Latest news with #Viceroy
Indian Express
6 days ago
- Business
- Indian Express
Hindustan Zinc pays out as dividend more than it earns, alleges US research firm Viceroy
US-based Viceroy Research has alleged that Hindustan Zinc Ltd (HZL), belonging to the Vedanta group led by Anil Agarwal, has paid out far more in dividends than it earned, purportedly borrowing to make up the shortfall. The research house has estimated a shortfall in free cash flow (FCF) of HZL — once a public sector firm — in the first quarter ended June 2025 to be around Rs 3,600 crore ($371m). 'HZL CFO Sandeep Modi's 'Rs 10,000 crore ($1.17b) free cash flow' claim collapses under scrutiny. Cash flows are subsidized by debt. If HZL's dividend remains the same as last year, we estimate HZL will incur an annual FCF shortfall of at least Rs 5,000 crore ($580m) and must be funded by more debt,' it said. When contacted, HZL spokesperson said. 'the Viceroy report is a combination of selective misinformation and baseless allegations. All resolutions are detailed and part of Board undertakings which are taken to them after rigorous due diligence. In the past 20 years the company's zinc production capacity has grown more than 4 times and silver by 20 times.' 'Hindustan Zinc is steered through a stringent governance framework wherein all matters are taken to the Board and this process is followed for all proposals,' HZL said. Viceroy alleged that HZL has not generated Rs 10,000 crore in FCF since 2023, at which point FCF has fallen sequentially. On an annualized run rate: we expect HZL FCF at Rs 7,000 crore. In FY 23, during a short commodities rally post covid, HZL generated Rs 12,000 crore FCF, and paid Rs 31,000 crore in dividends, accruing an enormous deficit. Leverage increased sharply vs Q1 2024, with the debt-equity ratio rising from 0.8x to 1.2x. FCF represents the amount of cash a business generates after accounting for capital expenditures needed to maintain or expand its asset base. In simpler terms, it's the cash left over after a company pays for its operating expenses and investments in equipment, property, or other assets. Vedanta acquired HZL from the government in 2002. Disclosures suggest HZL incurred Rs 2,000 crore ($232m) of new debt in the June quarter of FY26. HZL's auditor, SR Batliboi, failed to investigate material concerns, relying entirely on management assertions while the company's capital base deteriorated and governance collapsed, Viceroy alleged. HZL spokesperson said it has become the world's largest integrated zinc producer and is amongst the top 5 primary silver producers. 'It has created immense stakeholder value through increase in market cap by more than 500 times, in addition to dividends to shareholders and exchequer contribution. HZL contributes nearly 35 percent of the declared dividend to the government treasury, including dividend to government and tax deducted at source (TDS),' he said. According to HZL, this quarter amidst commodity headwinds the company delivered beyond market expectations and registered record high first quarter mined metal production and lowest cost of production. In FY25, the company clocked its second-best profit, up 33% YoY. Hindustan Zinc's bank facilities and debt programmes are Crisil AAA rated highlighting our efficient & integrated operations, and strong financial risk profile. And this consistent performance reflects the growing trust of our stakeholders, HZL said. The research firm also questioned the brand fees paid out by HZL. In the earnings call, HZL's CEO Arun Misra 'credited offshore brand fees (paid in advance) as justifiable by past 'risks' undertaken by Vedanta as a shareholder of HZL. This is preposterous,' the research firm said. 'HZL CEO Arun Misra's defense of the controversial 3 per cent brand fee, a fee that results in hundreds of crores in annual payments to VRL (Vedanta Resources), was the centrepiece of his narrative during the Q1FY26 Earnings Call,' the US firm said. 'We reiterate our belief that this 'brand fee' is an uncommercial contract with VEDL (Vedanta Ltd), who does not appear to provide any brand, management, or other auxiliary services to HZL. There are no employees or substantial operations at VRL to justify brand fee payments,' Viceroy said. 'Vedanta's shares in HZL bear the same risk as every other equity holder, including the government of India. If anything, it is the non-promoter shareholders that have borne the outsized risk of HZL taking outsized loans to bail out promoters,' it alleged. HZL said 'Vedanta' is a prominent global brand in the natural resources sector and the brand is a registered intellectual property of Vedanta Resources. 'HZL and other group companies use the brand under a brand license/sub-license agreement and pay a Board-approved brand and strategic services fee for its usage. This structure reflects a standard intercompany licensing model used globally by diversified groups and is fully compliant with Indian accounting, tax and governance regulations, and follows internationally accepted practices,' HZL spokesperson said.
Mint
21-07-2025
- Business
- Mint
Viceroy rebuts former Chief Justice D.Y. Chandrachud's legal opinion on its Vedanta report
Mumbai: US-based short-seller Viceroy Research has disputed former Chief Justice of India D.Y. Chandrachud's legal opinion on its allegations of financial misconduct and misrepresentation against Vedanta Group. Viceroy argued that Chandrachud's legal opinion did not answer questions raised by it with regards to dividend payments and alleged financial mismanagement at the mining and minerals conglomerate. Justice Chandrachud's opinion 'fails to refute, investigate, or even engage with a single substantive financial allegation in our reports,' the short-seller said in a report on Monday, 21 July, its eighth note on Vedanta in 13 days. Vedanta has consistently denied Viceroy's allegations, terming the accusations baseless. Justice Chandrachud in his legal opinion to Vedanta, which was made public on Friday, said Viceroy's first report on billionaire Anil Agarwal's group, published on 9 July, lacked credibility, and the researchers behind the report had 'dubious credentials'. He said he relied on information shared by Vedanta to arrive at this opinion since Viceroy's website had no information in this regard. The former Chief Justice also highlighted Viceroy's interest in profiteering from a possible rout in Vedanta Resources' commercial papers as a result of the short-seller's reports. He also said he suspected the timing of the report, coming just as India-listed Vedanta Ltd is headed for a demerger. In April, Viceroy Research took a short position on the bonds of Vedanta Resources Ltd, the London-based unlisted holding company of the Vedanta Group, according to Fraser Perring, founder of Viceroy Research, who didn't disclose the quantum of his firm's exposure. Viceroy argued that Chandrachud's legal opinion relied entirely on 'management representations without questioning', the short-seller said, adding that the opinion failed to dispute any of its findings, conclusions, or concerns. 'When faced with serious allegations backed by detailed financial evidence, the company responded not with transparency, but with a character assassination attempt dressed in legal language,' the short-seller said in its latest report. Viceroy also claimed Vedanta had to pay for a legal opinion to defend its parent company against claims of stealing money or misusing the subsidiary's funds. Vedanta Resources holds a majority stake in India-listed Vedanta Ltd through several intermediaries. Hindustan Zinc Ltd is a subsidiary of Vedanta Ltd. Justice Chandrachud declined to comment on the matter. He explained that his role was professional in nature and the opinion given was protected by professional privilege. 'It is inappropriate to discuss anything pertaining to it in the public realm,' he said. Vedanta Group did not immediately reply to Mint's emailed queries on Viceroy's rebuttal. In his legal opinion, Justice Chandrachud said the transactions disclosed in financial statements and regulatory filings by Vedanta showed there was transparency and compliance with regulations. Such disclosures should be presumed legitimate unless there was clear evidence to prove otherwise, he opined. To this, Viceroy argued that mere disclosure did not confirm legality of the transactions. Justice Chandrachud also said Viceroy Research's report contained serious allegations tarnishing the Vedanta Group's image and reputation. 'The report contains serious imputations such as 'ponzi scheme' and 'parasite', which have caused harm to querist's (here Vedanta Ltd) business and reputation,' he said, adding that Vedanta was well placed to seek legal remedies under such circumstances. Former trial court judge Rishabh Gandhi said dismissing Chandrachud's report as just an opinion was reductive and misleading. 'A legal opinion—an opinion rendered by a legal expert based on applicable law and the facts presented—when issued by a highly regarded authority like the former Chief Justice of India, carries considerable legal and institutional credibility,' said Gandhi, who is also the founder of law firm Rishabh Gandhi & Associates. Gandhi explained that most legal opinions are based on a detailed review of documents, statutory interpretation, and precedent, primarily to confirm legal compliance, and enforceability of corporate actions such as dividend declarations, inter-company transactions, or board resolutions. Gandhi, however, clarified that while Chandrachud's legal opinion likely affirmed the legal permissibility of Vedanta's transactions and dividend policies under Indian corporate law, it did not address the broader concerns around financial prudence, related-party dynamics, or cash flow impact. 'If Vedanta wishes to credibly address Viceroy's allegations and rebut the perception that the legal opinion is merely a public relations exercise, it would be prudentto commission an independent financial or forensic audit,' Gandhi said. Viceroy has accused Vedanta Group of alleged financial misconduct and misrepresentation, making empty promises to shore up share prices, manipulating asset values, raising off-balance sheet loans, and corporate governance lapses, Mint reported on 9 July. At Vedanta's annual general meeting on 10 July, shareholders reposed their confidence in the company. 'Different investors have different concerns as they view things differently,' said Shriram Subramanian, managing director of proxy advisory firm InGovern. 'Viceroy is a short seller and has a thesis and a short position. Other investors and stakeholders may have a different thesis.' If investors were truly concerned about Viceroy's allegations, Vedanta's stock would have seen a sharp decline, which hasn't happened, he said. On 9 July, when Viceroy published its first report on the mining conglomerate, Vedanta Ltd shares declined as much as 8% intraday to ₹ 420.65 apiece before recouping some of the losses following a clarification from the company to settle at ₹ 441.30, down 3.29% on the NSE. The shares have since recovered. On Monday, Vedanta ended 2% higher at ₹ 454.90 per share.
Daily Maverick
20-07-2025
- Business
- Daily Maverick
FSCA cleared to go global and pursue R50m fine for Viceroy over Capitec report
Following a high court ruling, South Africa's market cop has grown a new set of teeth that can pierce across borders. In a landmark ruling on 9 July, the Pretoria High Court handed the Financial Sector Conduct Authority (FSCA) a powerful new weapon: the ability to fine foreign entities that mess with South Africa's markets, even if they've never set foot in the country. The FSCA said that it considers this a significant legal victory and believes that it is an 'essential part of protection of the public in an interconnected, digital global financial environment'. For the likes of Viceroy Research, which became a household name in 2018 after detonating a bomb under Capitec with a dodgy research report, the rules of the game have changed. The next time a hedge fund hit squad fancies nuking a JSE-listed stock with dubious 'research', they might want to budget for a fight in a South African court. How to burn R9.3-billion before lunch In January 2018, Viceroy lit a match in the form of a report titled Capitec: A wolf in sheep's clothing. The report accused the bank of 'predatory lending practices', pushing clients into debt spirals and called for an immediate curatorship by the South African Reserve Bank (SARB). The report went on to claim that Capitec had to write off more than 42% of the gross collectible principle due to it in the 2017 financial year, even suggesting the loan book was an 'irreconciliable R3-billion'. Twitter went feral, media outlets amplified the claims, and by closing bell, Capitec's price share had plummeted 23%, erasing R9.345-million in market value, according to a FSCA newsletter sent out in September 2021. The SARB scrambled to calm markets, assuring everyone that Capitec was solvent, capitalised and had adequate liquidity. The stock might have bounced back, but the reputational shrapnel lingered. The FSCA later warned that Viceroy's falsehoods 'posed a clear and present threat to the stability of the South African financial system'. Capitec told Daily Maverick that the bank has 'consistently maintained the 2018 report was misleading and caused unwarranted harm'. A calculated hit and a big payday The watchdog eventually pieced together that Viceroy was executing a targeted hit. A transcript of a hearing held by the Financial Services Tribunal (FST) in October 2022, reveals that Viceroy had a deal with a hedge fund, Oasis. It would $100,000 a month for tailor-made hit pieces plus 12.5% of the profits from short positions. Oasis banked an estimated R82-million, and Viceroy's cut was estimated by the FSCA to be close to $744,482 (R10-million at the time). All while ignoring legal obligations to correct falsehoods under the Financial Services Act. Dodging the net The FSCA initially slapped Viceroy with a R50-million fine for breaching Section 81 of the Financial Markets Act, which bans false or misleading statements about listed securities. FSCA commissioner Unathi Kamlana hoped the penalty would be 'a deterrent to those hoping to make a quick buck by peddling false information'. Viceroy cried foul, basically saying, 'You can't touch us, we're not in South Africa'. Shockingly, the Financial Services Tribunal largely agreed. The tribunal admitted that Viceroy's actions 'had an effect' on South Africa. But under common law, they said, you need to serve a foreigner in person while they're in the country to establish jurisdiction. The fine was set aside and the case was closed. Or so Viceroy thought. Closing the loophole The FSCA fought back and launched an application to review the decision to scrap Viceroy's fine. The Pretoria High Court ruled on 9 July 2025 that clinging to an area of physical service would 'hamper and frustrate the effective regulation of financial activity that takes place extra-territorial and digitally'. Citing section 173 of the Constitution, the court developed the common law. The FSCA can fine a foreigner if: Notice is delivered by any means (including electronically); and The conduct's link to South Africa is 'sufficiently close'. 'The court remitted the reconsideration application brought by Viceroy Research and partners back to the Financial Services Tribunal, so that a decision can be made on the merits,' the FSCA said. The case is not yet closed, but the R50-million penalty is back on the table. The FSCA remains confident that it made a clear and compelling case against Viceroy. 'The public can take confidence from the fact that the FSCA will not shy away from taking appropriate action to protect its investigation and enforcement powers to ensure appropriate investor protection and the integrity of financial markets,' it said. DM
Mint
20-07-2025
- Business
- Mint
Vedanta rejects Viceroy Research's ₹2,500 crore loan routing claim, says ‘executed in full compliance…'
Mining giant Vedanta Ltd rejected Viceroy Research's allegations about the company's subsidiary Vedanta Semiconductors Pvt. Ltd (VSPL) routing ₹ 2,500 crore loans in a 'sham operation', stating that the loan transactions were executed in full compliance with the applicable laws, reported the news agency PTI on Sunday. Vedanta 'strongly rejects the baseless allegations made in the report regarding Vedanta Semiconductors Pvt Ltd (VSPL),' the report citied a statement by company's spokesperson. 'All business activities of VSPL have been transparently disclosed and are in line with statutory norms,' the company said. The company spokesperson added that Vedanta Ltd. and VSPL have 'consistently reported' the accurate transaction terms, rates, and collateral as per the mandated norms. 'Loans between VSPL and Vedanta Ltd were executed in full compliance with applicable laws, corporate governance standards, and both Vedanta Ltd and VSPL have consistently reported accurate loan terms, interest rates, and collateral in line with statutory norms,' a Vedanta spokesperson told the news agency. The company also reportedly asked the stakeholders to rely on verified disclosures and audited financial statements. Viceroy Research openly disclosed its short position against the debt of Vedanta Resources, the parent company of the Indian mining giant, on 9 July 2025, when they claimed that the company is 'systematically draining' its Indian subsidiary. In the latest development on the allegations saga, the US-based short seller, Viceroy Research, alleged that under the pressure to pay the brand fees, Vedanta Ltd routed ₹ 2,500 crore 'Under pressure to pay brand fees, VEDL routed a ₹ 2,500 crore loan through a company doing ₹ 416 crore in sham operations, hoping regulators didn't look,' said the short seller in its latest report. Viceroy Research released its latest report titled 'Vedanta – Vedanta Semiconductor: ₹ 2,500 Crore Dhoke Ka Sammraajy' on Friday, 18 July 2025. The report further alleged that VSPL is a 'sham commodities trading operation' which has been designed to avoid the classification of coming under a non-banking financial company (NBFC). '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),' they said in the report. They also claimed that the alleged loan routing was devised to facilitate Vedanta's remittance of brand fees to its parent company when it faced a severe liquidity crunch. 'This scheme was devised to facilitate VEDL's remittance of brand fees to Vedanta Resources' (VRL) in April 2025, when it faced a severe liquidity crisis,' said Viceroy. According to the report released on Friday, the short seller claims that Vedanta Semiconductors Private Limited needs an 'operational illusion' of 24 months or 2 years to fulfil its dues to its offshore lenders and hide the 'near-catastrophe' of April 2024. They also said that even though the credit rating analysts are 'snoozing through the alarm bells,' the Indian regulators are 'famously light sleepers.' '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,' claimed the short seller in its latest report. In April 2024, the company faced a severe liquidity crisis. The loans granted were allegedly used to fund the May dividend issue and not to pay the brand fees. 'The loan was intended to be used to send up the brand fees but, by the time JPM had sold the debt in the market, they had already been paid so the loan was used to fund the May dividend,' claimed the sort seller in the research report. '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.' Vedanta share price closed 0.33% higher at ₹ 445.70 after Friday's stock market session, compared to ₹ 444.25 at the previous market close, according to BSE data. Former Chief Justice of India (CJI) D Y Chandrachud said that Viceroy Research's report on Vedanta 'lacks credibility' and that the company would be well-positioned to seek legal help in the case. This comes after Vedanta asked for an independent legal opinion on the matter. Chandrachud also highlighted that the US-based firm has a track record of taking short positions in listed companies then publishing 'misleading' reports to unlawfully profit from the stock market impact.
Mint
20-07-2025
- Business
- Mint
Vedanta rejects Viceroy Research's ₹2,500 crore loan routing claim, says ‘executed in full compliance…'
Mining giant Vedanta Ltd rejected Viceroy Research's allegations about the company's subsidiary Vedanta Semiconductors Pvt. Ltd (VSPL) routing ₹ 2,500 crore loans in a 'sham operation', stating that the loan transactions were executed in full compliance with the applicable laws, reported the news agency PTI on Sunday. Vedanta 'strongly rejects the baseless allegations made in the report regarding Vedanta Semiconductors Pvt Ltd (VSPL),' the report citied a statement by company's spokesperson. 'All business activities of VSPL have been transparently disclosed and are in line with statutory norms,' the company said. The company spokesperson added that Vedanta Ltd. and VSPL have 'consistently reported' the accurate transaction terms, rates, and collateral as per the mandated norms. 'Loans between VSPL and Vedanta Ltd were executed in full compliance with applicable laws, corporate governance standards, and both Vedanta Ltd and VSPL have consistently reported accurate loan terms, interest rates, and collateral in line with statutory norms,' a Vedanta spokesperson told the news agency. The company also reportedly asked the stakeholders to rely on verified disclosures and audited financial statements. Viceroy Research openly disclosed its short position against the debt of Vedanta Resources, the parent company of the Indian mining giant, on 9 July 2025, when they claimed that the company is 'systematically draining' its Indian subsidiary. In the latest development on the allegations saga, the US-based short seller, Viceroy Research, alleged that under the pressure to pay the brand fees, Vedanta Ltd routed ₹ 2,500 crore 'Under pressure to pay brand fees, VEDL routed a ₹ 2,500 crore loan through a company doing ₹ 416 crore in sham operations, hoping regulators didn't look,' said the short seller in its latest report. Viceroy Research released its latest report titled 'Vedanta – Vedanta Semiconductor: ₹ 2,500 Crore Dhoke Ka Sammraajy' on Friday, 18 July 2025. The report further alleged that VSPL is a 'sham commodities trading operation' which has been designed to avoid the classification of coming under a non-banking financial company (NBFC). '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),' they said in the report. They also claimed that the alleged loan routing was devised to facilitate Vedanta's remittance of brand fees to its parent company when it faced a severe liquidity crunch. 'This scheme was devised to facilitate VEDL's remittance of brand fees to Vedanta Resources' (VRL) in April 2025, when it faced a severe liquidity crisis,' said Viceroy. According to the report released on Friday, the short seller claims that Vedanta Semiconductors Private Limited needs an 'operational illusion' of 24 months or 2 years to fulfil its dues to its offshore lenders and hide the 'near-catastrophe' of April 2024. They also said that even though the credit rating analysts are 'snoozing through the alarm bells,' the Indian regulators are 'famously light sleepers.' '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,' claimed the short seller in its latest report. In April 2024, the company faced a severe liquidity crisis. The loans granted were allegedly used to fund the May dividend issue and not to pay the brand fees. 'The loan was intended to be used to send up the brand fees but, by the time JPM had sold the debt in the market, they had already been paid so the loan was used to fund the May dividend,' claimed the sort seller in the research report. '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.' Vedanta share price closed 0.33% higher at ₹ 445.70 after Friday's stock market session, compared to ₹ 444.25 at the previous market close, according to BSE data.
