Shares of Vedanta and Hindustan Zinc tumbled up to 8% on Wednesday after US-based short-seller Viceroy Research published a scathing report alleging “material discrepancies” in the group’s financials and comparing parent company Vedanta Resources Ltd to a “Ponzi scheme.”
Vedanta Ltd plunged as much as 7.7% intraday to Rs 421 on BSE, while Hindustan Zinc fell 4.8% to Rs 415.30.
Viceroy said that “the entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors,” adding that Vedanta Resources (VRL) “is a parasite holding company with no significant operations of its own, propped up entirely by cash extracted from its dying host: Vedanta Limited.”
The short-seller likened the group’s cash flow arrangements to a "Ponzi scheme, where VEDL stakeholders, which include VRL creditors, are the suckers.”
Draining the host
At the core of Viceroy’s allegations is the assertion that Vedanta Resources is systematically siphoning cash from Vedanta Ltd to service its own debt, forcing the operating company to take on increasing leverage. This dynamic, the report claims, “erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors.”
To support its argument, Viceroy pointed to a $5.6 billion free cash flow shortfall at Vedanta Ltd over the past three years, which has been used to fund oversized dividend payments demanded by VRL. These payments, Viceroy alleges, are financed not by genuine free cash flow but by fresh borrowings, aggressive working capital management, and depletion of cash reserves.
"This strategy resembles a Ponzi scheme," Viceroy said. "As it stands: VEDL are the suckers."
Inflated assets and hidden liabilities
The short-seller report accused the group of inflating asset values and keeping billions of dollars in expenses off its balance sheet. According to Viceroy, Vedanta’s interest expenses “vastly exceed its reported note rates,” implying the existence of hidden or misreported debt.
In one instance, the report claimed that Vedanta Resources reported interest costs of $835 million against gross borrowings of $4.9 billion in FY25, suggesting an effective interest rate of 15.8%, far above the 9–11% range disclosed for most of its bonds and loans.
“We only see three possible scenarios where the reported interest expense figures are true,” Viceroy said. “They all represent significant financial misconduct.”
Brand fees, circular loans, and governance concerns
Viceroy also flagged what it calls “artificial brand fees” — hundreds of millions of dollars allegedly extracted annually from Vedanta Ltd and its subsidiaries without any commercial justification. In FY24, Viceroy says these brand fees totaled $338 million and were used by Vedanta Resources Ltd (VRL) to secure offshore credit lines.
Vedanta Ltd was also accused of funding Vedanta Resources’ share purchases through intercompany loans that were either written off or never repaid. In one 2020 episode, a Rs 7,934 crore ($956 million) unsecured loan was routed from Vedanta Ltd subsidiaries to Vedanta Resources affiliates and then used to consolidate control over Vedanta Ltd — an arrangement Viceroy described as a “covert financing maneuver.”
The short-seller also pointed to systematic governance failures across the group, including auditor choices that it claims were designed to avoid scrutiny. It described Vedanta Resources as a “financial zombie being kept alive by transfusions of cash from its subsidiary Vedanta Ltd.”
Crown jewel Hindustan Zinc under scrutiny
Even Vedanta’s prized asset, Hindustan Zinc, was not spared in the report. Viceroy claimed that Vedanta triggered a default event under its shareholder agreement with the Indian government by failing to build a required smelter. This, the report said, opened the door to a forced buyback or sale of Hindustan Zinc shares on punitive terms, with potential outflows as high as $10.66 billion.
Hindustan Zinc was also accused of paying Rs 1,562 crore in brand fees over three years for a brand it does not use — an arrangement Viceroy called “a clear case of minority shareholder abuse.”
“We strongly believe an independent review of the circumstances and justifications for this brand fee agreement is required, given the GoI’s stake in Hindustan Zinc — especially whether board approval was granted and the circumstances thereof,” the report said.
Viceroy’s short-seller report concluded with a stark warning: “The Vedanta Group is a house of cards built on a foundation of unsustainable debt, looted assets, and accounting fiction.” The proposed demerger, it says, will merely “spread the group’s insolvency across multiple, weaker entities,” each saddled with legacy liabilities.
Vedanta Ltd plunged as much as 7.7% intraday to Rs 421 on BSE, while Hindustan Zinc fell 4.8% to Rs 415.30.
Viceroy said that “the entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors,” adding that Vedanta Resources (VRL) “is a parasite holding company with no significant operations of its own, propped up entirely by cash extracted from its dying host: Vedanta Limited.”
The short-seller likened the group’s cash flow arrangements to a "Ponzi scheme, where VEDL stakeholders, which include VRL creditors, are the suckers.”
Draining the host
At the core of Viceroy’s allegations is the assertion that Vedanta Resources is systematically siphoning cash from Vedanta Ltd to service its own debt, forcing the operating company to take on increasing leverage. This dynamic, the report claims, “erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors.”
To support its argument, Viceroy pointed to a $5.6 billion free cash flow shortfall at Vedanta Ltd over the past three years, which has been used to fund oversized dividend payments demanded by VRL. These payments, Viceroy alleges, are financed not by genuine free cash flow but by fresh borrowings, aggressive working capital management, and depletion of cash reserves.
"This strategy resembles a Ponzi scheme," Viceroy said. "As it stands: VEDL are the suckers."
Inflated assets and hidden liabilities
The short-seller report accused the group of inflating asset values and keeping billions of dollars in expenses off its balance sheet. According to Viceroy, Vedanta’s interest expenses “vastly exceed its reported note rates,” implying the existence of hidden or misreported debt.
In one instance, the report claimed that Vedanta Resources reported interest costs of $835 million against gross borrowings of $4.9 billion in FY25, suggesting an effective interest rate of 15.8%, far above the 9–11% range disclosed for most of its bonds and loans.
“We only see three possible scenarios where the reported interest expense figures are true,” Viceroy said. “They all represent significant financial misconduct.”
Brand fees, circular loans, and governance concerns
Viceroy also flagged what it calls “artificial brand fees” — hundreds of millions of dollars allegedly extracted annually from Vedanta Ltd and its subsidiaries without any commercial justification. In FY24, Viceroy says these brand fees totaled $338 million and were used by Vedanta Resources Ltd (VRL) to secure offshore credit lines.
Vedanta Ltd was also accused of funding Vedanta Resources’ share purchases through intercompany loans that were either written off or never repaid. In one 2020 episode, a Rs 7,934 crore ($956 million) unsecured loan was routed from Vedanta Ltd subsidiaries to Vedanta Resources affiliates and then used to consolidate control over Vedanta Ltd — an arrangement Viceroy described as a “covert financing maneuver.”
The short-seller also pointed to systematic governance failures across the group, including auditor choices that it claims were designed to avoid scrutiny. It described Vedanta Resources as a “financial zombie being kept alive by transfusions of cash from its subsidiary Vedanta Ltd.”
Crown jewel Hindustan Zinc under scrutiny
Even Vedanta’s prized asset, Hindustan Zinc, was not spared in the report. Viceroy claimed that Vedanta triggered a default event under its shareholder agreement with the Indian government by failing to build a required smelter. This, the report said, opened the door to a forced buyback or sale of Hindustan Zinc shares on punitive terms, with potential outflows as high as $10.66 billion.
Hindustan Zinc was also accused of paying Rs 1,562 crore in brand fees over three years for a brand it does not use — an arrangement Viceroy called “a clear case of minority shareholder abuse.”
“We strongly believe an independent review of the circumstances and justifications for this brand fee agreement is required, given the GoI’s stake in Hindustan Zinc — especially whether board approval was granted and the circumstances thereof,” the report said.
Viceroy’s short-seller report concluded with a stark warning: “The Vedanta Group is a house of cards built on a foundation of unsustainable debt, looted assets, and accounting fiction.” The proposed demerger, it says, will merely “spread the group’s insolvency across multiple, weaker entities,” each saddled with legacy liabilities.
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