Viceroy shorts Vedanta Resources' debt; group calls report 'malicious'

Viceroy Research has shorted Vedanta Resources' debt, alleging the group is draining its Indian unit, inflating profits, and posing serious risks to creditors through unsustainable practices

Short-seller Viceroy Research on Wednesday announced that it has shorted the debt of Vedanta Resources Ltd (VRL), the UK-based parent company of Indian mining giant Vedanta Ltd. 

 

Responding to the allegations, a spokesperson for Vedanta Group dismissed the report, calling it “a malicious combination of selective misinformation and baseless allegations to discredit the group". The company said that the document was released “without any attempt to contact us”, and appeared to be “solely intended to create false propaganda".

 

In a detailed report, the firm raised serious concerns about the financial health and corporate practices of the Vedanta Group. "The entire group structure is financially unsustainable, operationally compromised and poses a severe, under-appreciated risk to creditors," the Viceroy note said.

 

 

Viceroy claimed that VRL is "systematically draining" its Indian subsidiary Vedanta Ltd (VEDL) to service its own growing debt obligations. The report alleges that this process has led VEDL to take on more debt and deplete its cash reserves, weakening its financial health.

 

Vedanta’s debt strategy a Ponzi scheme, says Viceroy

 

The short-seller further said, "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."

 

The firm compared the situation to a Ponzi scheme, claiming that VRL’s short-term debt management tactics are damaging creditors’ long-term recovery potential. It added that stakeholders of VEDL — including VRL's own lenders — have become the “suckers” in the arrangement.

 

Vedanta says report aims to derail upcoming initiatives

 

The company said, "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."

 

Questioning the timing of the publication, the company said, “It seems designed to undermine upcoming corporate initiatives. However, our stakeholders are discerning enough to see through such tactics.”

 

Claims of misrepresentation and capital misuse

 

In its 87-page report, Viceroy accused the company of inflating profits by capitalising expenses across operating subsidiaries. "This is a material misrepresentation," it said.

 

The report also pointed out a $5.6 billion free cash flow shortfall at VEDL over the past three years compared to the dividends paid out. Additionally, it noted that VEDL’s net debt has surged by 200 per cent, or $6.7 billion, since FY22 — including changes in working capital. The company has also reportedly run through its cash reserves and hit its borrowing limits.

 

According to Vedanta Resources’ annual report, as of March 31, 2025, its standalone net debt stood at $4.9 billion. Viceroy further alleged that VRL uses various strategies to extract cash from VEDL, prioritising short-term liquidity needs over the long-term sustainability of the operating entity.

 

“Each mechanism is designed to maximise upstream flows at the expense of VEDL's solvency and minority shareholders,” the report said.

 

The report triggered a sharp market reaction. Shares of Vedanta tanked up to 8 per cent in Wednesday’s intra-day trade on the BSE. Meanwhile, its subsidiary Hindustan Zinc Ltd also saw its stock decline by 2.8 per cent.