24 months of regulatory silence to fulfil its purpose, repaying its offshore lenders and hiding the near-catastrophe of April 2024. While credit analysts are snoozing through the alarm bells, India's regulators are famously light sleepers,' the report claimed.
The US-based short seller has been publishing a series of reports on the Vedanta Group for the last few days, alleging that Vedanta Resources, the holding company of Vedanta, is propped by cash entirely from its operating unit.
Vedanta has denied all allegations so far, calling them 'baseless'.
In its latest report, Viceroy said that in April 2024, Vedanta Limited (VEDL) faced a severe liquidity crisis.
'In response, VEDL reactivated VSPL, not as a semiconductor venture, but as a zero-margin trading entity whose operations appear to consist entirely of paper-based commodity trading,' the report alleged.
'VSPL tapped offshore lenders for a short-term, INR-denominated, 10 per cent NCDs secured by VEDL's stake in HZL (equivalent to 1 per cent of outstanding shares) VSPL then began trading commodities (copper, silver, gold) on a zero-margin basis reminiscent of wash trading. It remitted the loan to VEDL as a 24-month 12 per cent loan, with the spread intended to cover the sham operation's costs,' Viceroy Research said in its report.
'VSPL, superficially an operating entity, would face reduced scrutiny for loan repayments under FEMA, Companies Act, PMLA and AML frameworks. VSPL will likely have to continue these sham operations until FY27, when the loans fall due and repayment will have to be routed back through it. If at any point the regulators intervene at VSPL, the lender group is likely facing a total wipeout,' it further alleged.
Earlier this week, Viceroy Research levelled fresh allegations against Vedanta Group, accusing the company's promoters of holding an undisclosed stake through a welfare trust to recycle funds. The company in question is PTC Cables Pvt. Ltd (PTCC), which holds a 1.91 per cent stake in Vedanta Ltd, that has a market cap of Rs 1.75 lakh crore.
PTCC is owned by Bhadram Janhit Shalika Trust (BJST), which Viceroy alleges is controlled by the Agarwal family, founders of the Vedanta Group. However, the Vedanta Group has dismissed the allegations as 'baseless.'
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