US short-seller Viceroy Research calls Vedanta a 'financial zombie'

Shares of Vedanta Ltd declined 3.38 per cent on Wednesday after US-based short-seller Viceroy Research released a report accusing the group’s London-based parent, Vedanta Resources Ltd (VRL), of running a “ponzi-like” structure. The report alleged widespread financial misconduct, accounting fraud, and rising insolvency risks across the Vedanta group. 

The Anil Agarwal-led Vedanta group rejected the allegations, calling the report “a malicious combination of selective misinformation and baseless allegations”. 

In an 87-page forensic report, Viceroy — disclosing a short position in Vedanta Resources’ debt —characterised the group as a “financial zombie” dependent on extracting unsustainable cash flows from Vedanta to service debt at the parent level. The report alleged that Vedanta’s balance sheet was being hollowed out through massive leverage, accounting trickery, and cash transfers masked as brand fees and inter-company loans.

 

Shares of Hindustan Zinc Ltd (HZL), a Vedanta Ltd subsidiary, also fell 2.56 per cent. A decline in either Vedanta Ltd’s or HZL’s shares poses a risk to the promoters, as VRL’s entire stake in Vedanta Ltd is pledged. Furthermore, 93.5 per cent of Vedanta Ltd’s stake in HZL is pledged with lenders. 

 

In a statement, a Vedanta group spokesperson dismissed the report as an attempt to mislead investors. “The report is a malicious combination of selective misinformation and baseless allegations to discredit the group. It has been issued without making any attempt to contact us, with the sole objective of creating false propaganda,” the statement said. “It only contains a compilation of various information already in the public domain, sensationalised by the authors to profiteer from market reaction.”

 

The company also questioned the timing of the report, suggesting it was aimed at undermining upcoming corporate initiatives. “Our stakeholders are discerning enough to understand such tactics,” the spokesperson said. “To avoid any responsibility, the authors have included disclaimers stating the report is for educational purposes and merely expresses opinions, not facts.”

 

The report draws comparisons to the 2023 allegations by now-defunct American short-seller Hindenburg Research against the Adani group. Viceroy’s report centres on what it describes as a critical dynamic: That VRL is a “parasite” holding company with no operating business of its own, sustained by cash from its “dying host,” Vedanta Ltd.

 

To service its debt, Viceroy claims, VRL is draining Vedanta Ltd of resources, driving it into higher levels of debt and eroding its value -- the very collateral relied upon by VRL’s own creditors. “This looting erodes the fundamental value of Vedanta Ltd, which constitutes the primary collateral for VRL’s own creditors,” the report said. “Consequently, VRL’s actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal, a situation that resembles a ponzi scheme.” 

 

Viceroy Research was founded by Fraser Perring, a prominent critic of German payments company Wirecard AG. The firm has previously targeted major companies such as industrial software group Hexagon AB and was fined by South Africa’s regulator in 2021.

 

The report contends the group has been pushed to the edge of insolvency, sustained only by new debt, accounting manoeuvres, and deferred liabilities. “New credit lines serve only to destroy the PropCo’s only collateral, staving off immediate insolvency at the expense of any chance of creditors recovering principal,” it said. “The mechanisms used to maintain the illusion of stability are failing, and a group-wide insolvency event is no longer a distant risk.”

 

Viceroy also claimed that the group’s proposed demerger plan -- splitting Vedanta Ltd into six pure-play metals and mining entities -- would worsen financial fragility by spreading liabilities across weaker entities, rather than resolving the company’s debt load.

 

The report lands at a sensitive moment for Vedanta, which is navigating a complex restructuring aimed at unlocking value. Indian banks have approved the demerger, and the proposal is currently under judicial review.