Vedanta claims that the timing of the stock decline and share price selection could be used to sabotage upcoming company activities due to selective misinformation and unfounded accusations.
Following the identification of the Vedanta organization as bearing “unsustainable debt” by Viceroy Research, a short-seller and US-registered financial research organization, the shares of Vedanta Ltd. fell by as much as 8.7% to Rs 421 intraday, while those of Hindustan Zinc fell by 5% to Rs 415. By the time the market closed, the shares had recovered over half of their losses.
According to the research team, the Vedanta holding companies, including Vedanta Resources Limited (VRL) and intermediate holding companies above Vedanta Limited (VEDL), are “propped up entirely by cash extracted from” their subsidiary VED and resemble “a financial zombie” with “approximately $4.9 billion in gross interest-bearing liabilities as of FY25” but “no significant operations of its own.”
The Viceroy study, according to a media statement from the Vedanta Group, was “a malicious combination of selective misinformation and baseless allegations,” released “without making any attempt to contact” the Group and with the express purpose of spreading false propaganda.
The authors have attempted to sensationalize the situation in order to capitalize on market reaction, but it only consists of a combination of different material that is already in the public domain. The report’s timing is questionable and may be intended to sabotage upcoming company activities, according to the Vedanta statement.
Viceroy Research admitted that it is a short seller and that its report may make them money if Vedanta stocks dropped. In a disclaimer, the Viceroy report stated that on the date of publication, “you should assume that the authors have a direct or indirect interest/position in all stocks (and/or options, swaps, and other derivative securities related to the stock) and bonds covered herein, and therefore stand to realize monetary gains in the event that the price of either declines.”
The operating business is being forced to take on ever-increasing leverage and deplete its cash reserves as a result of VRL’s deliberate draining of VEDL to cover its own debt burden. The basic value of VEDL, which serves as the main collateral for VRL’s own creditors, is diminished by this thievery. (and) contributes to the Group’s increased risk of insolvency,” the audit stated.
Former Rajya Sabha MP and BJP national executive member Swapan Dasgupta said on social media site X: “Is there a deliberate effort by dubious US financial entities/research organizations to discredit India’s corporations and financial institutions? The number of coincidences is excessive. The security services ought to look into this, in my opinion.
Is there a concerted attempt by dodgy US financial entities / research organisation to undermine India’s corporates/ financial institutions.? There are too many coincidences. I think the security agencies should investigate.
— Swapan Dasgupta (@swapan55) July 9, 2025
While the Vedanta Group’s gross interest-bearing obligations decreased from $17.5 billion in FY21 to $15.6 billion in 2025, the Group’s gross finance costs and effective interest rate increased steadily from $1.3 billion (7.2%) in FY21 to $2 billion (13%) in 2025, according to the Viceroy study.
The Group’s cash and short-term investments, however, decreased from $5.9 billion in FY21 to $2.6 billion in FY25, according to the report. It stated that “the depletion of cash and short-term investments at a disproportionately higher rate than the repayment of debt has resulted in an increase in net debt.”
The “proposed demerger will merely spread the Group’s insolvency across multiple, weaker entities, each burdened with a legacy of impaired assets and unserviceable debt,” according to the assessment, as stated by Vedanta.
Anil Agarwal founded and serves as chair of the Vedanta Group, a multinational company with a primary focus on India. Mumbai-based VEDL is a “uniquely diversified company across the natural resources spectrum” and is listed on both the Bombay Stock Exchange and the National Stock Exchange. The holding company, VRL, was established in 2003 and is headquartered in London.
The full repayment of a $200 million facility agreement, for which a no-objection certificate was obtained from Canara Bank London Branch on July 3, resulted in the release of encumbrance over 220.5 crore equity shares of VEDL, or 56.38% of the total share capital held by VRL through intermediate holding companies, according to a disclosure made to SEBI on July 5.
Viceroy Research LLC, an investigative financial research firm established in Delaware, USA, was founded in 2016 by British short seller Fraser John Perring and his Australian associates Aiden Lau and Gabriel Bernarde. Viceroy claims on its website that its investigation has uncovered issues with numerous businesses, including the German payment behemoth Wirecard, which declared bankruptcy in 2020.
The Viceroy report lists a number of “material quantitative and qualitative discrepancies,” including assertions that “Billions of dollars of disputed expenses are kept off-balance sheet and undisclosed in financial reports, expenses across operating subsidiaries are systematically capitalized, and Vedanta’s interest expenses vastly exceed its reported note rates.”
Unsustainable Dividends
The audit noted that since FY21, VEDL had paid “disproportionately large” dividends totaling $10.7 billion (₹85,503 crore), continuously surpassing its free cash flow and accruing a $5.6 billion shortfall in free cash flow over the previous three years.
The study referred to this upstreaming process as “highly inefficient” since “a significant portion of every dividend issued leaks to minority shareholders,” claiming that VEDL’s payments are determined by VRL’s financing needs and are “funded not by free cash flow but by taking on more debt.”
“Artificial Brand Fees”
The report claims that VRL uses “brand fees,” which have no business rationale and are “designed to bypass dividend leakage to minority shareholders, including the government of India,” to extort hundreds of millions of dollars from VEDL and its subsidiaries each year.
According to the study, these fees totaled $338 million in FY24 alone, or 37% of VEDL and its subsidiaries’ net profit. In contrast, the report noted that Tata Steel’s brand fees, which are limited to ₹200 crore ($24.01 million) and represent 0.25% of turnover, “despite operating a brand with far greater public recognition and that is actually being used.”
