Viceroy Research's claim of ₹2,500 crore sham is baseless: Vedanta

Continuing its triad against mining Moghul Anil Agarwal's Vedanta group, US-based Viceroy Research has alleged that the group's semiconductor unit was a "sham commodities trading operation", designed to avoid classification as an NBFC, a charge the mining conglomerate dismissed as baseless.

US short seller Viceroy Research, which last week published a scathing report about Vedanta Group and followed it with similar reports on group companies, in fresh allegations said Vedanta Ltd's subsidiary, Vedanta Semiconductors Pvt Ltd, was part of a scheme to allow the Mumbai-listed firm to remit brand fees to parent Vedanta Resources in April this year, when it faced a severe liquidity crisis.

In a statement, Vedanta spokesperson said the group "strongly rejects the baseless allegations made in the report regarding Vedanta Semiconductors Pvt Ltd (VSPL)".

"All business activities of VSPL have been transparently disclosed and are in line with statutory norms," it said.

Viceroy said, "VSPL is a sham commodities trading operation designed to improperly avoid classification as a Non-Banking Financial Company (NBFC)".

"This scheme was devised to facilitate Vedanta Ltd's remittance of brand fees to Vedanta Resources' (VRL) in April 2025, when it faced a severe liquidity crisis," Viceroy said.

"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."  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."

"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," Viceroy alleged.

VSPL, it said, remitted the loan to VEDL as a 24-month 12 per cent loan, with the spread intended to cover the sham operation's costs.

The semiconductor unit, 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," the US short-seller alleged.

Vedanta spokesperson in the statement said, "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," it said, adding that it would encourage stakeholders to only reply on verified disclosures and audited financials.

Viceroy, on July 9, said it has taken a short position against the debt of Vedanta Resources, the UK-based parent of Indian miner Vedanta Ltd, and alleged in the report that the British firm is "systematically draining" its Indian unit.

Vedanta had dismissed the report as "a malicious combination of selective misinformation and baseless allegations", and that Research issued it without contacting the group.

Viceroy, in its latest report, said despite Vedanta's claim that it failed to engage, it is yet to receive a response to the issues flagged since July 9.

"For a company so quick to dismiss our findings, one might expect answers to be equally swift. It's been over a week since we formally requested clarification," the short seller added.