Vedanta refunded ₹1,030 cr brand fee to unit after ED scrutiny: Viceroy

Viceroy Research alleges Vedanta Resources refunded ₹1,030 crore to Vedanta Ltd after ED scrutiny, raising questions over intercompany brand fee payments and governance

Investigative financial firm Viceroy Research has alleged that Vedanta Resources Ltd (VRL) was forced to refund ₹1,030 crore (around $123 million) to its subsidiary Vedanta Ltd (VEDL) following regulatory scrutiny by the Enforcement Directorate (ED) in 2023. 

 

The brand fee was first disclosed in Vedanta's FY24 financials without explanation. The report, published on Wednesday, claims that the payment, termed a "brand fee rebate", was made after the ED questioned the legality of certain intercompany remittances, but was never disclosed to bondholders or the market. 

 

According to Viceroy, the ED summoned VEDL’s CFO and executive team in July 2023 over what it described as irregular brand fee payments to VRL. These payments, allegedly made in an ad hoc manner whenever the parent company faced liquidity stress, were deemed non-compliant with the Foreign Exchange Management Act (Fema) and corporate governance rules.

 

Newly appointed CFO Sonal Shrivastava had appeared before the ED alongside a non-board executive, while CEO Sunil Duggal skipped the interview. Shrivastava resigned just five months later, the report claimed.

 

The report described the refund not as a voluntary correction but as a direct outcome of regulatory pressure. It is alleged that the brand fee mechanism effectively functions as an “interest-free rolling credit facility” from VEDL to VRL, lacking any clear commercial justification.

 

In FY25 alone, Viceroy claims VEDL and its subsidiaries paid $361 million (₹3,085 crore) in brand fees to VRL, which roughly amounts to 15 per cent of VEDL’s net income. These payments, the report says, helped service VRL’s $4.9 billion net debt and $835 million annual interest burden.

 

Background: Prior allegations against Vedanta

The allegations against the Anil Agarwal-led group first appeared in an 87-page report released by Viceroy Research on July 9. The firm accused Vedanta Resources of being a “parasite” that is “systematically draining” Vedanta Ltd to service its own debt obligations. Viceroy further claims that the conglomerate is built on “unsustainable debt, looted assets, and accounting fiction.”

 

Vedanta dismissed Viceroy's allegations

Vedanta dismissed the allegations, calling the report “a malicious combination of selective misinformation and baseless allegations to discredit the group”. The company stated that Viceroy made no attempt to contact it before publication and claimed the report was intended “solely to create false propaganda”.

 

Former Chief Justice of India DY Chandrachud also criticised the report, stating it lacked “credibility”.