Short-seller Viceroy accuses Vedanta promoters of hidden stake via welfare trust

Mint

5 days ago

The entity under scrutiny is PTC Cables Pvt. Ltd (PTCC), which holds a 1.91% stake in Vedanta Ltd, a company with a market capitalization of ₹ 1.75 trillion, according to BSE data. PTCC is owned by Bhadram Janhit Shalika Trust (BJST), which Viceroy alleges is controlled by the Agarwal family, founders of the Vedanta Group.
According to Viceroy, PTCC received ₹ 1,500 crore in dividend income from Vedanta over the past five years, and the capital was "upcycled" to promoter-linked entities.
'PTCC exists for one purpose: to quietly recycle Vedanta's cash into promoter-controlled vehicles while maintaining the illusion of independence," the Viceroy report said.
Vedanta denied the allegations.
'These assertions are baseless," a spokesperson for the company said, adding that the company was compliant with the disclosure norms as stipulated by the Securities and Exchange Board of India (Sebi) and the Companies Act, 2013.
'Neither BJST nor PTCC are part of the promoter group as defined under applicable regulations, and their shareholding has been transparently disclosed in public filings," the spokesperson added.
A day after Viceroy released its report, JP Morgan had issued a note, telling investors not to get distracted by the allegations on corporate governance and financial management, and that the global brokerage had an Overweight rating on both Vedanta Resources Ltd and Vedanta Ltd.
Viceroy's claims are based on publicly available records.
In a 2009 income-tax case, BJST's correspondence address was listed as Anil Agarwal's personal residence in Mumbai. In another case, the trust's address was that of Todarwal & Todarwal, a firm linked to Arun Todarwal, who currently serves as a director on the board of Sterlite Power Grid Ventures, a Vedanta subsidiary. Todarwal has also previously served as a director on the boards of Hindustan Zinc Ltd, Sterlite Technologies, MALCO, and BALCO.
The report acknowledged that no conclusive documentation of current control was available, noting that Indian trusts are subject to less stringent disclosure obligations compared to companies.
Viceroy also cited unnamed former Vedanta employees who claimed that the Agarwal family's control over PTCC was an "open secret" within the company.
In addition to alleging hidden promoter ownership, the report flagged governance concerns at PTCC. The company was incorporated in 1993 with the Agarwal family as shareholders and was transferred to BJST in 2017. Its current directors are Todarwal and Kannan Ramamirthan.
Ramamirthan is an independent director of Hindustan Zinc, Vedanta's most profitable subsidiary. He has also previously served on the boards of other Vedanta group firms, including Talwandi Sabo Power Plant, BALCO, Sterlite Energy, and Sterlite Interlinks.
Vedanta has not disclosed in its filings that PTCC—classified as a public shareholder—has directors with long-standing associations with the group.
The company did not respond to a specific query on this issue. Calls and emails to Todarwal for a comment did not elicit a response. Mint could not reach Ramamirthan for a comment.
Concerns about the independence of BJST and PTCC are not new. In a 2020 note, proxy advisory firm Stakeholder Empowerment Services (SES) had said that BJST was previously known as the SIL Employee Welfare Trust and was linked to Sterlite Industries Ltd, which was later merged into Vedanta. The trust was subsequently renamed as BJST.
'It is not clear as to who presently controls the BJST," SES had written. However, if the firm was under the control of Vedanta, then PTCC should be classified as a promoter shareholder, it said.
Viceroy's first report on the Vedanta Group was published on 10 July, a day before Vedanta Ltd's annual general meeting (AGM). The initial report triggered a drop in the company's stock, though shares later recovered. At the AGM, shareholders reposed their faith in the company. Since the report's release, Vedanta shares have gained 2% to close at ₹ 449.75 on Tuesday. Also Read | Vedanta shareholders back firm after Viceroy report
Viceroy has disclosed a short position in the bonds of Vedanta Resources, the unlisted holding company of the group, but said it has no exposure to Vedanta Ltd or any other listed Vedanta entities in India.