Latest news with #SwapanDasgupta
Mint
16-07-2025
- Business
- Mint
Why no one blows the whistle until a short-seller turns up
The reaction to US-based short seller Viceroy Research's scathing report on the Vedanta Group was as predictable as it was performative. The company, not surprisingly, called the allegations 'baseless". There was also the familiar barrage of nationalist rhetoric summed up by former Rajya Sabha MP and BJP national executive member Swapan Dasgupta, who tweeted: 'Is there a concerted attempt by dodgy US financial organisations to undermine India's corporates/financial institutions?" But strip away the outrage, and the uncomfortable question remains: why did it take a foreign short-seller to say what no one in India's financial ecosystem had the courage or incentive to? After all, as Vedanta's CEO Deshnee Naidoo admitted, the points raised in the report are not new and have been previously disclosed to shareholders. Viceroy's dossier alleges opaque structures, questionable related-party transactions, and fragile debt positions across the sprawling Vedanta empire. You don't need to agree with every bit of the report. The key issue is that in a market ecosystem populated by regulators, exchanges, research analysts and institutional investors, why was such scrutiny absent until a short-seller showed up? The discomfiting answer is the lack of incentives. Reviled they may be, but short sellers are among the few market participants who have a genuine incentive to unearth problems inside companies. Since they make money when stock prices of their target companies fall, they are financially motivated to find what others ignore. Their motives are certainly not altruistic, but they drive the kind of transparency and accountability that almost all other market players shy away from. Take the recent Jane Street saga. The US-based high-frequency trader was eventually censured by Sebi for allegedly fraudulent and manipulative trades in index options. Sebi's action came as a surprise, but Jane Street's actions were known and discussed widely for months before the regulator's action. Shankar Sharma, Veteran investor and founder of GQuant Investech, posed the obvious question: Why did the exchange not act earlier? His answer: "Simple conflict of interest…How can they sanction JS when it drives FO volume massively, hence SE profits." That's because when you trade F&O contracts on the NSE, you are charged a small percentage of the trade value as transaction fees. Sharma's critique strikes at the core of our market structure; when exchanges benefit from the very entities they are meant to police, enforcement becomes a question of convenience rather than principle. That's why independent, profit-seeking actors like short-sellers are necessary, even if they operate in the shadows. It is no accident that some of the most explosive corporate scandals like Adani in India, Wirecard in Germany and Luckin Coffee in China, were flagged first by short-sellers. In each case, insiders maintained a studied silence till the proverbial fecal matter hit the overhead fan. In each case, external watchdogs were too slow or too compromised. The dirty work was done by someone with skin in the game and a profit motive. Of course, short-sellers can be wrong. They exaggerate, cherry-pick and even manipulate. But their work, when rooted in data and grounded in fact, performs a critical function. They are often the only ones willing to publicly accuse a company of fraud — because they have the most to gain if they're right, and the most to lose if they're wrong. Could the questions that Viceroy posed to Vedanta have been asked by its independent directors? Or its bankers? Or rating agencies? Or large institutional shareholders (foreign institutional investors (FIIs) and domestic institutional investors (DIIs) who together hold over 27% stake in Vedanta Ltd)? Possibly. But the brutal truth is that for none of them did the risk-reward trade-off make sense. The vitriol aimed at Viceroy isn't anything new. Others who've dared to say the emperor is naked, have faced far worse. In June 2012, Canada-based Veritas Investment Research called out Anil Ambani-group company Reliance Communications (RCom) for its accounting practices and corporate governance, leading to significant a drop in the company's stock price. Here's how the telco responded to the charges: 'The Veritas report lacks any credibility and is malafide in intent and approach…The report is full of factual inaccuracies, and baseless allegations masquerading as research." By 2016, RCom was desperately trying to sell assets in a bid to pay off its ₹45,000 crore of debt. In February 2019, it filed for bankruptcy. In another 2011 report, Veritas called out Kingfisher Airlines for 'poor disclosures, capricious accounting policies and understated liabilities". The company dubbed the report 'mischievous and sensational". In 2012, Kingfisher ceased operations and faced bankruptcy proceedings. As for Veritas, it was forced to wind up its business in India in 2014 after Nitin Mangal, one of its analysts, was remanded in custody for his report raising accounting and governance issues at Indiabulls Financial Services, Indiabulls Real Estate and other group firms. Markets need naysayers as much as they need Yes men and women, because uncomfortable truths often come from those with a vested interest in revealing them. Until domestic institutions are more willing, and incentivized, to speak up, we should be careful of shooting the messenger and look at the message instead.
Indian Express
09-07-2025
- Business
- Indian Express
Vedanta shares plunge after US short-seller flags ‘unsustainable debt'
The shares of Vedanta Ltd plunged by as much 8.7 per cent to Rs 421 intraday, and that of Hindustan Zinc by 5 per cent to Rs 415, after Viceroy Research, a short-seller and US-registered financial research group, flagged the Vedanta Group for carrying 'unsustainable debt'. The shares have recouped part of the losses since. The research group claimed that the Vedanta holding companies — Vedanta Resources Limited (VRL) along with intermediate holding companies above Vedanta Limited (VEDL) — resemble 'a financial zombie' with 'approximately $4.9 billion in gross interest-bearing liabilities as of FY25' but 'no significant operations of its own,' being 'propped up entirely by cash extracted from' its subsidiary VEDL. In a media statement, the Vedanta Group described the Viceroy report as 'a malicious combination of selective misinformation and baseless allegations,' issued with the sole objective of creating false propaganda, and 'without making any attempt to contact' the Group. 'It only contains compilation of various information — which is already in the public domain, but the authors have tried to sensationalise the context to profiteer from market reaction. The timing of the Report is suspect and could be to undermine the forthcoming corporate initiatives,' the Vedanta statement said. Viceroy Research acknowledged it is a short seller and that it stood to profit if the Vedanta stocks fell as a result of its report. 'As of the publication date of this report, you should assume that the authors have a direct or indirect interest/position in all stocks (and/or options, swaps, and other derivative securities related to the stock) and bonds covered herein, and therefore stand to realize monetary gains in the event that the price of either declines,' the Viceroy report said in a disclaimer. 'To service its own debt burden, VRL is systematically draining VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors… (and) drives the increase in the Group's insolvency risk,' the report said. In a post on social media platform X, former Rajya Sabha MP and BJP national executive member Swapan Dasgupta said: 'Is there a concerted attempt by dodgy US financial entities/ research organisation to undermine India's corporates/ financial institutions? There are too many coincidences. I think the security agencies should investigate.' The Viceroy report pointed out that the Vedanta Group's gross finance costs and effective interest rate rose consistently from $1.3 billion (7.2%) in FY21 to $2 billion (13%) in 2025, while the Group's gross interest-bearing liabilities fell from $17.5 billion in FY21 to $15.6 billion in 2025. However, the report noted that the Group's cash and short-term investments have fallen from $5.9 billion in FY21 to $2.6 billion in FY25. 'Net debt has increased, as cash and short-term investments have been depleted at a disproportionately higher rate than debt has been repaid,' it said. The report claimed that Vedanta's 'proposed demerger will merely spread the Group's insolvency across multiple, weaker entities, each burdened with a legacy of impaired assets and unserviceable debt.' Founded and chaired by Anil Agarwal, Vedanta Group is a global conglomerate, primarily focused on India. Listed on the Bombay Stock Exchange and the National Stock Exchange, Mumbai-based VEDL is a 'uniquely diversified company across the natural resources spectrum.' VRL, the London-based holding company, was founded in 2003. According to a disclosure to SEBI on July 5, encumbrance over 220.5 crore equity shares of VEDL, representing 56.38% of the total share capital held by VRL through intermediate holding companies, was released following the full repayment of a $200 million facility agreement, for which a no-objection certificate was received from Canara Bank London Branch on July 3. Founded in 2016 by British short seller Fraser John Perring with Australian partners Aiden Lau and Gabriel Bernarde, Viceroy Research LLC claims to be an investigative financial research group registered in Delaware, United States. On its website, Viceroy says its research has raised red flags on many companies, including Wirecard, the German payment giant that filed for bankruptcy in 2020. Multiple 'material quantitative and qualitative discrepancies' listed in the Viceroy report include claims that 'Vedanta's interest expenses vastly exceed its reported note rates, expenses across operating subsidiaries are systematically capitalized, and billions of dollars of disputed expenses are kept off-balance sheet and undisclosed in financial reports.' VEDL has paid 'disproportionately large' dividends totalling $10.7 billion (₹85,503 crore) since FY21, consistently exceeding its free cash flow and accrued $5.6 billion free cash flow shortfall over the last 3 years, the report pointed out. Claiming that VRL's financing needs dictate VEDL's dividends, which are 'funded not by free cash flow but by taking on more debt,' the report called this upstreaming process 'highly inefficient' because 'a significant portion of every dividend issued leaks to minority shareholders.' According to the report, VRL extracts hundreds of millions of dollars annually from VEDL and its subsidiaries through 'brand fees' that lack any commercial justification and are 'designed to bypass dividend leakage to minority shareholders, including the government of India.' In FY24 alone, the report said, these fees amounted to $338 million, representing 37% of the net profit of VEDL and its subsidiaries. By comparison, it pointed out, Tata Steel's brand fees are 0.25% of the turnover, capped at ₹200 crore ($24.01m) 'despite operating a brand with far greater public recognition and that is actually being used.' Loans from subsidiaries According to Viceroy, VRL uses loans from VEDL subsidiaries to aggressively purchase more VEDL stock in 'blatant violation of the Companies Act.' Also, over $122 million of the loan was 'written off' and never repaid to VEDL, said the report. Jay Mazoomdaar is an investigative reporter focused on offshore finance, equitable growth, natural resources management and biodiversity conservation. Over two decades, his work has been recognised by the International Press Institute, the Ramnath Goenka Foundation, the Commonwealth Press Union, the Prem Bhatia Memorial Trust, the Asian College of Journalism etc. Mazoomdaar's major investigations include the extirpation of tigers in Sariska, global offshore probes such as Panama Papers, Robert Vadra's land deals in Rajasthan, India's dubious forest cover data, Vyapam deaths in Madhya Pradesh, mega projects flouting clearance conditions, Nitin Gadkari's link to e-rickshaws, India shifting stand on ivory ban to fly in African cheetahs, the loss of indigenous cow breeds, the hydel rush in Arunachal Pradesh, land mafias inside Corbett, the JDY financial inclusion scheme, an iron ore heist in Odisha, highways expansion through the Kanha-Pench landscape etc. ... Read More
Time of India
28-06-2025
- Politics
- Time of India
Supreme Leader Ayatollah Khamenei: Iran regime on borrowed time, but meddling could backfire
Iran regime on borrowed time, but meddling could backfire Swapan Dasgupta Updated: Jun 28, 2025, 19:36 IST IST Despite Iran's claims of victory, a recent conflict revealed significant vulnerabilities, with Israel inflicting substantial damage on military capabilities and key symbolic targets. In his first pronouncement since the ceasefire — what the regime is celebrating as the 'divine victory' — Iran's ageing Supreme Leader Ayatollah Khamenei revealed that 'the Zionist entity has almost collapsed under the attacks of the Islamic Republic of Iran .' According to his understanding, 'The US intervened in the war because it felt if it did not do so, the Zionist entity would be completely wiped out.' The glaring mismatch between how Tehran has projected the outcome of its confrontation with Israel and the US, and how the 12-day war is being viewed elsewhere, may well prompt despair among those anxious to see Iran's return to 'normal' existence. The conventional wisdom is that defeat prompts revolution.
